1.“Peak Oil” theory. As shown in chart below, NYMEX Feb 09’s crude oil price is $40.8 and Dec 09’s price is $58.45. Though it is unlikely that the oil price will be back to its all time high of $147 set last summer, it is unlikely to stay in the $40 range too long either. In theory, traders can physical buy oil at $40.8, rent tankers to store it, then sell at $58.45 a year later and make a nice 43% premium. (Of course you need to deduct interest charges and storage costs, including insurance.)

Canada is basically a resource-based economy. According to Yahoo Finance, Industrial Materials (15.6%) and Energy (26.3%) sectors account for more than 41.9% of EWC, with such main players in industry such as Canadian Natural Resources (CNQ), Encana Corp. (ECA) and Suncor Energy Inc. (SU).

2.The US dollar will plunge. With a trillion+ dollars of stimulus planned, sooner or later the US dollar will depreciate. Accordingly, foreign country ETFs such as EWC will appreciate, other things being equal. Besides, you certainly want gold in your portfolio if you believe US dollars will plunge. The biggest and second biggest gold companies (based on market cap) in North America are Canadian companies: Barrick Gold (ABX) and Goldcorp Inc (GG).

3.Thanks to the Canadian government’s conservative regulation, Canada’s financial system is in much better shape than the US’s.

4.Unlike the US’s proposed $1.2 trillion deficit in 2009, Canada is the only G8 country still running a surplus (until last month).

5.For years, the US unemployment rate was around 1% – 1.5% lower than Canada’s. However, now it is 7.2%, while Canada’s is 6.6%.

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It’s a major reversal from even last August, when government officials were projecting Alberta would rake in an $8.5-billion surplus by the end of the 2008-09 fiscal year.

Alberta Finance Minister Iris Evans said the province’s Heritage Savings Trust Fund, a rainy-day savings hit, has been hit particularly hard by the current global financial turmoil. There are estimates its value has dropped by $3-billion from $17-billion.

She said the Progressive Conservative government, which has governed Alberta since 1971, is looking at ways to cut spending. However, she said the government has no immediate plans to abandon a $2-billion carbon capture and storage project. The aim of the project, in part, is to clean up the province’s image as an environmental wasteland.

Ms. Evans said that while Alberta has entered a “sharp period of recession” and will likely shed 50 jobs a day in the coming year, its economic position is still enviable when compared to other jurisdictions.

“This is like riding a very bad tidal wave, but in the best boat possible,” she said. “Alberta has absolutely got more resources available to it than anybody else facing a decline. Where are they going to get the money from?”

Opposition parties have been warning for years that the Tory government’s spending was out of control, and that it was not doing enough to save the eye-popping surpluses it was reaping from soaring oil and natural-gas royalties.

In 2007, the finance minister of the day, Lyle Oberg, speculated a deficit was possible if the province could not rein in its runaway spending. Since 2005-06, total government spending has jumped at least 32 per cent and per capita spending has been higher than that of any other provincial government.

Economist Andre Plourde says it should come as no surprise that the resource-based economy is taking a hit now that oil prices have dropped from a summer high of US$147 a barrel to below US$35.

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The Calgary-based energy investment dealer said Tuesday cartel outliers Iran and Venezuela are in the toughest spot, requiring oil at US$90 a barrel for their budgets to break even next year, while Nigeria and Bahrain need crude above US$70 a barrel.

Even producers in the Arabian Gulf are getting close to the oil price they need — US$50 a barrel — for their government budgets to break even. Oil settled at US$50.75 a barrel in New York Tuesday, down US$3.75 on worries the U.S. Energy Department will reveal a growth in oil inventories Wednesday, and down nearly US$100 since mid-July.

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