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Thread: What are we going to do when oil prices collapse?

  1. #1

    Default What are we going to do when oil prices collapse?

    Anyone thought about this - in terms of Edmonton's future?

  2. #2

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    tell me, do you really see the price of oil collapsing?

  3. #3

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    I suppose if Iran started firing missiles at Israel and all hell broke loose in the Middle East then there could be a collapse in oil prices, although the opposite could apply as well, supply and demand. I think more the point would be what will happen when the oil sands dry up.

  4. #4

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    I'll be long since 6 feet under by the time "the oilsands" dry up.

  5. #5

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    "Drowning in oil"
    Mar 4th 1999

    check out this article (link below).
    http://www.economist.com/opinion/dis...tory_id=188131
    or
    http://www.casi.org.uk/discuss/1999/msg00181.html

    "The Economist predicts low oil prices for foreseeable future."

    I remember this - it was only 9 years ago!!! Sounded to reasonable and rational - yet was so wrong. In fact I remember reading this and within days oil prices began rising not falling!

    It's really worth reading to see where seemingly rational thoughts and assumptions go very wrong - and because today people are saying we'd better get used to high oil if not rising prices for the foreseeable future. (If the foreseeable future is a week - they might be right but I just don't believe anyone can truly forecast these things - so we'd better be prepared for anything to happen.

    http://www.casi.org.uk/discuss/1999/msg00181.html

  6. #6

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    Quote Originally Posted by Denizen View Post
    I suppose if Iran started firing missiles at Israel and all hell broke loose in the Middle East then there could be a collapse in oil prices, although the opposite could apply as well, supply and demand.
    Say what? Iranian oil off the market and the Strait of Hormuz blocked... effectively taking middle eastern oil off the market (for "a period" of time)... and you suggest there could be a "collapse" of oil prices. Not gonna happen - can we say $200+ barrel oil?

  7. #7

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    Quote Originally Posted by Jeff View Post
    Quote Originally Posted by Denizen View Post
    I suppose if Iran started firing missiles at Israel and all hell broke loose in the Middle East then there could be a collapse in oil prices, although the opposite could apply as well, supply and demand.
    Say what? Iranian oil off the market and the Strait of Hormuz blocked... effectively taking middle eastern oil off the market (for "a period" of time)... and you suggest there could be a "collapse" of oil prices. Not gonna happen - can we say $200+ barrel oil?
    See above Jeff.

  8. #8

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    Hypothetically, if the price of oil drastically bottomed out to a price to halt operations of the oil sands and the Alberta economy took a severe beating, I would simply pick up and move to where the economy was good and I could find a job elsewhere. Would I want to? Hell no - but I would just suck it up and do it.


    I hear a lot of noise (from people in mostly Eastern provinces) wondering why they don't get more federal dollars injected into their economies so they could get jobs and stay where they are instead of moving out West, and I HATE that attitude.

  9. #9

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    I think Oil would have to go below $45-50 a barrel right now before I would even consider worrying. Lets focus on diversifying the economy as much as possible well times are good. Build the keys to the future not relying on oil, through the money oil is currently providing Alberta. The demand for oilseems to just keep going up no matter how much we try to change it.

    Go Oilers.

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    I think, with the economy going the way it is, that Edmonton should work on diversifying its economy. This is our opportunity.

  11. #11

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    Quote Originally Posted by The_Cat View Post
    I think, with the economy going the way it is, that Edmonton should work on diversifying its economy. This is our opportunity.
    Easier said than done. With the economy the way it is, our labour is more expensive than elsewhere, which limits diversification efforts. Just as an overpass costs more, or an LRT, business costs more too. There just is not the labour to set up 1001 different types of business here, as it is, companies are overwhelmed trying to keep up with the Oil Sands.

    To some extent, we do see diversification - which is in high tech / universities. Things like the nano-technology centre, heart institute, carbon capture, are all the types of things that need to be continuted to invested in, IMO.

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    Quote Originally Posted by Denizen View Post
    I suppose if Iran started firing missiles at Israel and all hell broke loose in the Middle East then there could be a collapse in oil prices, although the opposite could apply as well, supply and demand. I think more the point would be what will happen when the oil sands dry up.
    Um, if there was conflict between Israel and Iran, prices wouldn't collapse. They'd sky rocket. I have no idea how much, but I'd say that $250 would be a very low guess. We'd possibly see world economic collapse.

    As far as the oilsands go, there's enough oil there for at least a couple centuries of production, depending on how much we ramp up production.

    I don't see oil prices collapsing, if by collapsing you mean below say $30 a barrel. But I don't want to make any bold predictions because I'm sure they'll turn out wrong in the end, anyway.

  13. #13

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    Personally, I'd say there's incredible risk out there of some sort of supply disruption - especially Saudi supply. In fact the early 1990s I was writing to Forbes and Fortune magazines highlighting this fact and suggesting they write articles on the potential for investing in Alberta's oil sands due to productin cost reductions. I bet they'd never heard of the oil sands.

    Nonetheless, risky supply conditions existed in the 1990's as well, yet oil prices still fell to $10/bbl. Amazing 10/bbl yet China was already growing fast, there was a far lower level of US military forces stationed in the Middle East to quickly move to protect any facility, etc.

    Basically, oil prices are very hard to predict and there are always excellent reasons for whatever the current trend is, to continue. Clearly those reasons can be broadly accepted and disasterously wrong.

    My postiion is that we almost can't rule out any future price for oil - high or low.

  14. #14

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    The only darn way there will be a collapse in oil prices is one of two scenarios, or even a combination...


    1. an eco-acceptable, easy to manufacture/refine, safe, relatively plentiful, and readily easy to distribute source of alternative energy is found, -AND/OR-
    2. government interference.

    That's all. Otherwise, the Mid East can shoot off all the little buzz bombs they want, the oil prices will only escalate.
    Last edited by RichardS; 14-07-2008 at 08:56 AM. Reason: syntax
    Onward and upward

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    LOL LOL LOL LOL LOL

    Oil prices may fall a bit but never enough for prices to drop at the pumps.

    Hey we can dream though

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    Never say never! I don't think it's likely either, but it's not outside the realm of possibility.

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    I love how the media trumpets "BIGGEST DROP IN PRICE EVAR!!!!!!1!!one" when the reality is a $10 drop in the price of oil today is only a 6-7% drop, which I'm sure historically isn't all that well, historic. The market's reacting to further doom and gloom predictions for the US economy. Now if we can just string, oh, 10 consecutive trading sessions of drops of that size, we'll be back to where we were, oh, 9 months ago.

  19. #19

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    Big deal - oil prices just dropped from $146 to $138 per barrel.


    $130 was a record price only a few short weeks ago.

