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

  1. #201

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    Quote Originally Posted by KC View Post
    If it matters to anyone...

    Here Are The Breakeven Oil Prices For Every Drilling Project In The World
    MYLES UDLAND, nov 28, 2014

    http://www.businessinsider.com/citi-...prices-2014-11
    Decades ago OPEC used to squeeze the price upwards by shutting off the taps.
    Strangling the US oil consumers and forcing them to pay more money.

    Now OPEC squeeze the price downwards by turning up the taps.
    Strangling the US oil producers and forcing them to lose more money.


    http://www.loc.gov/exhibits/herblock...verything.html
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  2. #202

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    Read about the economics of the airline industry and what Buffett had to say about companies going bankrupt. A lot of shale drillers have a lot of debt and so may go bankrupt. Is this a huge risk to pricing going forward for the next while?

    http://books.google.ca/books?id=Rndl...20free&f=false

  3. #203

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    OK, so let us all start saying oil prices are going to shoot back up over $90/bbl in a month or two. We have the "faith" and that will solve everything! No need for brains.




    Here comes the pain — Premier Prentice tells Calgary businessmen plummeting price of oil is gonna hurt
    by Rick Bell, Calgary Herald, NOVEMBER 28, 2014

    excerpt:


    We will see spending cuts. It will not be pretty. If oil prices stay low then billions will be lost to the provincial public purse.

    ...

    “It will not be easy on Albertans. Tough choices will have to be made and we will make them and they will be felt across the province,” says Prentice.

    “I cannot cushion the challenge ahead. The impact will be felt. We all have to tighten our belts. There will be consequences for all Albertans.”

    “If the impact of our budget reaches as high as a $4-billion watermark we could lay off every single member of the civil service of Alberta and it wouldn’t fix the deficit. There are no simple solutions.”

    ...

    "As for adding to the province’s $11 billion-plus debt, the premier says ...”



    http://www.calgarysun.com/2014/11/29...-is-gonna-hurt


    ~
    Last edited by KC; 29-11-2014 at 04:31 PM.

  4. #204

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    Until decent alternative energy sources force out oil, I figure, if demand continues its increases, peak oil talk will prevail until new marginal sources come into production and maybe even massive new discoveries may appear and ease the pressure. At this point the new supply will driving down oil prices and the idea of peak oil will temporarily appear discredited. That oil though will be used up in short order and peak oil talk along with rising prices will reappear.

    This link below was posted a few years ago on c2e and I think every Edmontonians should watch the entire series of videos.

    The most important video you'll ever see

    https://m.youtube.com/playlist?list=PL64E7C3CF6115AA89

  5. #205

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    ^peak oil was always a very silly idea. Any time oil prices have gone up, exploration has increased, often using new technologies. The 1970s lead to North Sea Oil and oil sands. The mid 2000s lead to shale and in situ. We have still only scratched the surface on what's out there in the world, there is plenty more oil that can be economically produced if prices go high enough. The only real threat to oils dominance as an auto fuel is when either hydrogen or electric become cheaper and more practical. With OPEC no longer so dominant, there will IMO never be a time when production can't keep up with supply leading to shortages or crazy prices, before that happens, there will be new supply, or new alternatives. I expect we are going to have one or two years of oil in the 60s and 70s now, then it might rise a bit as demand increases, depending on how much new shale arrives. That's my guess.
    Last edited by moahunter; 30-11-2014 at 09:33 PM.

  6. #206

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    ^ ...and if so, we can't expect never ending price increases to keep Albertans in the lifestyle to which they've grown accustomed. We can expect price collapses. Why would we NOT prepare for such risk?

    Still, oil, gold, land, water - at higher prices more usually can be found and become available - but everything has its limits and the timing of the availability becomes an issue. So you get price volatility and switching in the interim. A feast to famine to feast to famine volatility.



    Oil at $40 Possible as Market Transforms Caracas to Iran

    By Gregory Viscusi, Tara Patel and Simon Kennedy Nov 30, 2014

    Excerpt:
    "Oil has dropped 37 percent this year and, in theory, production can continue to flow until prices fall below the day-to-day costs at existing wells. Stevens said some U.S. shale producers may break even at $40 a barrel or less. The International Energy Agency estimates most drilling in the Bakken formation -- the shale producers that OPEC seeks to drive out of business -- return cash at $42 a barrel.

    “Right now we’re seeing a price shock coming out of the meeting and it will be a couple of weeks until we see where the price really falls,” said Yergin. Officials “have to figure out where the new price range is, and that’s the drama that’s going to play out in the weeks ahead.”
    ...

    http://www.bloomberg.com/news/2014-1...id=yhoo.inline




    Note: everyone forecasts with rulers, so if oil hits $40/bbl, expect articles to quickly appear predicting $20/bbl, and so on. Also, I'm not so sure break even is really break even. Debt has to be rolled, spreads widen, financing gets harder to find... In a crisis previously uncorrelated variables, begin to correlate. The massive scale of junk bond issuance to finance shale developments may trigger some unexpected developments. Large scale and or wide spread asset liquidatios make for asset sales for pennies on the dollar thus lowering break even for the buyers... One company going bankrupt is one thing, a hundred at once is quite another.
    Last edited by KC; 30-11-2014 at 10:42 PM.

  7. #207

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    He mentions Canada's high costs. So, as a highly influential and successful CEO I imagine he's long been pounding the table to get the province and its cities to prepare for such an possibility so we don't get knee-jerk responses.

    " Where's the plan? "


    Canadian Natural Resources chairman sees oil touching US$30 a barrel

    http://business.financialpost.com/20..._lsa=5667-9756

  8. #208

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    ^as I posted in the "gas soar" thread, CNRL is a contra investor, they won't mind if the prices drop to 30 (seems he is trying to talk the market into it), as its an opportunity for them to buy up big then.

  9. #209

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    Quote Originally Posted by moahunter View Post
    ^as I posted in the "gas soar" thread, CNRL is a contra investor, they won't mind if the prices drop to 30 (seems he is trying to talk the market into it), as its an opportunity for them to buy up big then.
    Yeah, he's one of the smartest out there - but I know nothing about his morals. Buffett however doesn't talk his book without being right up front about it and I see that he is acting now too. It will be interesting to see just how close to the edge some operators lived.


