Revolution in the oil-producing Arab world has created chaos in oil markets and ignited new interest in Canada's oilsands.

Unrest in the Arab world has caused crude oil prices to spike in recent days, as oil-hungry Western democracies fret over supply concerns should the spigots suddenly turn off.

The price for the European benchmark, Brent crude, closed at $113.06 a barrel on Tuesday. The North American equivalent closed down slightly at $104.93 in New York.

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Three-month stock chart for Suncor on the TSX.

Both have risen to near their pre-recessionary highs. That, in turn has caused renewed interest in the Athabasca basin, home to the world's second-largest reserve of crude oil.

"The higher oil prices we're seeing because of what's happening in Libya are certainly very useful for pushing the Alberta tarsands as an alternative," Schulich School of Business Perry Sadorsky said in an interview Tuesday. "That's a major factor in why some people have changed their tune."

Indeed, U.S. Secretary of State Hillary Clinton angered environmentalists recently by saying she was inclined to support a massive $7 billion, 3,000-kilometre pipeline that would bring more oilsands oil to U.S refiners.

'The oil security dimension now has to be a part of the equation' —British High Commissioner Andrew Pocock

In 2008, the last year for which statistics are available, Canada exported roughly 1.5 million barrels a day to the United States.

"I am generally supportive of receiving more oil from Canada," Clinton told a Congressional subcommittee last week.

America isn't the only one. British High Commissioner Andrew Pocock said last week that with the world's need for energy unlikely to abate, the oilsands are only going to grow in strategic importance. "The oil security dimension now has to be a part of the equation with the oilsands," Pocock said.

News reports of protesters being killed and the brutal, despotic nature of the regimes that remain in place have many rethinking their positions oil patch, which is persistently knocked for the massive environmental footprint that bitumen extraction leaves. "Any company that has exposure to [Middle Eastern oil]," Canaccard Genuity analyst Phil Skolnick said, "they have to start thinking about the oilsands a bit harder."

As outgoing premier Ed Stelmach put it last week, "Alberta's oil is not only plentiful, but it's produced in a very stable, secure country."

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Three-month stock chart for Nexen on the TSX.

Canadian oil stocks are already reaping the rewards of that perceived security.

Suncor Energy Inc. shares have rebounded nicely, despite the temporary closure of its 50,000-barrel per day Libyan operation due to staff safety concerns. The shuttering put roughly nine per cent of the company's global production offline, and yet Suncor shares are roughly 20 per cent above their January lows.

Also faring well is rival Nexen Inc. The company's shares are up 15 per cent in less than a month. It is benefiting in two ways, Skolnick said, because not only is it able to sell crude at elevated prices, but it's also more exposed to the more-expensive Brent crude than other North American oil companies thanks to its holdings in Yemen and the North Sea.

PRICE GAP

Prices for light, sweet crude, (the North American benchmark) and Brent Crude (the European benchmark) normally move in lockstep. But in recent months, North American refining capacity has become effectively full, which has stopped West Texas Intermediate prices from rising as much as Brent prices have. At one point recently, the gap was as wide as $13 per barrel.

"What's happening in Libya isn't affecting oil consumption or supply in Chicago one iota," Sadorsky said. "For all intents and purposes, the North American oil supply is completely isolated from what's happening elsewhere."

Even though the costs of oilsands extraction are much higher than those for conventional or offshore oil projects, the interest from major foreign players in securing dependable access to oil is at an all-time high. Deals like PetroChina's $2 billion move for a stake in Athabasca Oil Sands Corp. are a testament to that, experts say, and likely to be just the first of many to come in the oil patch.

India has yet to make its presence felt in Canada's energy sector, something that's bound to change, Skolnick predicts.

It's not yet clear where the dust will settle as these populist uprisings unfold. But one way or another, Canadian companies in the oil patch are bound to be affected.

"I think we need a few more weeks to see how this plays out," Sadorsky said.