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    Default oil prices drop ?

    what will I do ? probably the same thing I do everyday .....get up and go to work .

  21. #21

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    Having lived here in the 80's / 90s I've experienced the get up and 'not' go to work scenario.

    However, if you folks are right and high/rising oil prices are pretty much here to stay - then I guess I shouldn't be concerned that Edmonton will see a repeat of the 1970s excesses and the 80s / 90s cut backs. (In those years, poor reasoning, emotions and irrational behavior allowed the pendulum to swing too far in either direction. We lost a lot of valuable time in this city.)

    My worry has been that we're clearly in that 70's scenario where you can pretty much double or triple any project's budget and get a closer approximation to what the final cost to taxpayers will be. "Here Come the 70s."
    Last edited by KC; 16-07-2008 at 08:05 PM.

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    The biggest difference between the 80's recession and now is that back then prime interest rates were 12% to 16%. Today's prime rate is, what, 4.75% and likely falling?
    “You have to dream big. If we want to be a little city, we dream small. If we want to be a big city, we dream big, and this is a big idea.” - Mayor Stephen Mandel, 02/22/2012

  23. #23

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    They learned a lot from the crash of 1982...

    However, it is feeling like 1979 more and more each day...
    Onward and upward

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    On what basis, Richard? Single family housing his been hit hard, and that's it. Unemployment is still historically low, commercial, industrial, and infrastructure construction is still flat out, and oil is still near historic highs with not much to indicate we'll see a massive drop down to sub $50/barrel prices. The US economy has most likely started it's recovery (don't forget that the statistics and signs that the market watchers use to prognosticate on are typically 6months to a year behind) and never even actually entered a recession, and China/India/Brazil are still going strong.

    I see few similarities between then and now, but then again I wasn't around back then either.

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    Been on vacation for the last week, raz? Because wow, you missed a good one.

    (or: any claims that the US is out of the woods seem a bit premature at this point.)

    And SDM, average interest rates in the 70's were higher than today. But they only spiked to the 8-12-15-20% range as an inflation fighting measure. That's not a problem today, is it? Our neighbours to the south don't seem to know what they're doing, and (more importantly) they don't seem to be able to convice people that they know what they're doing.

    Interesting times.

  26. #26

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    the only thing in common between the 1970s and now is that oil is expensive. But the MAJOR difference are the reasons for the high price of oil.

    Back then oil prices went up because the Middle Eastern countries weren't letting us have any, so we were forced to produce more to compensate. Once they decided to play along, they opened the taps and prices plummeted.

    Now in 2008 we are getting all the oil we want, but with emerging economies and increased industrialization (especially in Asia) the world (including Alberta) simply can't produce oil fast enough. Unless everyone in the US and China switch to electric cars overnight, we will continue expanding oil production and selling it to the highest bidders.

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    Certainly volatility in oil prices can lead to collapses.

    Price and supply of Oil is already and has historically impacted economies and manufacturing.

    -The price can go down through surplus(new major supplies in operation)

    -The price continuing to spur alternate energy forms.

    -The inordinately high price resulting in economic collapse of industries which therefore would have no need for world oil.

    -The subsequent drop in demand from countries and populace majorly impacted by oil induced recession/depression.

    -Even a temporary key interruption in supplies of oil could destroy segments of the economy and thereby lessen demand.

    -A drop in the price of Oil could also deflate demand by undermining oil producing economies.

    Volatility is inherently volatile. Anybody that went through the 70's fairly knows that anything could happen to the price of oil.

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    Been on vacation for the last week, raz? Because wow, you missed a good one

    (or: any claims that the US is out of the woods seem a bit premature at this point.)
    Nope. Care to offer specifics of what happened in the past week that leads you to think that we're in the lead up to a massive bust like we experienced in the 80's? (hey, I'm not so pleased about the TSX's impact on my RRSP account either) Oh noz, a couple down days in the price of oil! The sky is falling! The fact is, the US economy did not enter a recession, and virtually no is predicting it will now. Growth is slowed to be sure, and inflation's a concern, but that slowed growth is tempering oil prices, and barring any catastrophe everyone is expecting the US economy to start picking up over the next year or two.

    I don't see what the huge concern is, honestly. Things have slowed down, big deal.

    Volatility is inherently volatile. Anybody that went through the 70's fairly knows that anything could happen to the price of oil.
    Yeah, I'd agree with that. No one knows for sure what's going to happen. But I think that comparisons to the energy crises of the 70's and 80's is not supported by any evidence.

  30. #30

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    Quote Originally Posted by raz0469 View Post
    Yeah, I'd agree with that. No one knows for sure what's going to happen. But I think that comparisons to the energy crises of the 70's and 80's is not supported by any evidence.
    I don't know - there is a long history of commodities, be it oil, or whatever, going through bust and boom cycles. In saying that, I think we in Edmonton may be insulated for some time given how much has already been committed to be invested in the region, but never say never on busts or booms, and I don't think ever say never on learning from the past- they thought things were permanently different in the 1970's too.

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    Quote Originally Posted by raz0469 View Post
    The fact is, the US economy did not enter a recession, and virtually no is predicting it will now. Growth is slowed to be sure, and inflation's a concern, but that slowed growth is tempering oil prices, and barring any catastrophe everyone is expecting the US economy to start picking up over the next year or two.
    For starters, head to googlenews and do a quick search for US and Recession. I think there might still be a little bit of recession talk out there.

    Beyond that:

    Yeah, it was just a little run on the bank.

    And the two largest quasi-governmental US mortgage insurers along with untold billions in bad debt will probably need to be bailed out by US taxpayers - but that happens everyday. And twice on sundays.

    And the Fed and Treasury have been playing musical chairs for the last few months. For fun, obviously. Nothing to see here.

    And the Fed is actually admitting that it expects 5% headline inflation by the end of the year, but also can't (or at least won't) raise rates for fear of a widespread banking collapse? And today the ECB is talking about slackening its inflation target because meeting it might trigger a recession. Again though, they must be choosing to ignore their inflation goals for fun - not because there are any problems or out of desperation. It's not like those targets serve any real purpose, right?

    Ultimately, “Whether it’s a technical recession or not is not all that relevant,” Mr. Bernanke said. “It’s clearly the case that for a variety of reasons families are facing hardship.”

    The sky isn't falling, but it's way to early to claim that there's nothing but clear skies ahead.

  32. #32

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    Of course everything we buy, from a can of beans to a leather jacket is determined by the markets, just as oil prices. There are reasons why the price of oil has recently gone down and I wonder what those reasons are. Perhaps we will never know.

