In this clip from the Industry Focus: Energy podcast, Sean O'Reilly talks with Motley Fool Canada head, Taylor Muckerman, about the Canadian oil industry scene.

Listen in to find out why oil sands are so much harder to work with than the shale that so many American wells have been blessed with, how big Canada's oil business is compared to the rest of the world, why the expensive Canadian sands are being drilled while offshore rigs are left untouched, how long-term investors should think about investing in Canadian oil companies (and commodities in general), and more.

A full transcript follows the video.

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This podcast was recorded on Aug. 18, 2016.

Sean O'Reilly: It occurred to me recently, I was like, "We've got this guy that helps run Fool Canada. They're crushing it up there. He goes to Toronto occasionally."

Taylor Muckerman: Occasionally.

O'Reilly: We really should pick your brain, Taylor's brain, about what's the difference between Canadian oil companies and the U.S. industry.

Muckerman: In terms of companies, they operate pretty similarly, but they're dealing with oil sands for the most part rather than shale oil like drillers in the United States have been blessed with recently. When you look at the industry up there, Alberta is Grand Central Station. If you look at Alberta by itself, I think it's in the top five for oil reserves in the world.

O'Reilly: On the planet Earth?

Muckerman: Yeah.

O'Reilly: It's them, Saudi Arabia...

Muckerman: There's plenty of gas. Let's see. If you look at it, they have the third-largest crude reserves in the world. They're talking if technology improves, you could see 300 billion barrels of bitumen. Right now, with current technology, around 170 billion barrels.

O'Reilly: For the layman, bitumen is basically like tar?

Muckerman: Yes. Oil sands is what they have up there. It's very hard to extract, very greenhouse gas-intensive.

O'Reilly: They use those trucks. It's very messy.

Muckerman: To ship it in pipelines, you have to use diluent. They have to, basically, ship from the United States in a pipeline up to Canada, dilute the bitumen so that it flows through the pipeline -- because it's so thick and nasty that it wouldn't move on its own, so you dilute it a little bit -- so then you can ship it through pipelines to transport it. Which is kind of why crude-by-rail has been a big deal for them, because that was a big boom for oil sands, because you just loaded it into a truck or a tanker rather than having to ship diluent up and then combine it. It removed that step from the process because you could just put bitumen right in the tanks.

O'Reilly: All of this sounds expensive.

Muckerman: It is.

O'Reilly: Can you just give a ballpark estimate compared to... Last week, we talked about the Permian Basin. Where does Canada fall, globally, on the cost structure of things?

Muckerman: Depending on the offshore field that you're talking about, it's upwards in that range of offshore drilling. Right now, they're definitely not breaking even on barrels of oil that they're producing and you're also looking at Western Canadian Select being the kind of oil that you price in Canada, which is sold at a discount even to West Texas, which is sold at a discount to Brent.

O'Reilly: Because it's so dirty and it's a hassle.

Muckerman: It's dirty and it's more remote. One of the big bottlenecks in Canada is infrastructure to move oil around the country. You see Keystone XL got shut down, the plans for that... You got the southern leg on board, which is totally in the United States.

O'Reilly: Kinder Morgan (KMI 2.09%) just got approved for that $4 billion pipeline up there.

Muckerman: That was an expansion, I believe. But then, you look at Enbridge's Northern Gateway Pipeline, which was supposed to go from Alberta to the West Coast so that it gives oil more access to Asia. That was originally approved in 2014, but I believe they just lost an appeals case recently, so that pipeline...

O'Reilly: Was that an environmental thing?

Muckerman: Yeah. It was an environmental thing with the native tribes in that area. There were some areas where maybe the government and Enbridge overlooked, and so during the appeals process, those were brought up and now that pipeline is back on the shelf.

O'Reilly: Got it.

Muckerman: That's one of the biggest issues outside of the high cost to produce it versus the low cost that it's currently selling at. The big thing there is infrastructure, because when you look at Canada, they use hardly any of the oil that they produce. It's pretty much all exported, mostly to the United States. They're big on natural gas and even bigger on hydropower in Canada. They're one of the cleanest energy-producing countries in the world in terms of what they use to produce energy, but the oil that they produce and export is very expensive and dirty.