    The oil price dip may only last a month or two - or a decade or more. I can't predict the future. However a lot of people think they can, so in terms of Alberta's housing prices, jobs, etc. a lot of people have taken on a lot of debt on the basis that "this time things are different" and the good times would continue to roll. (Lets us now hope they will.) Many people promoted or accommodated this action for the sake of their own careers and profits.

    So what bothers me it when reckless or thoughtless behaviour imperils a whole lot of other innocent bystanders. Even worse is when tough times hit, many of those very same risk takers or "profiteers" redirect blame away from themselves, to save themselves, while slamming the poor innocent bystanders just trying to survive.



    Berkshire to Buy Weatherford Units for at Least $750 Million
    By Laura Davison, Jing Cao and David Wethe Dec 1, 2014

    "The Weatherford deal “provides us a new growth platform as we build out a multibillion business in specialty chemicals and drilling fluids for the oilfield space,” Hambrick said in a statement today."

    http://www.bloomberg.com/news/2014-1...tml?cmpid=yhoo
    Last edited by KC; 01-12-2014 at 12:06 PM.

  10. #210

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    ^ about living beyond their means:

    Yes a segment of people do, since 2001 we have added a crap load of jobs just in maintance and operations at industrial sites!

    Housing already crashed 20% in the recession from 2008 which we JUST recovered from which I believe we can't and will not have a double dip on housing.

    One of the best beauties of lower oil are the out of province workers in the oilsands are finally going to get a VERY hard pill to swallow!Thousands of people flying in a rotation 14/7 as far as Newfoundland $2000 plane rides to live at home with cheaper housing. Now the trough is going to dry up forcing more people to foot the travel costs themselves or move to alberta, a beautiful cycle really. We need these small corrections in this province once in a while to iron out the chaos that happens.

    My father was a welder, born and raised Albertan, one of my favourite lines from him was chicken one day feathers the next classic alberta scenerio lol

  11. #211
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    Compare housing prices today to 15 years ago. Even after accounting for general inflation (about 35% since 1999), housing prices have at least doubled. There is a lot of room for prices to fall if the price of oil stays down and population growth stalls. The fly-in camp workers may be the first to feel the squeeze, but they won't be the only casualties.

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    I'm looking forward to a possible correction.

  13. #213
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  14. #214

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    “Faced with the choice between changing one's mind and proving that there is no need to do so, almost everybody gets busy on the proof.”
    ― John Kenneth Galbraith




    Oil Investors May Be Running Off a Cliff They Can’t See

    By Alex Morales Dec 2, 2014

    excerpts:

    "The German utilities are “on their knees,” said Lewis. “These things can happen much more quickly than you think.” "


    "What Threat?

    As a utilities analyst at another bank years ago, Lewis said he asked power companies how they would combat the threat to their fleet of coal-fired plants from wind and solar.

    What threat? came the response.

    "The oil companies “are in denial in exactly the same way that the German utilities were 10 years ago,” Lewis said. “Not only did they not see the renewables revolution coming along, they dismissed it out of hand.” "

    http://www.bloomberg.com/news/2014-1...can-t-see.html

  15. #215
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    Quote Originally Posted by Kitlope View Post
    The Oracle of Edmonton?

  16. #216

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    US news

    Gas prices have been falling for months, and thanks to plummeting oil prices, they're expected to keep on dropping through the end of the year—dipping below $2 per gallon in some parts of the country.

    https://time.com/money/3611655/cheap...-2-per-gallon/

    How cheap? The national average may hit $2.50, and gas stations in states where pump prices are already low are all but guaranteed to dip into sub-$2 territory.

    “We’ll see at least one station in the nation at $2 by Christmas,” Patrick DeHaan, an analyst with the gas price-tracking site GasBuddy told Bloomberg recently. “And that’s not really a prediction at all. That’s more like a certainty.”

    “Drivers in southeastern states may see a select few stations selling gas at or below $2 in the coming weeks,” AAA spokesman Josh Carrasco said in a news release.

    Drivers in all states can expect increasingly cheaper prices at the pump through the end of the year. And drivers in states where prices are already below average—including Alabama, Arkansas, Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, and Texas—are most likely to see prices drop below the $2 mark.
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  17. #217

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    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Alright people, tighten your seat belts and prepare for a wild ride.

    After both I creasing their oil production AND slashing prices in Asia, Saudies are now aggressively targeting European markets. I think we would have a couple of weeks before oil hits $60. Enjoy it while it lasts.

    http://online.wsj.com/articles/saudi...NewsCollection
    Ok, the $80 WTI price floor which resisted for a while, broke today...next stop $70..

    http://www.bloomberg.com/news/2014-1...-discount.html
    Hmmmm, we are almost there, hang in there...$70 floor also broke today, might come back by day end, but the path is cleared...

    Seems Saudis have read c2e and my price prediction

    Wall Street Journal, Dec. 3, 2014

    Saudi Arabia Sees Oil Prices Stabilizing Around $60 a Barrel


    http://online.wsj.com/articles/saudi...LEFTTopStories

  18. #218

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    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Alright people, tighten your seat belts and prepare for a wild ride.

    After both I creasing their oil production AND slashing prices in Asia, Saudies are now aggressively targeting European markets. I think we would have a couple of weeks before oil hits $60. Enjoy it while it lasts.

    http://online.wsj.com/articles/saudi...NewsCollection
    Ok, the $80 WTI price floor which resisted for a while, broke today...next stop $70..

    http://www.bloomberg.com/news/2014-1...-discount.html
    Hmmmm, we are almost there, hang in there...$70 floor also broke today, might come back by day end, but the path is cleared...

    Seems Saudis have read c2e and my price prediction

    Wall Street Journal, Dec. 3, 2014

    Saudi Arabia Sees Oil Prices Stabilizing Around $60 a Barrel


    http://online.wsj.com/articles/saudi...LEFTTopStories
    It's about time c2e got the recognition it deserves!