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    For starters, head to googlenews and do a quick search for US and Recession. I think there might still be a little bit of recession talk out there.
    Definitions of recession vary, but the commonly accepted one is two quarters of negative GDP growth. The US has not had one yet, and isn't expected to. From your own article:

    Quote Originally Posted by Wall Street Journal
    Economists’ shorthand definition of recession — two straight quarters of declining economic output — has not been met. And the Fed expects weak but positive economic growth for the rest of the year.
    Yeah, it was just a little run on the bank.

    And the two largest quasi-governmental US mortgage insurers along with untold billions in bad debt will probably need to be bailed out by US taxpayers - but that happens everyday. And twice on sundays.

    And the Fed and Treasury have been playing musical chairs for the last few months. For fun, obviously. Nothing to see here.
    No quesion that credit markets are still goofed up, and will probably be for some time.

    The sky isn't falling, but it's way to early to claim that there's nothing but clear skies ahead.
    I never claimed it was nothing but clear skies. I said that I don't think that we're facing anything like what we saw 30 years ago. There's definitely a slow down underway, and it's likely to persist for awhile yet. That's no surprise, the economy is cyclical and bad times come with the good. That doesn't mean that we're headed for stagflation or hyperinflation here in Alberta or even in Canada generally (although I sure wouldn't want to live in Windsor or really most of Southern Ontario right now).

    There are reasons why the price of oil has recently gone down and I wonder what those reasons are. Perhaps we will never know.
    It's pretty obvious actually. There's been a fair amount of bad news in the US lately, and growth targets have been reduced, which in turn would indicate that oil consumption in the US will not grow as fast as expected or may even decline, leading to sentiment that oil supplies will increase. Tomorrow someone will blow up a pipeline in Nigeria or Iraq or something and they'll go up a few bucks, and so on and so forth. It's anybody's guess which way oil will go at this point, but I'd say the smart money is on it declining somewhat in the near term, but I'm certainly no analyst.
    Last edited by raz0469; 17-07-2008 at 11:21 PM.

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    I'm with KC on this one. Never say never. A year ago who would have thought there would be this many homes up for sale. All I know is something always happens that nobody thought of and then everything changes...
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    Quote Originally Posted by raz0469 View Post
    ...
    Definitions of recession vary, but...
    a recession is when you get laid off. a depression is when i get laid off.

    one of the things of note over the last decade or two (for those of us old enough to have memories that go back that far) is the inordinate amount of time that seems to get spent having others tell us how well we're doing or not doing. how many of us in fact are doing poorer this year than last? we read four magazines a week instead of one a month. we read four newspapers a day instead of one. we surf two radio bands plus two satellite sets. as the song goes about our televisions - 57 channels and nothing on but we watch them all anyway. we don't even surf the net anymore - we subscribe to "feeds" and e-zines and blogs...

    i think we all get caught up in the property manager's career curse - you can have as many tenants in your portfolio as you choose but you'll still never hear from the happy ones. if you didn't know better you would think there aren't any...

    this time last year if you listened to everything out there you would have thought things were so good that it would just explode and if you listened to all the noise out there today you can't help but think that it it will just implode and leave a black hole in the universe forever. it's probably some where in between - as it usually is - but there still isn't anywhere else i'd rather be for the next couple of decades than right here.
    "If you did not want much, there was plenty." Harper Lee

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    I remember when the Shell oilsands project was given the go ahead. Oil was $12/bbl. This was in 1998.

    I believe if oil prices dropped below $80/bbl, you might see some trouble in Edmonton. A lot of marginal wells are being put on line because they can make money now. Margins are not that good in Canada in the oilfield supply/manufacturing due to higher costs (both labour and material). Or at least, not as good as they should be, given the price of the commodity.

    Most of the bigger operations wouldn't have any trouble until 40-50$/bbl.

  37. #37

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    [QUOTE=kcantor;113651]
    Quote Originally Posted by raz0469 View Post
    ...
    ...this time last year if you listened to everything out there you would have thought things were so good that it would just explode and if you listened to all the noise out there today you can't help but think that it it will just implode and leave a black hole in the universe forever. it's probably some where in between - as it usually is - but there still isn't anywhere else i'd rather be for the next couple of decades than right here.
    " it's probably some where in between - as it usually is " You are "probably" right. The media sells their material by taking things to ever greater and greater extremes. Nonetheless, sometimes the extreme reports don't even match the ensuing reality. What's bothering me is that today the dogma has turned 180s degrees from "oil will be low for the foreseeable future " to "oil will be high for the foreseeable future ". ( "The foreseeable future" in reality seems to be only about a month or two.) Today's dogma is giving some people the excuse to again mortgage our kids future to satisty their every want and to lock us into a potentially unsupportable spending cycle. And it not just spending - it's a lot of other behaviors.

    Instead I think we must keep our minds - and to some extent our options - open to a wider range of possible future scenarios. Hopefully, the future will be even better than we expect but it could be anything. (Re-read that Economist article - it's fascinating in hindsight - seemingly totally rational expectations can go totally wrong - as they often do.) We really need to be more critical of today's prognostications no matter how rational they sound. The Economist missed one little variable - China. What are our forecasters missing today?

    I'd prefer it if we took the attitide that: We've won the lottery twice now - lets not screw it up a SECOND time.


    And I love these two quotes:

    "I am reminded of the story Nobel Prize winner Ken Arrow tells about his experience trying to make long-range weather forecasts for the military during World War II. He told his superiors that his forecasts were so unreliable as to be useless. The word came back that the General knew his forecasts were useless, but needed them anyway for planning purposes. " - Bill Miller,

    "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist." - JM Keynes

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    So, as the oil price falls are Alberta labour and other costs falling too?

    In talking with a neighbour (an oil/gas driller) a few weeks back he said he could see a lot of the planned Ft. McMurray projects being shelved if oil fell below $85/bbl. - since costs have risen so dramatically.

    That's not to say that a lot of the old plants won't continue to make a ton of money off even $50/bbl oil - but the new ones may not be profitable.

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    Quote Originally Posted by KC View Post
    So, as the oil price falls are Alberta labour and other costs falling too?
    This will be great for projects around the Edmonton region. We have gone from needing thousands of tradesman to needing none. Travel cards are being laid off and they are going home, this saves allot of money as each travel card cost $185 LOA per day to have them here.

    savings in fuel too I bet cost cutts by 50%

    won't experience high turnover also, people will value the jobs they have.
    Last edited by DDD; 12-10-2008 at 12:19 PM.

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    So, as the oil price falls are Alberta labour and other costs falling too?
    The actual costs won't fall. The union CBA's for the mega projects all have rate increases of 5-7% annually for the next few years, to the best of my knowledge. Open shop companies typically mirror that otherwise they'll lose guys. So labor isn't going down any time soon. Materials might start stabilizing with commodity prices levelling out. The flip side is the Canadian dollar is going down and lots of building materials come from the US, so that might come in to play if it keeps dropping.