O'Reilly: Yeah, plus their population is not big.

Muckerman: It's about a tenth of what it is here.

O'Reilly: There's like 90% of the Canadian population lives within 100 miles of the United States border or something like that.

Muckerman: You look at Ontario and British Columbia are the hubs and you've got, obviously, Calgary is a big city, Montreal is a big city, Quebec, but if you look at Vancouver and Toronto and then the surrounding areas of those two cities, Canada in a nutshell.

O'Reilly: Taking a step back, Canadian oil sands basically cost the same as offshore like in the Gulf of Mexico or something.

Muckerman: It gets up there.

O'Reilly: It's like 60, 70, 80, you need that to justify these projects.

Muckerman: If you look at some recent projects, you look at Suncor (SU -0.77%) just developed a $13 billion project in Fort Hills, but that's like, they said, "OK, that's pretty much our last major project."

O'Reilly: For?

Muckerman: For the foreseeable future. They are turning their mind toward smaller projects because they're a little bit more predictable. Obviously, they're less expensive.

O'Reilly: Don't want to overcommit, man.

Muckerman: Yeah, you don't want overproduction at this point in time.

O'Reilly: On the flip side of that, though, I can't remember when we talked about this, but I seem to remember us talking about an offshore auction in the Gulf of Mexico and there were no bidders. I've been looking at Suncor and a couple of other competitors. They're still producing. They're still doing some projects. Is it just because it's on land? What's the disconnect there if the costs are the same? Why is nobody going to the Gulf, but Canada is still doing some stuff?

Muckerman: I'm pretty sure in those auctions, you've got a limited time frame that you have to drill or begin producing before the money that you spent at the auction is just a sunk cost. I guess it's a sunk cost immediately, but then it basically just disappears. You get nothing for your money if you don't drill soon enough. A lot of these companies in Canada have the right to that land so they can...

O'Reilly: They own it and that's it.

Muckerman: Yeah. They might as well produce. You've got the transportation. Offshore, you have to have a unique transportation for each well because there aren't these pipelines crisscrossing the Gulf of Mexico, thankfully. With the oil sands, these companies -- like we talked about last week -- the companies have to keep the lights on, but they are trimming back. If you look at 2014, oil spending was around $80 billion. This year, two years later, it's around $30 billion for the full year of 2016. It's the biggest two-year change since they started measuring that in the 1940s.

O'Reilly: I'll never forget we saw the capex is now down to like 1952 levels or something.

Muckerman: Yeah, it's bad.

O'Reilly: Eisenhower wasn't the president. Taking an investor perspective to all this, it sounds like based upon all that we've discussed in this show that -- ignoring nationalities and tax effects and all that kind of fun stuff -- do you need higher oil prices to even think about investing in a Canadian oil company? In the $40-$50 world, should we be looking in the Permian Basin?

Muckerman: Sure. You look at Suncor, it's integrated so it's got the full operations just like...

O'Reilly: Their refining operations have been doing well.

Muckerman: Yeah, they have. That may be a company to look at. For us, in Stock Advisor Canada, we've never recommended an energy or oil and gas producer. We have quite a few pipelines and quite a few services companies on our scorecard. That's the method we've been choosing to address the Canadian energy market because we're benchmarked against the S&P/TSX and so you have to have energy exposure, because once energy started to rebound earlier this year, it was...

O'Reilly: You don't want to lag it, obviously.

Muckerman: Right. We did quite well during the downturn comparatively, but once that uptake hit, it was a noticeable lacking portion of our portfolio. We've got several companies that either maintain pipelines, own pipelines. They go out there and provide equipment in the drilling fields. We've got that exposure that way. I think it permeates through the Fool to stay away from producers, in large part, because commodities are so cyclical. The services companies are affected as well, but maybe not to the same degree.