    I've also read of the $60 price. The key word is "Around". Is that +/- $5, 10, 20 or 30/bbl? Otherwise don't believe it. As we know in Alberta, commodity prices like that of oil rarely sit at any one price level for long. So that might be an average price going forward for a while - but maybe only after a while - a lot of damage can be done by falling prices long before a commodity returns to trend. It's often all about cash flows at the individual business level and how in aggregagte those businesses perform.

    I think the Saudi's aim is to show how risky or 'marginal' shale investing can be. They know they can't stop it without selling off all their own resources at low margins so they need some pain to occur among some of major shale players in the coming year(s). This will basically take some of the responsibility of being a swing producer away from Saudi Arabia and drop it into US and global shale producer laps. Since these producers have a lot of junk debt that is looking even junkier now, that may not be difficult. Once bankers and investors taste heavy losses, they will be far less ready to finance massive shale development in the future. (Going forward near term though, I could imagine that there's likely motivation by "countries" in the middle east and maybe even in Russia to create unrest in Saudi Arabia that would threaten supply and drive the price back up to take pressure off their own domestic situations.)

    Oil tycoon T. Boone Pickens predicts return to $100 a barrel
    Dec 2, 2014
    excerpt:

    "Prominent oil investor and sometime-renewable-energy booster T. Boone Pickens predicted Tuesday that the plunging oil price would rebound to $100 a barrel in the next 12 to 18 months."

    ...

    " “They didn’t say... They can take $70 oil and take it out 10 years — they have the cash reserves that allow them to do that. But they can’t do that to the rest of OPEC,” Pickens said. ..."

    http://www.marketwatch.com/story/oil...rel-2014-12-02



    ~
    Last edited by KC; 03-12-2014 at 01:02 PM.

  19. #219

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    More forecaster B.S. No one knows - and if they did, then they'd have been predicting the current price a year ago. All we know it that oil is a commodity and commodities do what commodities do - go from market surplus to scarcity and back again, from low prices to high prices then back to low, but maybe not as low, prices.

    This volatility is almost an inevitability, so as such, I'd love to rename this whole thread to: When Oil Prices Collapse - "WHERE'S THE PLAN?"


    TSX down 329 points as oil slumps to new multiyear lows
    Morgan Stanley predicts oil prices could drop to $43 US a barrel next year

    http://www.cbc.ca/news/business/tsx-...lows-1.2864101


    Oil Prices Crash...Obama's Latest Blow To The American Economy?
    12/08/2014

    "Imagine what the picture would look like today had there been all this additional drilling. Not only would such additional oil product have further increased the glut of oil we are now experiencing, what would you have said about thousands of additional capped wells we would soon see on federal lands as the price of extraction surpasses the price of sale?"


    http://www.forbes.com/sites/rickunga...rican-economy/
    Last edited by KC; 08-12-2014 at 03:15 PM.

  20. #220

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    It is beginning to feel like 1980. I don't mean that in a good way.

    Amid my pessimism, the one good thing I keep hoping for is that perhaps, just perhaps, the seemingly inevitable coming oil crash will finally prove to the average Albertan fool that the national energy program had nothing really to do with the last one.

  21. #221

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    My own suspicion, by the way, is that the price is being driven down with Western government collusion as a way of hitting Russia, so as to replicate the 1980s low-oil price troubles that ultimately collapsed the USSR.

  22. #222

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    Quote Originally Posted by AShetsen View Post
    It is beginning to feel like 1980. I don't mean that in a good way.

    Amid my pessimism, the one good thing I keep hoping for is that perhaps, just perhaps, the seemingly inevitable coming oil crash will finally prove to the average Albertan fool that the national energy program had nothing really to do with the last one.
    What do you mean? It had a BIG negative effect. It was as if someone wrote the script to: Accentuate the Negative. It showed a total lack of foresight and a total commitment to a belief that already bubble-like oil prices would go to the sky.

  23. #223

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    Market demand and supply is shifting. There will be pains as things shake out. It will be interesting to see where things end up...
    Despite decline in some regions, world oil consumption still seen rising
    http://www.eia.gov/todayinenergy/detail.cfm?id=17931
    Last edited by lat; 08-12-2014 at 04:02 PM.

  24. #224
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    Quote Originally Posted by KC View Post
    Quote Originally Posted by AShetsen View Post
    It is beginning to feel like 1980. I don't mean that in a good way.

    Amid my pessimism, the one good thing I keep hoping for is that perhaps, just perhaps, the seemingly inevitable coming oil crash will finally prove to the average Albertan fool that the national energy program had nothing really to do with the last one.
    What do you mean? It had a BIG negative effect. It was as if someone wrote the script to: Accentuate the Negative. It showed a total lack of foresight and a total commitment to a belief that already bubble-like oil prices would go to the sky.
    History is full of ironies and unintended consequences.

    The NEP was an attempt to keep Canadian oil prices below world oil prices at a time when all parties (including Alberta and the energy industry) thought world prices were headed ever higher. Most of the price controls and a federal oil export tax were removed by September 1981.

    Ironically, Alberta and the energy industry finally got the world oil price just as it started heading downward. No question the mid-1980s collapse in world oil prices - which persisted for most of the next 15 years - did more sustained and long-term damage to the Alberta economy than the more short-lived NEP.

  25. #225
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    Agreed, the NEP was an afterthought to what was going on in the world stage. And like today, the collapse was fast.

    Not worried though - this is relative short term arab posturing. IMO.

  26. #226

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    ^^ in terms of setting up Alberta for a bigger fall, there was the NEP, especially the PGRT, debt buildup, rising interest rates, stupid oil price forecasts, rising property prices, over building, efficiency measures taking place in export markets, in-migration, etc.

  27. #227

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    Economist says budget cuts in offing as oil price drops
    BY MARIAM IBRAHIM, EDMONTON JOURNAL DECEMBER 8, 2014

    " “This is serious and I don’t see any evidence that ...” Smith said. "

    http://www.edmontonjournal.com/news/...56/story.htmll

  28. #228

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    ^ WoW. Nobel prize worthy. That's one reason our province is so adept in avoiding boom-bust cycles. Our economists can predict, with a high degree of certainty, our oil-addicted budget will get a hit when price of oil has plunged 40%. No $hit.