    Most importantly though, there's going to be less work out there, and margins are going to tighten for construction companies as things get more competitive. No more begging just to get two competitive tenders.

    At the very least, things are going to moderate or stabilize for awhile I would think.

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    Quote Originally Posted by raz0469 View Post
    So, as the oil price falls are Alberta labour and other costs falling too?
    The actual costs won't fall. The union CBA's for the mega projects all have rate increases of 5-7% annually for the next few years, to the best of my knowledge. Open shop companies typically mirror that otherwise they'll lose guys. So labor isn't going down any time soon. Materials might start stabilizing with commodity prices levelling out. The flip side is the Canadian dollar is going down and lots of building materials come from the US, so that might come in to play if it keeps dropping.

    Most importantly though, there's going to be less work out there, and margins are going to tighten for construction companies as things get more competitive. No more begging just to get two competitive tenders.

    At the very least, things are going to moderate or stabilize for awhile I would think.
    Copper is down from 4$ to 2$. Copper is typically viewed as a major indicator of the world economy, it is signaling a significant pull back in the commodities. So, yes, we should see cost reductions through materials costs going down.

    Unless there is some catastrophic event and labour unions are forced into "enabling clauses" which circumvent the agreed to labour agreements in an effort to put members to work, no the standard labour costs are not going down. However, with more available labour pools across Canada and the United States, some amount of labour cost control may be possible through being more able to fill manpower requirements vs. doing so via overtime.

  42. #42

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    The key driver though is the price of oil. And as we learned in the 1990s, there aren't many long term opportunistically minded thinkers out there.

  43. #43

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    I heard on the radio yesterday that the Province is considering layoffs.

  44. #44

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    Quote Originally Posted by Jeff View Post
    Quote Originally Posted by Denizen View Post
    I suppose if Iran started firing missiles at Israel and all hell broke loose in the Middle East then there could be a collapse in oil prices, although the opposite could apply as well, supply and demand.
    Say what? Iranian oil off the market and the Strait of Hormuz blocked... effectively taking middle eastern oil off the market (for "a period" of time)... and you suggest there could be a "collapse" of oil prices. Not gonna happen - can we say $200+ barrel oil?

    "$200+ barrel oil" followed by a collapse of several economies... followed by a collapse in the price of oil? It depends on your time horizon - one week or one year. A bit of tension like this is probably good for oil prices and great for Alberta's economy however, if it ends up in war, it may only be 'good' if you figure the ALCAN was good.


    Iran 'test-fires medium-range missile' in Gulf

    http://www.bbc.co.uk/news/world-middle-east-16377185
    excerpt:

    "Iran threatened to close the Strait of Hormuz, which links the Gulf - and its oil-producing states - to the Indian Ocean.

    About 20% of the world's oil passes through the narrow strait..."

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    if oil prices goes as high as $ 200 a barrel , Canadian Economy is in trouble because prices on everything from food, cars , houses and etc will go through the roof and many low and middle income earners will suffer the worst, if that is going to happen like that.
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    Remember how the price of food shot up in 2008 because oil was around $150.00 a barrel? Ever notice how once oil crashed in the fall of 2008 and into winter the price of these goods never went back down? Notice how the last 3 years prices continue to go up and wages don't?

    Welcome to the new reality folks. The middle class is disappearing and we're all letting it happen.

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    Not a great case made for it here, but Smead does add some evidence.

    http://smeadcap.com/smead-strategies...hen-2-12-2013/

    Excerpt:

    "Question number two: Will a massive increase in oil supplies, record-setting gas mileage improvements in autos and China's eventual bust cause a big decline in oil prices?

    We believe that dramatically lower oil prices are on the way. At the end of 1995, I remember a survey on what mattered..."

  48. #48

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    China may bust... but there is still India

    India is also heavily banking on Africa.

    The worlds love affair with oil is not going anywhere.
    "Do you give people who already use transit a better service, or do you build it where they don't use it in the hopes they might start to use it?" Nenshi

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    Quote Originally Posted by Kitlope View Post
    Remember how the price of food shot up in 2008 because oil was around $150.00 a barrel? Ever notice how once oil crashed in the fall of 2008 and into winter the price of these goods never went back down? Notice how the last 3 years prices continue to go up and wages don't?

    Welcome to the new reality folks. The middle class is disappearing and we're all letting it happen.
    didn't you know? it's a conspiracy. now if we could only find out who's behind it...
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    I am.

    I like what edmonton daily photo said. The world's love affair with oil is not going anywhere. No one here in town is trembling in fear right now.
    happy to be the grumpy old bugger waking up the booster club!

  51. #51

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    By products of oil is just not gasoline folks. With China's hunger for oil (1.4 billion people) and India on the verge of economic prosperity (1.4 billion), there will be no collapse anytime soon. China's consumption at this stage is fullfilling the needs of possibly 15/20% of its population. On the low side, another billion people are still in the wants so connect the dots... It will not surprise me if oil hits the $250/300 a barrel within 10 years.

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    77 million generation Y people in the US are only now getting established in their careers. For significant part of them up till now disposable income and car ownership has not been a factor. I expect this to change dramatically in the coming years. Priorities will shift , families will form and Energy use will be in demand. The significant gain in life style status after an extended economic recession will be too hard to resist.

    Auto sales and housing starts are beginning to turn around in The US and it will be long ramp back . All of these have energy demands for now and more in the future.

  53. #53

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    Quote Originally Posted by Hull534 View Post
    77 million generation Y people in the US are only now getting established in their careers. For significant part of them up till now disposable income and car ownership has not been a factor. I expect this to change dramatically in the coming years. Priorities will shift , families will form and Energy use will be in demand. The significant gain in life style status after an extended economic recession will be too hard to resist.

    Auto sales and housing starts are beginning to turn around in The US and it will be long ramp back . All of these have energy demands for now and more in the future.
    Good points on the demographics. However, the world had a fair bit of growth in the 1980s and 90s too yet oil prices languished.

  54. #54

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    US Oil Headed for Steep Drop to $75: Pro

    Excerpt:


    "Shale oil is the reason why oil prices fell last year and the reason why it will continue to fall in the next few years," said Su.

    "Shale oil will reshape the way that the entire oil industry is run and the U.S. will become an exporter of oil in next five to 10 years. That will have a significant impact on the U.S. and the global economy," he added."

    http://www.cnbc.com/id/100544785

  55. #55

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    Well...the price of our oil has already dropped.

    Not because of external factors, but because we can't get it to market.

    Which shows it's not just external/international factors affecting us.

    Now is the time, as a Province, to be very serious about breaking our reliance on oil and diversifying our economy for the future. That diversification can also be a way to use the oil we have with new industries.

