Just look at Suncor, the Exxon of the Canadian oil sands, which recently cleared a new record high. Investors have made a fortune owning big companies like Suncor, PetroCanada, Imperial Oil and Western Oilsands.

But the buck doesn't stop there. We've uncovered a hidden gem in the Canadian oil sands space. It's a company that has so much oil (proven oil), you can get 3.25 barrels of oil for $5. (U.S. Investment Portfolio)

Ever since the price for a barrel of oil pushed past the $100 benchmark, people have been asking where it's going from here. There is a wide range of predictions, all of them dodging the question in some way or another. Despite a few of them suggesting prices will "inevitably fall", most have estimated oil will average slightly higher than current prices.

Geopolitical and weather factors can exacerbate prices in a heartbeat, but the long term driver behind oil prices has always been supply and demand. Admittedly, focusing solely on supply and demand is only part of the picture, but one thing has become clear: oil markets are getting tighter.

If oil prices remain above $90 a barrel over the next few months, then we may be seeing $120 for a barrel of oil during the summer. OPEC seems intent on defending $90 oil, especially if rumors of a production cut in their next meeting becomes a reality.

Last year, oil prices briefly dipped to $50 a barrel before heading back up. Since then, they haven't looked back. During the peak of 2007's driving season, prices reached around $76 a barrel.


A similar increase in 2008 will mean $140 for a barrel of oil by July!

Even with lower demand estimates, there is not enough of a production boost from countries to make a dent in prices. After all, the only OPEC producer that are capable of increasing output over the next few years is Saudi Arabia, any growth beyond that is questionable. Production from newer fields will take years to come online.

One of the problems is that the world's oil production is too dependent on a small number of giant fields, most of which have been pumping oil for over four decades. It's not enough that production remains flat since producers are forced to make up for decline rates. Unconventional production from offshore drilling, heavy oil deposits or even oil shales will be able to help, but won't be enough in the long run.

Remember, it wasn't too long ago that $100 oil was unimaginable.

Gasoline Hike in 2008

Look, you don't need to guess  the kind of effect that $120 oil would have on pump prices. If you toss in all of those other factors that can swing oil prices, we're going to be in for another record year.

Now, you don't need me to tell you the kind of pain our wallets will have at the pump if oil hits $120 or more a barrel this summer. Then add into that cost the increases that various governments will take from additional or existing taxes!

These increases will show with increased prices in food, shelter, clothing or any purchase that requires transportation of goods to market.