  29. #229

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    Quote Originally Posted by DefinatelyMaybe View Post
    ^ WoW. Nobel prize worthy. That's one reason our province is so adept in avoiding boom-bust cycles. Our economists can predict, with a high degree of certainty, our oil-addicted budget will get a hit when price of oil has plunged 40%. No $hit.

    "The only function of economic forecasting is to make astrology look respectable." - John Kenneth Galbraith


    "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 conventional view serves to protect us from the painful job of thinking." - John Kenneth Galbraith



    Low oil prices punch $6-$7B hole in Alberta budget, Prentice says

    "But he says fixing the problem is not as simple as making deep across-the-board cuts in government spending."

    "The premier says the government will limit spending to below the rate of growth, plus inflation, and focus on core services."

    "It will also rely on much more conservative estimates for oil prices when putting together future budgets."

    http://www.ctvnews.ca/politics/low-o...ays-1.2140141#
    Last edited by KC; 09-12-2014 at 02:57 PM.

  30. #230
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    Can't the government just slash civil servant jobs, blow up hospitals, and continue privatizing?

    Worked before. Maybe it will work again.
    The world is full of kings and queens, who blind your eyes then steal your dreams.
    It's heaven and hell!

  31. #231

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    Now THIS is getting interesting. Seems people are getting stressed, emotions are at play. So this is when I'd say that people have to start thinking about any risk of supply interruptions.


    Cratering oil price blamed on US production, Saudi 'treachery'
    Patti Domm, 2 Hours Ago

    "Read More: Saudi Oil Minister: Why should we cut production?
    ...
    "OPEC's loose alliance to hold down production showed some fissures Wednesday, when Iranian President Hassan Rouhani blamed falling oil prices on "treachery," in an apparent dig at rival Saudi Arabia, according to news wires. Iranian officials, at the cartel's meeting last month, spoke publicly in support of the Saudi-led effort to hold production levels in the face of falling prices, even though they had sought a production cut. ..."

    http://www.cnbc.com/id/102256702#.

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    Choice quote:

    Analysts say the lower oil prices go, the harder it will be to recover if producers keep pumping. But ultimately, they say it should stabilize and in two years, the world may well be somewhat short of oil due to the projects that are now being shut down and delayed.

  33. #233

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    Quote Originally Posted by Marcel Petrin View Post
    Choice quote:

    Analysts say the lower oil prices go, the harder it will be to recover if producers keep pumping. But ultimately, they say it should stabilize and in two years, the world may well be somewhat short of oil due to the projects that are now being shut down and delayed.
    Say what?

    These aren't houses they are over producing. Time perspective is the critical issue.

    Pumped oil has to go somewhere and reserves only hold so much, so if they keep pumping, they'll drive prices down until consumption demand stops the price slide. If the market responds in a typical supply and demand fashion to cheaper prices, more oil will eventually be burned, oil usage embedded in product purchases like big trucks, less efficient production plants, etc. - thus if producers keep pumping, it will be harder NOT to recover - we'll just see more volatility and on the down swing more producers failing to the point of bankruptcy and taking large amounts of production off the market. Thus a quicker downward spiral followed by a quicker recovery as investors can't help but see the opportunity.

    Withholding production, drilling more holes and finding more supply is another matter. Being able to suddenly turn on the taps to any little demand increase is quite different than dealing with the affects of a total wash out. Recovery will be delayed because whenever the price moves up slightly, more than enough supply will be quickly made available and the price will fall again. No one will make any outsized returns and financing will be difficult to obtain. A slow, slow process with no clear investor view of the future other than more of the same.
    Last edited by KC; 10-12-2014 at 02:53 PM.

  34. #234

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    Proposed Alberta budget freeze creates chill on provincial front lines
    BY ELISE STOLTE, EDMONTON JOURNAL DECEMBER 11, 2014
    excerpt:

    “But if they’re looking at using the price of oil as an excuse to cut, that’s only going to increase the problem,” Smith said. “There’s absolutely nowhere to cut on the front lines.”...

    "...The general population grew 31 per cent between 2004 and 2014, while the public service grew by..."


    http://www.edmontonjournal.com/news/...689/story.html



    Thomson: It’s bitumen deja vu all over again
    BY GRAHAM THOMSON, EDMONTON JOURNAL DECEMBER 11, 2014

    excerpt:

    "The point here is that we keep hearing the same message from Alberta premiers over the years when they face fiscal troubles, the same excuses that they don’t set energy prices, the same promises to get off the oil price roller-coaster.

    And nothing changes.

    This time, we don’t know what Prentice has in mind. He’s being frustratingly vague. “I’ve been ...

    Albert Einstein once defined insanity as “doing the same thing over and over again and expecting different results.”

    If alive today, his definition would be much shorter:..."

    http://www.edmontonjournal.com/touch...tml?rel=847766
    Last edited by KC; 11-12-2014 at 08:18 AM.

  35. #235

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    Interesting spin on falling energy prices... (Didn't work the last time however. Everyone bought big SUVs and built even bigger houses without really upgrading insulation or window quality much at all.)


    America Is Shaking Its Addiction to Oil
    By Lynn Doan and Dan Murtaugh Dec 11, 2014

    excerpt:


    "Companies are investing $133 billion in the U.S. chemical industry to take advantage of plentiful natural gas from shale formations in places like Pennsylvania and Texas, according to the American Chemistry Council.

    And then there’s this twist in the energy independence story -- lower crude prices could paradoxically weaken demand. The argument goes like this: Declining oil will give consumers more disposable income that they can use to purchase more efficient vehicles, energy economist Philip Verleger said Dec. 8 by phone from Carbondale, Colorado. Likewise, airlines will reinvest profits made possible by cheaper fuel into new planes with more economic engines, he said.

    " “Consumers are doing their best to get themselves out of buying petroleum products,” Verleger said. “The fall in oil prices is going to accelerate the fuel’s own demise.” "

    http://www.bloomberg.com/news/2014-1...amid-glut.html

  36. #236

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    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Alright people, tighten your seat belts and prepare for a wild ride.