    At the same time we need to find new ways to get what we have to market, cross Canada pipeline? Rail?

    Time to innovate and be proactive rather than reactive.

    In my highly biased personal opinion

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    I haven't looked yet but I wonder if there has been research into a comparison of cost, frequency of spills, and environmental impact between truck, rail, and pipeline distribution.

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    Quote Originally Posted by azzey View Post
    I haven't looked yet but I wonder if there has been research into a comparison of cost, frequency of spills, and environmental impact between truck, rail, and pipeline distribution.
    There is. Pipelines are far and away the cheapest, safest, and "greenest" ways to move oil.

    http://www.newscientist.com/article/...tar-sands.html

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    ^bingo.

    Get a line to the coast, to the east and to the south. That said, continue to work on value added production here.
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    Quote Originally Posted by IanO View Post
    ^bingo.

    Get a line to the coast, to the east and to the south. That said, continue to work on value added production here.
    South and west won't be happening any time soon. East, who knows?

  60. #60

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    I think there is more openness right now to built a pipeline East.

  61. #61

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    Maybe lock in some supply and only sell our oil when we can maximize our margin.

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    I agree that we have a clogged up situation of getting the product to market . This needs to be resolved.

    One thing that I do not understand is the argument of instead of pipelines we can refine the product here . It seems to me that the product would still have to get to market, after all the volumes would still be relatively the same size. This would necessitate pipelines notwithstanding.

    I still see the value in an export line to the North. The corridor is over halfway fully developed. The environmental impacts have been studied to death. Unlike to the west , the aboriginal support is there. The future potential to export ( or bring south for that matter) huge potential in the Mackenzie Delta and Canol reserves could be added to the mix. The NWT govt now would be getting royalties for this.

    The Russians are already running oil exports through their northern passage, so the technology is proven. We could do this and we could do this relatively quickly. As an added benefit , unlike the west and east coast options. I could see much of the infrastructure built in our yards in Edmonton and transported north.

  63. #63

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    ^I am guessing (?) it is very expensive to build in the north (you have to camp labor, poor transport infrastructure, etc), I agree it would be great if could be done though.

  64. #64

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    ^
    Regardless of direction, all the things you mentioned would still apply.

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    worse ever for oil crisis is in 1973, I have never forget that time as my dad have a tough time with finding cheaper gas for the car.
    gas prices went so high that my family could not afford to travel outside Ontario on a vacation that time.
    Last edited by jagators63; 16-03-2013 at 08:28 PM.
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    Here is an informative paper from the US Energy Information Administration that lays out the scope of the challenge Canadian oil sands producers will likely be facing in the next several years (maybe much longer).

    "Crude oil production increased by 790,000 barrels per day (bbl/d) between 2011 and 2012, the largest increase in annual output since the beginning of U.S. commercial crude oil production in 1859... U.S. crude oil output is forecast to rise to 815,000 bbl/d this year to 7.25 million barrels per day, according to the February 2013 STEO. U.S. daily oil production is expected to rise by another 570,000 bbl/d in 2014 to 7.82 million barrels per day, the highest annual average level since 1988." Link: http://www.eia.gov/forecasts/steo/sp...2013_sp_02.pdf

    US domestic crude oil production is expected to increase by 2.2 million barrels per day between 2012 to 2014. This 3-year production increase is more than the 1.5 million barrels per day total current output of the Alberta oil sands.
    Last edited by East McCauley; 17-03-2013 at 12:06 PM. Reason: add quotes

  67. #67

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    ^the good news is that while supply is going through the roof (what a load of crap the peak oil theory was, technology always advances when prices get high), demand internationally (not so much north america, rather, the developing world), is also going through the roof. By all accounts OPEC is producing pretty much to capacity easily extracted oil (even with the global recession), so the key for us longer term is to access ports (shipping oil being incredibly cheap once you get it to the ocean).
    Last edited by moahunter; 17-03-2013 at 12:24 PM.

  68. #68

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    This is whats going to happen



  69. #69

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    Interesting article


    Oil’s $5 Trillion Permian Boom Threatened by $70 Crude - Bloomberg

    http://www.bloomberg.com/news/2013-1...-70-crude.html

  70. #70

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    So, are we replacing dwindling conventional oil or adding more capacity than is needed? If the latter, maybe the fear of a supply glut and the consequent fear of losses will hold back supply. That or global growth will suck up the extra supply. If not, we may be in for a replay of the 1980s and 1990s depression times here in Alberta.

    I don't know why, but I always get the feeling that despite our incredible wealth, our ability to spend it too, repeatedly puts us on thin ice.


    North America to Drown in Oil as Mexico Ends Monopoly - Bloomberg

    By Joe Carroll and Bradley Olson Dec 16, 2013

    Excerpt:
    "That boom would augment a supply surge from U.S. and Canadian wells that Exxon Mobil Corp. (XOM) predicts will vault North American production ahead of every OPEC member except Saudi Arabia within two years. "
    ...
    "An influx of Mexican oil would contribute to a glut that is expected to lower the price of Brent crude, the benchmark for more than half the world’s crude that has averaged $108.62 a barrel this year, to as low as $88 a barrel in 2017, based on estimates from ...."

    http://www.bloomberg.com/news/2013-1...-monopoly.html




    .
    Last edited by KC; 22-12-2013 at 12:03 AM.

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    "Crude oil production increased by 790,000 barrels per day (bbl/d) between 2011 and 2012, the largest increase in annual output since the beginning of U.S. commercial crude oil production in 1859... U.S. crude oil output is forecast to rise to 815,000 bbl/d this year to 7.25 million barrels per day, according to the February 2013 STEO. U.S. daily oil production is expected to rise by another 570,000 bbl/d in 2014 to 7.82 million barrels per day, the highest annual average level since 1988." Link: http://www.eia.gov/forecasts/steo/sp...2013_sp_02.pdf

    It's all but certain that the above forecast for US crude oil production made at the beginning of 2013 was overly conservative. Actual production for the first 9 months of 2013 is already 100,000 barrels per day above the forecast for the entire year. Production for the most recent month (September 2013) is almost at the level forecast for 2014 (7.8 millions/day). Link: http://www.eia.gov/dnav/pet/hist/Lea...s=MCRFPUS2&f=M

    The Energy Information Administration is revising its 2014 and beyond production forecasts upwards.

    Trying to predict future oil prices is a mug's game. But it sure seems the fundamentals of supply and demand are more in line with lower, rather than higher, prices in the next few tears.

  72. #72
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    I'm usually not one to go for Freudian slips and whatnot, but...

    Quote Originally Posted by East McCauley View Post
    [I]Trying to predict future oil prices is a mug's game. But it sure seems the fundamentals of supply and demand are more in line with lower, rather than higher, prices in the next few tears.
    Was that last word there a reference to the Alberta government's budget-planners?

