Several days ago, I wrote an article entitled “Canadian Royalty Trusts Will Never Return to Their Former Glory." The article ginned up pros and cons and overall a great discussion. It covered the punishing changes the Canadian government inflicted on American investors. But with all the back and forth, I and the others missed the important point. Americans believe that Canada is not a third world country where the rules change daily and an investor is taken for a ride and then discarded when no longer serving a useful purpose. But that is what happened to every American who invested in Canadian Royalty Trusts.

Let me make one thing perfectly clear: none of this is the responsibility or fault of the hard working men and women who run Canada’s Oil and Gas Industry.

Someone (allegedly John D. Rockefeller, but no one is sure) said, "More people have been robbed of their money chasing yield than those that have been robbed at knife and gun point."

The Canroys

Oil and gas investors are constantly trying to find the small explorco that will hit the “company maker find”, raising the stock 5 to 10 fold. The problems are constant for the small explorco, drilling locations, risk tolerance, technical talent and, most of all, money.

The current credit situation is in the process of hitting small explorcos even harder on the borrowing front than drilling failures. Even if a small explorco has some assets, borrowed money is now harder to come by for the small explorco. The LSE AIM market is being littered by the small explorco dead or they are being gobbled up by larger companies at cheap prices, leaving the IPO investor with a loss. Small explorcos working in the North Sea started to see lending facilities dry up back in March of 2006 and it only has gotten worse.

Oil at $100 plus per barrel has not produced many winners for investors in the upstream, downstream or integrated oil and refining companies. Crack spreads have narrowed, exploration costs are rising faster than ROI and the NOC’s have a death grip on cheaper to extract resources. Since October of 2007, there has been a slow grinding death spiral in these stocks, and with the refiners, the spiral has not been so slow.

The reasons are many, ranging from failure to complete projects on time, relentless rising costs, hedge fund illiquidity and a market refusal to price explorcos NAV at the higher and current oil prices. Suffice it to say that 2008 so far has not been a good year to start an energy fund.

In an eye popping purchase, a new Canadian oil and gas trust paid a record price for producing and non-producing Bakken lands.

Canadian insurer Manufacturer’s Life, in a 50 percent interest in a partnership with NAL Oil and Gas Trust (NOIGF.PK) on February 11, 2008, set a record in purchasing Bakken Lands in Southeast Saskatchewan.

Where to drill? The ultimate factor in any oil company's success or failure.

Stories abound about great oil riches in faraway places yet undiscovered; the foot of the Himalayas, the Spratley Islands, the Atlantic Rockall volcanic peak. These stories have become legend with ever increasing speculation on the estimates of recoverable reserves. Fact or fiction - or partly both?

"The market can remain irrational longer than you can remain solvent." (John Maynard Keynes)

I'm reminded of this quote when I look at today's oil prices.