    After both I creasing their oil production AND slashing prices in Asia, Saudies are now aggressively targeting European markets. I think we would have a couple of weeks before oil hits $60. Enjoy it while it lasts.

    http://online.wsj.com/articles/saudi...NewsCollection
    Ok, the $80 WTI price floor which resisted for a while, broke today...next stop $70..

    http://www.bloomberg.com/news/2014-1...-discount.html
    Hmmmm, we are almost there, hang in there...$70 floor also broke today, might come back by day end, but the path is cleared...

    Seems Saudis have read c2e and my price prediction

    Wall Street Journal, Dec. 3, 2014

    Saudi Arabia Sees Oil Prices Stabilizing Around $60 a Barrel


    http://online.wsj.com/articles/saudi...LEFTTopStories

    Ok, Saudi Arabia, we entered the $50-handle WTI price today. Stabilize the prices right away or I will be forced to lower my expectations to $40...don't disappoint me, OK?
    Love and Kisses, Prentice and team

  37. #237

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    Now some interesting comments in the article and the interpretation that this reflects a lot of "anxiety" in the middle east... It may be time to think a lot deeper about potential unintended consequences that could come with an commodity collapse like this one. e.g.. You can almost guarantee that someone somewhere it looking at military issues.


    excerpts:

    "Led by oil exporting kingpin Saudi Arabia, OPEC decided to keep pumping at full choke instead of surrendering further market share to shale oil producers in North America, which it sees as a threat."
    ...
    “It’s a disaster,” Mr al-Attiyah told The Daily Telegraph. “OPEC should meet with non-OPEC countries to resolve this, but America will never cut production.”



    Source: OPEC ‘powerless’ to halt oil slump without other producers’ help, warns former president
    Andrew Critchlow in London, The Telegraph | December 12, 2014
    http://business.financialpost.com/20..._lsa=b05e-53bb
    Last edited by KC; 12-12-2014 at 01:01 PM.

  38. #238

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    ^tough. Its their choice, cut production, watch prices rise, but also watch their market share decline (as no-one else will cut). Or, maintain production, but watch prices continue to depress, and their econoimes falter as they run out of cash.

  39. #239

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    Quote Originally Posted by moahunter View Post
    ^tough. Its their choice, cut production, watch prices rise, but also watch their market share decline (as no-one else will cut). Or, maintain production, but watch prices continue to depress, and their econoimes falter as they run out of cash.
    It's a game of chicken. Apparently a lot of production has been financed with junk debt. That is in the process of washing out as spreads spike and the debt becomes worth-less. No problem if you're a producer that has all the financing you need, no restrictive convents to get in the way, etc. but it will be a problem raising financing going forward. Then there's those producers that are losing money now with no hope of any new investor interest beyond taking all your equity or buying the assets out of bankruptcy. Once they do that (pick up assets on the cheap), their cost of production falls - so the price war has loads of potential to continue to spiral downwards. (It's how the rich get richer.)

  40. #240

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    ^Its intersesting, a lot of people in Toronto go on about how their economy will do better without oil and gas proping up the dollar, but now they are being hammered in their financial industry, banks and similar, who are heavily exposed to Western Canada.

    I think this is going to backfire on Saudi Arabia (but I don't think they really had a choice otherwise, this was inevitable at some point). I think a lot of smaller companies in NA will go under / fail, but that will just be a huge opportunity for the big ones to go in and by up all that production at cheap prices. Production in NA isn't going to go down anytime soon (perhaps the growth in it, but not the current levels, people will maximize their volumes to make up for what they have lost in price, not the reverse), the ownership of it is just going to shift hands from those with a high cost of finance, to more mature players that have a lower one.
    Last edited by moahunter; 12-12-2014 at 01:21 PM.

  41. #241

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    It becomes a chicken and egg / cause and effect phenomena. Which comes first: the newly revised downward forecast or the downward prices that the last forecast was driven off of... greed begets more greed, fear begets more fear.


    Oil falls nearly 4% after IEA cuts demand outlook
    Published: Dec 12, 2014

    http://www.marketwatch.com/story/oil...-60-2014-12-12

  42. #242
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    ^and ^^

    As the departing AIMCO CEO recently said "markets always over-react."

    Provincial economic forecasts are being re-written as we speak. RBC Economics has just released a forecast saying Ontario's economy will be Canada's fastest growing in 2015 reflecting the net boost it will receive from substantially lower oil prices. For Ontario a lower Canadian dollar and low oil prices is an unbeatable combination.

    Alberta is now forecast to grow at the same rate as the Canadian average assuming WTI averages $70US per barrel in 2015 and $80US per barrel in 2016.

    http://www.rbc.com/economics/economi...st-dec2014.pdf

  43. #243

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    No one at the federal level is talking about the pending longer-term hit from asset write downs and the resulting lower tax receipts if oil stays down for a while.

    Crude Crash Set To Continue After Arab Emirates Hint $40 Oil Coming Next
    Tyler Durden, 12/14/2014

    http://www.zerohedge.com/news/2014-1...il-coming-next


    OPEC chief defends policy, says group to try to ride out price fall
    BY WILLIAM MACLEAN, DUBAI, Dec 14, 2014
    excerpt:

    "Some people say this decision was directed at the United States and shale oil. All of this is incorrect. Some also say it was directed at Iran and Russia. This also is incorrect," he said. ..."

    http://www.reuters.com/article/2014/...0JS06F20141214


    Joe Oliver looks on the bright side of low oil prices
    Cheaper gas means more money for savings, consumer spending, and a boost for manufacturing
    By Laura Payton, CBC News Posted: Dec 14, 2014

    http://www.cbc.ca/news/politics/joe-...ices-1.2871802



    Saudi Arabia’s oil war against Iran and Russia
    By Ralph PetersDecember 14, 2014
    excerpt:

    "...While it’s true that part of Riyadh’s actions respond to the energy renaissance in North America, the greater motivation is breaking Iran’s will.

    The Saudis believe they can no longer rely on the US to contain Tehran’s imminent nuclear threat, so they’re out to do what our lukewarm sanctions couldn’t.

    There’s no love lost between the Saudis and the Russians, either. The Saudis want the Assad regime in Syria to go. Moscow props it up.