  73. #73
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    ^No. The Alberta government has to put a forecast price in its budget. The price is almost always wrong, sometimes to the upside and sometimes to the downside.

    For 2013-14, the forecast WTI price of $92.50 per barrel is below what the actual price is likely to be. Plus the Canadian dollar has gone down more than expected relative to the US dollar. Both of these factors mean a lower than forecast budget deficit this year.

    Not even going to hazard a guess as to the accuracy of the province's $95/barrel forecast for 2014-15 or the $92/barrel forecast for WTI for 2015-16. Will be interesting in seeing what the updated forecast oil prices are in the 2014 Budget.

    Life is short enough as it is. Can't imagine how much less hair I would have if I was an Alberta government energy price forecaster.

  74. #74

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    Quote Originally Posted by KC View Post
    "Drowning in oil"
    Mar 4th 1999

    check out this article (link below).
    http://www.economist.com/opinion/dis...tory_id=188131
    or
    http://www.casi.org.uk/discuss/1999/msg00181.html

    "The Economist predicts low oil prices for foreseeable future."

    I remember this - it was only 9 years ago!!! Sounded to reasonable and rational - yet was so wrong. In fact I remember reading this and within days oil prices began rising not falling!

    It's really worth reading to see where seemingly rational thoughts and assumptions go very wrong - and because today people are saying we'd better get used to high oil if not rising prices for the foreseeable future. (If the foreseeable future is a week - they might be right but I just don't believe anyone can truly forecast these things - so we'd better be prepared for anything to happen.

    http://www.casi.org.uk/discuss/1999/msg00181.html
    I keep thinking back to the Dr. Albert A. Bartlett video(s): "The most important video you will ever see" and wondering how much relief shale and other future discoveries will provide to the global economy and harm it could do to Alberta's economy (think natural gas). All I can think is that we should see a lot more volatility in prices so we get more repeats of 2008-2009 oil price volatility. So Alberta would benefit from rising prices but then, since we spend everything we make, we'll periodically be hit with large unexpected short term price drops that send us into a cost cutting panic.

    https://www.youtube.com/watch?v=umFnrvcS6AQ


    The Economist: ”Oil is yesterday’s fuel”
    August 1, 2013
    excerpt
    :
    "The next issue of The Economist has a front cover that says, “The future of oil – Yesterday’s fuel”. 14 years ago, on 4 March 1999, the front cover had a completely different message. Then, the editors of the Economist published an article titled, “Drowning in Oil”. They wrote that “The world is awash with the stuff, and it is likely to remain so”. They thought that cheap oil from the Middle East would reduce the then price of $10 down to $5 per barrel.

    One year earlier Colin Campbell and Jean Laherrere wrote in an article in Scientific American that cheap oil would reach peak production in around 2004 (read the article). It was the flow of this cheap oil that, according to The Economist, would force the price down to $5 per barrel. We now know that, according to the International Energy Agency (IEA) cheap oil reached maximal production in 2005 and the shortage of cheap oil subsequently forced the price up to over $100 per barrel."...
    ...
    "The fact that the oil price rose from $10 per barrel in 1999 to over $100 today should give every faithful economist reason to believe that we are now experiencing an oil shortage."

    http://aleklett.wordpress.com/2013/0...sterdays-fuel/

    Peeking at Peak Oil
    excerpt:
    "...World conventional oil production is on an 82-million-bpd plateau. However, the real sleeper is the production decline rate in existing fields, about 4% to 6% annually… After a painstaking, detailed analysis, he concludes that the maximum, incremental production increase from all unconventional sources, combined, is about 8 million bpd during the next 25 years. Since the total flow from fields already producing is decreasing 4 million bopd every year, unconventional output gains during the next 25 years can only compensate for a two-year decline in conventional production… Aleklett and other analysts estimate that worldwide conventional oil production could begin declining within five years."

    http://deepresource.wordpress.com/2012/05/08/1119/




    Peak Oil becomes an Issue Again after the IEA Revised its Predictions
    Tom Dispatch | Thu, 09 January 2014
    excerpt:
    "As the year went on, the eulogies came in fast and furious. “Today, it is probably safe to say we have slayed ‘peak oil’ once and for all, thanks to the combination of new shale oil and gas production techniques,” declared Rob Wile, an energy and economics reporter for Business Insider. Similar comments from energy experts were commonplace, prompting an R.I.P. headline at Time.com announcing, “Peak Oil is Dead.”..."
    ...
    "But that was then. The most recent edition of World Energy Outlook, published this past November, was a lot more circumspect. Yes, shale oil, tar sands, and other unconventional fuels will add to global supplies in the years ahead, and, yes, technology will help prolong the life of petroleum. Nonetheless, it’s easy to forget that we are also witnessing the wholesale depletion of the world’s existing oil fields and so all these increases in shale output must be balanced against declines in conventional production. "

    http://oilprice.com/Energy/Crude-Oil...edictions.html

    ^This last one brings up the very issues that Bartlett raised in his videos. Rising global consumption can easily swamp any new potential sources of oil.
    Last edited by KC; 11-03-2014 at 01:15 PM.

  75. #75
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    Default It's happened - big time!



    “You have to dream big. If we want to be a little city, we dream small. If we want to be a big city, we dream big, and this is a big idea.” - Mayor Stephen Mandel, 02/22/2012

  76. #76

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    ^lol, that would mean time to implemeent plan B (leave Alberta)...

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    ^^Bizzaro. Is that an actual screen capture from today?

    Before everyone clogs the highways in a mad rush out of Alberta, by 8:17 pm, the WTI crude price seems to have recovered to $103.45 US.
    http://www.theglobeandmail.com/globe-investor/

  78. #78

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    ^Suddenly were in Venezuela?


    Here's a recent article on oil prices... It might represent a buying opportunity, and a greenhouse gas taxing opportunity. Shazzam! Global deficits disappear! I'm back adding a second link debating the first.

    Here Comes $75 Oil - Barron's
    Excerpts:

    "THE GAME CHANGERS on the supply side are the three new types of oil production that have not been counted as part of the oil supply until recently: ..."

    http://online.barrons.com/news/artic...59323209921860


    Citi vs. Chevron: two opposing views of the oil price future « The Barrel Blog
    http://blogs.platts.com/2014/04/09/c...ron-oil-price/



    .
    Last edited by KC; 15-04-2014 at 07:46 PM.

  79. #79

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    Saudi Arabia apparently wants to keep its market share... Fortunately we've diversified our economy into home and infrastructure spending and personal fiscal stimulus.

    http://www.cnbc.com/id/102053966


    Economists optimistic about Alberta economy despite oil price plunge
    BY GARY LAMPHIER, EDMONTON JOURNAL OCTOBER 2, 2014

    http://www.edmontonjournal.com/Econo...?__federated=1
    Last edited by KC; 03-10-2014 at 07:56 AM.

  80. #80

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    ^it probably helps that the dollar is dropping, but things might get a lot tighter, re Alberta's crazy government spend. I expect as long as over $60 locally we will be alright, probably even if goes a bit below, but the good times might be nearing an end.

  81. #81
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    ^Since oil is denominated in US dollars, the decline in crude oil prices on provincial government revenues is off-set to some extent by the recent decline in the value of the Canadian dollar relative to the US dollar.

    Despite all the attention being paid to rising oil production in North Dakota, the real elephant in the room is Texas. Oil production in the Lone Star State has grown by 2 million barrels per day in the past 5 years, and in July 2014 is now 500,000 barrels per day higher than in 1981. The growth in Texas oil production in just the past 5 years is greater than the total production from Alberta's oil sands.

    Here is a link to a chart from the US Energy Information Administration showing the production trend in Texas:

    http://www.eia.gov/dnav/pet/hist/Lea...s=MCRFPTX2&f=M

  82. #82

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    ^I was there a few days ago, tanks being constructed, refineries are churning out gasoline to be sent all over the US (its a fascinating hub). Its amazing to drive from Galveston to Houston and see refineries along the entire trip, if more of our heavy oil ever gets there (i.e. Keystone), there will still be plenty of market for it, the massive infrastructure to get refined products to market across the US is all there.

  83. #83

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    Quote Originally Posted by moahunter View Post
    ^I was there a few days ago, tanks being constructed, refineries are churning out gasoline to be sent all over the US (its a fascinating hub). Its amazing to drive from Galveston to Houston and see refineries along the entire trip, if more of our heavy oil ever gets there (i.e. Keystone), there will still be plenty of market for it, the massive infrastructure to get refined products to market across the US is all there.
    So are we back to being hewers and they capture the higher margin business and employ the higher paid positions?

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    I remember 1973 Oil embargo lasted till March 1974 costing a barrel of oil from $ 3 to $ 12

    The oil crisis, or "shock", had many short-term and long-term effects on global politics and the global economy.
    Edmonton Rocks Rocks Rocks

  85. #85

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    Quote Originally Posted by KC View Post
    So are we back to being hewers and they capture the higher margin business and employ the higher paid positions?
    No, this is low margin stuff, refineries are highly expensive (cost billions), over capacity (dozens of them in Texas), low margin high pollution business. The margins are in extracting oil efficiently using modern technology. My point is if you can get oil to Texas you supply the entire US so prices there are premium, because refined product from there goes all over the US in pipelines that feed from that hub. Whether the oil goes there by Keystone, Enbridges backdoor line, or even tanker from the coast, it's a desirable place to sell to, to maximize the profits we make.
    Last edited by moahunter; 05-10-2014 at 03:19 PM.

  86. #86

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    Yeah, they're really concerned about our economy. But this is basically what we're aiming for in Alberta already.



    In Houston on Tuesday, Exxon-Mobil’s CEO, Rex Tillerson, proclaimed to a business group that the more sure-fire way to add jobs to the US economy would be for the nation to export its oil instead of refining it, and using it, here. As it stands right now, before companies can export oil, it needs to be refined from its crude state, a process which employs 83,000 people nationwide. Rex’s proposal would be to fire all of them, and send the crude directly overseas for other nations to refine and then reimport into the US. All in the name of the “free market.”

    http://www.addictinginfo.org/2014/10...il-export-oil/

  87. #87

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    Quote Originally Posted by kkozoriz View Post
    Yeah, they're really concerned about our economy. But this is basically what we're aiming for in Alberta already.



    In Houston on Tuesday, Exxon-Mobil’s CEO, Rex Tillerson, proclaimed to a business group that the more sure-fire way to add jobs to the US economy would be for the nation to export its oil instead of refining it, and using it, here. As it stands right now, before companies can export oil, it needs to be refined from its crude state, a process which employs 83,000 people nationwide. Rex’s proposal would be to fire all of them, and send the crude directly overseas for other nations to refine and then reimport into the US. All in the name of the “free market.”

    http://www.addictinginfo.org/2014/10...il-export-oil/
    Hmmm.
    All I know is that when we use up oil here in Alberta we're leaving ourselves with less oil to sell. Thus a dollar saved becomes two dollars earned. So essentially we should all be driving smart cars and not pickups in order to reduce the losses. Like the old cliche says: we're eating our profits.

  88. #88

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    ^we aren't going to run out of oil in Alberta anytime soon, certainly not for hundreds of years. The only quesiton is whether or not its going to remain economic to extract, which will depend on the demand for oil (versus new alternatives), and whether other new sources around the world become cheaper to extract than ours (which becomes more and more likely as our salaries get higher and higher). We can make money from it now (which we desperatley need to pay for all these expensive hospitals and universities which are supposed to help diversify our economy), who knows in the future, it could just end up what its always been, a natural phenomenon. If we ever reduce production, its likely it will never ramp up again, once the investment goes, it doesn't come back, we could revert one day to a farming economy like Montanas. Hopefully not in my lifetime.
    Last edited by moahunter; 06-10-2014 at 08:59 AM.

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    Quote Originally Posted by moahunter
    If we ever reduce production, its likely it will never ramp up again, once the investment goes, it doesn't come back, we could revert one day to a farming economy like Montanas. Hopefully not in my lifetime.
    That's a bold claim. Care to back it up? Investment dollars go where they can make a good return. They don't hold grudges, and they don't get scared off permanently. Especially in the petroleum industry, where something like 80% or more of the world's reserves are controlled by state oil companies. The private oil majors don't have a lot of alternatives for their investment.

  90. #90

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    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by moahunter
    If we ever reduce production, its likely it will never ramp up again, once the investment goes, it doesn't come back, we could revert one day to a farming economy like Montanas. Hopefully not in my lifetime.
    That's a bold claim. Care to back it up? Investment dollars go where they can make a good return. They don't hold grudges, and they don't get scared off permanently. Especially in the petroleum industry, where something like 80% or more of the world's reserves are controlled by state oil companies. The private oil majors don't have a lot of alternatives for their investment.
    Have to agree with Marcel

    We already went through a cycle in the early 80s where Big Oil pulled (the NEP) and when the economics returned to a workable model they were back in the game.

    The bigger question (to me) really is...

    If we continue on the current path, what will Edmonton look like when there is an oil price collapse (for whatever reason)?

    Currently this is an "oil fueled" city (and Province), diversification, while getting great lip service for decades, has never really happened.

    Yes there are hot spots (nanotech, pharma-research and some others) but they are comparatively small scale compared to the overall economy.