    The Saudis aren’t doing any of this to help us, but it helps us just the same. Now the key issue is: How long will prices stay low? ..."


    http://nypost.com/2014/12/14/saudi-a...-and-russia-2/
    Last edited by KC; 15-12-2014 at 09:32 AM.

  44. #244

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    A very good and comprehensive article well worth reading...


    Oil’s slide troubling for Alberta government, industry, consumers
    BY DAVID HOWELL AND BILL MAH, EDMONTON JOURNAL DECEMBER 15, 2014

    http://www.edmontonjournal.com/slide...924/story.html

  45. #245

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    Yup.. The 'challenges' we face...

    Alberta government announces hiring freeze as oil prices tumble
    December 15, 2014 By Staff, Metro

    excerpt:

    “While our provincial financial picture is strong and we are in the best position to deal with this low price environment, it is important that we take action and control spending,” he said. “Sustained low prices are having a significant impact on provincial revenues and we must exercise fiscal discipline and treat taxpayer dollars prudently.”


    http://metronews.ca/news/edmonton/12...prices-tumble/

  46. #246
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    Good idea

  47. #247
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    For many, this might involve moving back to Winnipeg
    The world is full of kings and queens, who blind your eyes then steal your dreams.
    It's heaven and hell!

  48. #248
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    Goin to Winnipeg

  49. #249
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    No ones going to lose their job. Its only a hiring freeze, not layoffs or firing. Govt jobs only.

  50. #250

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    Quote Originally Posted by KC View Post

    “While our provincial financial picture is strong and we are in the best position to deal with this low price environment, it is important that we take action and control spending,” he said. “Sustained low prices are having a significant impact on provincial revenues and we must exercise fiscal discipline and treat taxpayer dollars prudently.”
    not sure why we only worry about this in rough times. We should always exercise fiscal discipline and treat taxpayer dollars prudently

  51. #251

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    Quote Originally Posted by Drumbones View Post
    Good idea
    An across the board hiring freeze - really?

    It was totally predictable though - right out of the "Crisis Management Handbook". How can anyone not feel sorry for Prentice. Starts a new job and before he has a chance to encourage his people to use their brains, all hell breaks loose and panic ensues.

  52. #252

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    Quote Originally Posted by Medwards View Post
    Quote Originally Posted by KC View Post

    “While our provincial financial picture is strong and we are in the best position to deal with this low price environment, it is important that we take action and control spending,” he said. “Sustained low prices are having a significant impact on provincial revenues and we must exercise fiscal discipline and treat taxpayer dollars prudently.”
    not sure why we only worry about this in rough times. We should always exercise fiscal discipline and treat taxpayer dollars prudently
    No, no, no. These aren't rough times. We're rich province. Oil will be back at $100/bbl 'soon'. The forecasters said it last year. Have faith. Calm down, have a drink, go to the casino, spend like it's the 1920s - everyone else is.

  53. #253

  54. #254

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    Just quoting quotes from another thread on oil prices... Our postings from two years ago. Those of you new to this or those who ignored the link/analysis two years ago might now find it quite interesting.

    Quote Originally Posted by KC View Post
    A useful, educational quote here from Warren Buffett's 1982 shareholder letter for his Berkshire Hathaway. Have all your children memorize it!

    http://www.berkshirehathaway.com/letters/1982.html

    "Businesses in industries with both substantial over-capacity and a "commodity" product (undifferentiated in any customer-important way by factors such as performance, appearance, service support, etc.) are prime candidates for profit troubles. These may be escaped, true, if prices or costs are administered in some manner and thereby insulated at least partially from normal market forces. This administration can be carried out (a) legally through government intervention (until recently, this category included pricing for truckers and deposit costs for financial institutions), (b) illegally through collusion, or (c) "extra- legally" through OPEC-style foreign cartelization (with tag-along benefits for domestic non-cartel operators).

    If, however, costs and prices are determined by full-bore competition, there is more than ample capacity, and the buyer cares little about whose product or distribution services he uses, industry economics are almost certain to be unexciting. They may well be disastrous.

    Hence the constant struggle of every vendor to establish and emphasize special qualities of product or service. This works with candy bars (customers buy by brand name, not by asking for a "two-ounce candy bar") but doesn't work with sugar (how often do you hear, "I'll have a cup of coffee with cream and C & H sugar, please").

    In many industries, differentiation simply can't be made meaningful. A few producers in such industries may consistently do well if they have a cost advantage that is both wide and sustainable. By definition such exceptions are few, and, in many industries, are non-existent. For the great majority of companies selling "commodity" products, a depressing equation of business economics prevails: persistent over-capacity without administered prices (or costs) equals poor profitability.

    Of course, over-capacity may eventually self-correct, either as capacity shrinks or demand expands. Unfortunately for the participants, such corrections often are long delayed. When they finally occur, the rebound to prosperity frequently produces a pervasive enthusiasm for expansion that, within a few years, again creates over-capacity and a new profitless environment. In other words, nothing fails like success.

    What finally determines levels of long-term profitability in such industries is the ratio of supply-tight to supply-ample years. Frequently that ratio is dismal. (It seems as if the most recent supply-tight period in our textile business - it occurred some years back - lasted the better part of a morning.)

    In some industries, however, capacity-tight conditions can last a long time. Sometimes actual growth in demand will outrun forecasted growth for an extended period. In other cases, adding capacity requires very long lead times because complicated manufacturing facilities must be planned and built."?...
    Quote Originally Posted by KC View Post
    conclusion starts on page 64...

    Oil: The Next Revolution - The unprecedented upsurge of oil production capacity and what it means for the world
    June 2012

    "Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices.

    The most surprising factor of the global picture, however, is the explosion of the U.S. oil output."...

    http://belfercenter.ksg.harvard.edu/...Revolution.pdf


    Source: Dropping price of oil...
    http://www.connect2edmonton.ca/forum...reply&p=449991


    Now a bit more from that second link (quoted above):

    "...these features of the current oil market will make it highly volatile until 2015, with significant probabilities of an oil price fall due to the fundamentals of supply and demand, and possible new spikes due to geopolitical tensions. This will make difficult for financial investors to devise a sound investment strategy and allocate capital on oil and gas companies.