    Sorry but if oil prices crashed tomorrow (under $40.00 per barrel) Edmonton would rapidly become a ghost town (as would most of the Province).
    - Big oil means big jobs, big paychecks
    - Big oil drives manufacturing
    - Big oil paychecks (and consumer credit) drive housing/development
    - Big oil paychecks (and consumer credit) drives the majority of retail sales
    and on and on...

    We are still a one trick pony in a very volatile market as I see it.

    If we do not change what we are doing it's not a case of if there will be a crash...it's a case of when...next year, 10 years, 20 years, 50 or more.

    Politically...it could be almost anytime.

    In my highly biased personal opinion

  91. #91

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    Quote Originally Posted by Marcel Petrin View Post
    That's a bold claim. Care to back it up? Investment dollars go where they can make a good return. They don't hold grudges, and they don't get scared off permanently.
    I disagree, if you invest billions in a location, and don't get the return because of changes to government policy, you don't reinvest there when there are better opportunities in stable locations (e.g. Texas, Dakota, etc.). This is why for years Sasketchewan couldn't attract any investment (despite terrific resources, it took a long time to recovery from pathetic government policy), and why Venuzella is now a basket case. You have to make hay while the sun shines, especially when you are greedily spending like a drunken sailor (which we are). If oil prices plumet, our economy will be in trouble, we are living a very good lifestyle right now with some of the best pay cheques in the world (e.g. look at what our teachers earn compared to the US), it may not be sustained forever, people aren't living this lifestyle without resources (except in a very few spots in the world where there are very low taxes and excellent government policy - e.g. Singapore), so no amount of magical "diversification" would get us back to it.
    Last edited by moahunter; 06-10-2014 at 10:28 AM.

  92. #92

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    Quote Originally Posted by moahunter View Post
    ...if you invest billions in a location, and don't get the return because of changes to government policy, you don't reinvest there when there are better opportunities in stable locations (e.g. Texas, Dakota, etc.).
    Yup. And changes in government policy over the years is also one of the reasons we haven't built any new refineries on this continent in recent history. You would be nuts to invest Billions into a new refinery today, just to have a different party form government and change a bunch of laws that would make you have to spend another few hundred million to modify it (then do it again when another party comes into power).

  93. #93
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    There's no question that regulatory uncertainty can scare off investment. But a well managed change to the royalty structure over a period of time with clear outlines of what will happen and when can address that. Not to mention that Alberta has had the same government for coming up on half a century. We're incredibly stable, in that regard.

  94. #94

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    Quote Originally Posted by moahunter View Post
    ^we aren't going to run out of oil in Alberta anytime soon, certainly not for hundreds of years. The only quesiton is whether or not its going to remain economic to extract, which will depend on the demand for oil (versus new alternatives), and whether other new sources around the world become cheaper to extract than ours (which becomes more and more likely as our salaries get higher and higher). We can make money from it now (which we desperatley need to pay for all these expensive hospitals and universities which are supposed to help diversify our economy), who knows in the future, it could just end up what its always been, a natural phenomenon. If we ever reduce production, its likely it will never ramp up again, once the investment goes, it doesn't come back, we could revert one day to a farming economy like Montanas. Hopefully not in my lifetime.
    So, I think we're on the same page. We need to reduce out 'domestic' waste so we maximize the benefit from producing what we produce today. Just because we own it and have lots of it, doesn't mean we should use it up ourselves. It's like Venezuela, Saudi Arabia, etc. grossly subsidizing its production price at home and its citizens wasting the gift they've been given.

    We're not going to run out but just like someone working, they may be young and feel that it's ok to spend everything them make but life for them could get a lot easier by reducing waste on the dollars they earn today by maximizing their net income. Similarly, some of today's oil and gas production value gets needlessly wasted or burned up today within the province, thus reducing our income potential. It's like having an assembly line with product needlessly falling off it onto the floor, or staff taking product home, rather than all of it reaching the retail store.

  95. #95
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    Quote Originally Posted by moahunter View Post
    Quote Originally Posted by KC View Post
    So are we back to being hewers and they capture the higher margin business and employ the higher paid positions?
    No, this is low margin stuff, refineries are highly expensive (cost billions), over capacity (dozens of them in Texas), low margin high pollution business. The margins are in extracting oil efficiently using modern technology. My point is if you can get oil to Texas you supply the entire US so prices there are premium, because refined product from there goes all over the US in pipelines that feed from that hub. Whether the oil goes there by Keystone, Enbridges backdoor line, or even tanker from the coast, it's a desirable place to sell to, to maximize the profits we make.
    Two different ways of looking at "margin". Moahunter is thinking about net (profit) margins. Those are small in the refining business, and thus the reluctance the industry to invest in refineries. KC is thinking of gross margin (aka value added). Those margins are substantial. From a government / macroeconomic point of view, industries with large value added but small profit margin are highly desirable, as they produce a lot of revenue that gets spread around to many people, who in turn pay income taxes and spend most of their earnings locally.

    So, Alberta could really use more refining capacity, but getting it built will be a challenge.

  96. #96
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    Quote Originally Posted by moahunter View Post
    ^we aren't going to run out of oil in Alberta anytime soon, certainly not for hundreds of years. The only quesiton is whether or not its going to remain economic to extract, which will depend on the demand for oil (versus new alternatives), and whether other new sources around the world become cheaper to extract than ours (which becomes more and more likely as our salaries get higher and higher). We can make money from it now (which we desperatley need to pay for all these expensive hospitals and universities which are supposed to help diversify our economy), who knows in the future, it could just end up what its always been, a natural phenomenon. If we ever reduce production, its likely it will never ramp up again, once the investment goes, it doesn't come back, we could revert one day to a farming economy like Montanas. Hopefully not in my lifetime.
    If we were smart, we would be paying for all of that infrastructure with tax revenue, and saving the oil revenue for the day when it is no longer profitable to extract and sell it. Norway understands this, but Albertans seem far too short sighted to get it.

  97. #97

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    "I got my Ralph Bucks!" Woo-hoo! Good times!"

    Time to cut royalties again because prices are going down. Might as well just stick up a sign that says "Free Oil!"

  98. #98

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    Quote Originally Posted by Titanium48 View Post
    Norway understands this, but Albertans seem far too short sighted to get it.
    If we had the money that is equalized to Quebec from Alberta, our fund would be bigger than Norways. The reality is, anything excess we make, gets clawed back, other provinces would never allow such a fund, equalization to them would go up, and health transfer payments to us go down. This is why Norway was smart to not join the EU, they didn't want all their fund clawed back by Greece or similar.

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    That's what comes from comparing a province to a country.

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    In an economic downturn, does Edmonton and Calgary hit equally hard, or is one city better at weathering the storm?
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