    A hypothetical oil price downturn would have a significant impact, albeit short-lived, if it occurred before most of the projects considered in this paper had advanced significantly - that is, before 2015.

    Conversely, if an oil price collapse were to occur after 2015, a prolonged phase of overproduction could take place, because production capacity would have already expanded and production costs would have decreased as expected, unless oil demand were to grow at a sustained yearly rate of at least 1.6 percent for the entire decade."

    http://belfercenter.ksg.harvard.edu/...Revolution.pdf
    Last edited by KC; 15-12-2014 at 11:41 PM.

  55. #255
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    I was watching the news and an alternate theory as to the price of oil declining is the U.S. is good buddies with 4 of the high output OPEC nations in the middle east... and that everybody is taking a hit so that the Russians take an even bigger hit. The ruble is sinking fast, the west's recent sanctions are starting to have an effect, oil monies (and production) will be way down and it's already stated that their economy looks to be going into recession.

    Personally, I don't think these low prices will last very long and I also don't think we'll be seeing $100+ oil anytime soon.
    Last edited by Kitlope; 16-12-2014 at 01:16 AM.

  56. #256

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    Quote Originally Posted by Kitlope View Post
    I was watching the news and an alternate theory as to the price of oil declining is the U.S. is good buddies with 4 of the high output OPEC nations in the middle east... and that everybody is taking a hit so that the Russians take an even bigger hit. The ruble is sinking fast, the west's recent sanctions are starting to have an effect, oil monies (and production) will be way down and it's already stated that their economy looks to be going into recession.

    Personally, I don't think these low prices will last very long and I also don't think we'll be seeing $100+ oil anytime soon.
    Multiple good reasons for it to happen now. One more: Slowing global economies (especially China) need assistance and in exchange maybe the Saudis get softer global warming treatment or better trade deals in the future. Tit for tat.

    Destabilizing Russia though is a very dangerous game. I'd bet the U.S. was fairly happy with things the way they were about a month ago with oil around $70/bbl. Let Russia flex its muscles but not really have to do anything offensive beyond usurping part of Ukraine and in exchange slowly get economically squeezed. Now it's becoming serious and Putin's potential responses could enter game changing territory. (Eg. Covertly help ISIS take out 'The House of Saud' or something dramatic.)
    Last edited by KC; 16-12-2014 at 01:41 AM.

  57. #257
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    Putins an azzhole on a good day. I hate to see his reaction on bad ones.

  58. #258

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    Quote Originally Posted by Drumbones View Post
    Putins an azzhole on a good day. I hate to see his reaction on bad ones.
    ..and China is arming up too.

    Russia is buying weapons - a lot of them
    By Ivana Kotta
    http://money.cnn.com/2014/12/14/news...l?iid=HP_River

  59. #259

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    Oil free market is bad news for U.S.
    December 8, 2014 posted by Martin Hutchinson

    "However, once the oil price falls below $70, the economic ill-effects for the U.S. of being the world's high-cost oil producer kick in. Investment in the oil sector becomes hopelessly unprofitable, so a wave of bankruptcies must result. In the Austrian economic analysis, the U.S. and Canadian investment in fracking, tar sands and deep-sea drilling becomes "malinvestment" that must be liquidated. You can see the effect of this in..."

    " ...While some of that borrowing has gone to invest in refineries, which benefit from lower prices, and pipelines, which are close to neutral, any that has gone toward the production of oil or gas is likely to be very difficult to service."

    "There will be an important second-order effect on the U.S. economy from the energy price downturn. ...so will the reduction or even elimination of the country’s energy-cost advantage bring a second wave of outsourcing to other countries of both capital investment and generally well-paid jobs. This is an effect entirely ignored by the simple first-order Keynesian models. But if oil prices remain below $70 a barrel there will be further unpleasant surprises for the U.S. workforce, which has already suffered so badly from U.S. economic mismanagement."


    http://www.prudentbear.com/2014/12/t...et-is-bad.html


    Canadian heavy oil drops below US$40 as new oilsands projects rev up
    Robert Tuttle, Bloomberg News | December 15, 2014

    "A total of 14 new oilsands projects are scheduled to start next year with a combined capacity of 266,240 barrels a day, according to data published by Oilsands Review. That’s 36 per cent more than was started in 2014."

    http://business.financialpost.com/20..._lsa=b05e-53bb
    Last edited by KC; 16-12-2014 at 10:58 AM.

  60. #260
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    You know, the more I think about it, I swear that this whole oil dip is the west playing with Putin just to show him who's boss.
    Last edited by Kitlope; 17-12-2014 at 12:26 AM.

  61. #261

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    I had thoughts on that as well and saw on the news tonight how Harper associated the oil prices to Russia and their interference with Ukrain. What does the prices have to do with Russia and Ukrain political issues? Unless it is to undermine Russia's economy which is heavily dependant on oil.

  62. #262
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    That's exactly what it is. And this isn't just Harper - IMO it's pretty much yet another western sanction, or however they want to dress it up as.

    In otherwords, just a simple slap of the ol' Putin pee-pee.
    Last edited by Kitlope; 17-12-2014 at 01:31 AM. Reason: had to add the Putin pee-pee part

  63. #263

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    Quote Originally Posted by Kitlope View Post
    You know, the more I think about it, I swear that this whole oil dip is the Saudis playing with Putin/The West/Europe/etc just to show him who's boss.
    made this more correct for you.

  64. #264
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    ^ Agreed. I don't buy the backroom deal with OPEC to hurt Russia theory. OPEC fearing losing control of the market and trying to deal a setback to the competition is a much simpler explanation, although I'm sure the USA (which is still a net importer of oil) is not unhappy about the fall in prices.

  65. #265

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    It's certainly hurting Russia more than Canada - the Ruble has lost almost 50% of its value in only a few months.

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    Quote Originally Posted by Kitlope View Post
    You know, the more I think about it, I swear that this whole oil dip is the west playing with Putin just to show him who's boss.
    If you think that "The West" has such good control over oil prices, why would they have let it get to $100 or $140 in the recent past? That's unequivocally bad for just about every Western economy save for Canada, Norway, and one or two other oil producers. There's no conspiracy here to hurt Russia/Iran/Venezuela, just like there wasn't a conspiracy a couple years ago or back in 2006-8 to help them.

    High prices caused a huge spike in exploration and development of new sources of oil, while choking off the world economy. Also, geopolitical concerns probably helped prop oil prices up higher and for longer than they should have, given all the ISIS and Arab Spring things going on in the Middle East (which in the end haven't caused much oil supply disruption, except for in Libya). Now supply has outrun demand by a significant degree and reserves are building up in a pretty big way. Now there'll be a big pullback in exploration/development over the next year or two as prices stay low, the low prices will help jolt the world economy since it acts as a stimulus, demand will pick up down the road just as supply growth starts tailing off, and prices will rise again.

    There's no need for a conspiracy to explain any of this.
    Last edited by Marcel Petrin; 17-12-2014 at 08:58 AM.

  67. #267
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    ^and ^^^Agreed.

    In particular, with surging North American and to a lesser extent Russian oil production, the Saudis and the other Gulf States do not want a repeat of the early to mid-1980s. During this time, the Saudis repeatedly cut production from 10 million barrels per day to less than 4 million barrels per day only see higher cost producers (at that time including North Sea, Alaska and Mexico oil) continually erode their market share.

    Historical Saudi Arabia oil production here:

    http://www.tradingeconomics.com/saud...oil-production

    There is definitely no love lost between the Saudis and the Russians for a host of geopolitical reasons, but in this instance it is more of a beneficial side effect that lower oil prices will cause pain to the Putin government.

  68. #268

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    Part of it is also Saudi Arabia looking to hurt Iran financially.

    Saudis allow falling oil prices to squeeze archrival Iran

    http://www.washingtontimes.com/news/...w-oil-prices-/

  69. #269

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    Quote Originally Posted by Titanium48 View Post
    ^ Agreed. I don't buy the backroom deal with OPEC to hurt Russia theory. OPEC fearing losing control of the market and trying to deal a setback to the competition is a much simpler explanation, although I'm sure the USA (which is still a net importer of oil) is not unhappy about the fall in prices.

    As this analysis showed (below), their window of opportunity was closing fast...

    (however it was closing for all of OPEC and the other members seem angry at the Saudis)



    "...A hypothetical oil price downturn would have a significant impact, albeit short-lived, if it occurred before most of the projects considered in this paper had advanced significantly - that is, before 2015.

    Conversely, if an oil price collapse were to occur after 2015,..."

    http://belfercenter.ksg.harvard.edu/...Revolution.pdf

  70. #270

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    Those purely academic models, people like Marcel or Titanium are buying into, works very well in the vacuum, i.e., academic papers and discussions. It is also simple enough for average Joe to think he understands what is going on, thus is adopted by talking heads and mainstream media. If it was that simple, we shouldn't have any shocks and surprises; regularly updated data on growth patterns, industrial outputs, purchasing manager prices, oil inventories down to the level of number of rigs being drilled are all widely available. Truth is, they just don't add up. BTW, if you really dig into academic research, you find the term "call on OPEC". What it is, is a junk bin to put a number in it so that supply-demand equation holds. It really is ingenious.

    The fact that each nation plays all its cards to advance its interests on the global stage is anything but conspiracy theory.

    "In theory there is no difference between theory and practice. In practice there is."
    Yogi Berra

  71. #271

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    If history rhymes...

    The reason oil could drop as low as $20 per barrel
    By Anatole Kaletsky December 19, 2014
    Excerpt:
    "The history of inflation-adjusted oil prices, deflated by the U.S. Consumer Price Index, offers some intriguing hints. The 40 years since OPEC first flexed its muscles in 1974 can be divided into three distinct periods. From ... From 1986 to 2004, the price ranged from $21 to $48 (apart from ...

    "What makes these three periods significant is that the trading range of the past 10 years was very similar to the 1974-85 first decade of OPEC domination, but the 19 years from 1986 to 2004 represented a totally different regime. It seems plausible that ... "

    "In view of this history, ..."

    "There are several reasons to expect a new trading range as low as $20 to $50, as in the period from 1986 to 2004. Technological and environmental pressures are reducing long-term oil demand and ..."

    http://blogs.reuters.com/anatole-kal...20-per-barrel/
    Last edited by KC; 20-12-2014 at 12:55 AM.

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    I've heard Alberta is sitting on one giant coal seam. Maybe we can start selling coal to China. I see trains going through all the time with Wyoming coal destined for China through Prince Rupert. Maybe a lot more Alberta coal could be going that way.

  73. #273

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    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Quote Originally Posted by DefinatelyMaybe View Post
    Alright people, tighten your seat belts and prepare for a wild ride.

    After both I creasing their oil production AND slashing prices in Asia, Saudies are now aggressively targeting European markets. I think we would have a couple of weeks before oil hits $60. Enjoy it while it lasts.

    http://online.wsj.com/articles/saudi...NewsCollection
    Ok, the $80 WTI price floor which resisted for a while, broke today...next stop $70..

    http://www.bloomberg.com/news/2014-1...-discount.html
    Hmmmm, we are almost there, hang in there...$70 floor also broke today, might come back by day end, but the path is cleared...

    Seems Saudis have read c2e and my price prediction

    Wall Street Journal, Dec. 3, 2014

    Saudi Arabia Sees Oil Prices Stabilizing Around $60 a Barrel


    http://online.wsj.com/articles/saudi...LEFTTopStories

    Ok, Saudi Arabia, we entered the $50-handle WTI price today. Stabilize the prices right away or I will be forced to lower my expectations to $40...don't disappoint me, OK?
    Love and Kisses, Prentice and team
    Ok, al-Naimi, Saudi oil minister didn't like my joke, and just pi$$ed on the oil market....ready for another bloodbath in the market on Monday....Merry Christmas to one and all


    Saudi Arabia says won't cut oil output
    Reuters, Dec 21, 2014
    http://www.reuters.com/article/2014/...0JZ05W20141221

  74. #274

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    Ready for $20 Oil?

    Dec 21, 2014
    By A. Gary Shilling
    excerpt:

    "What matters are marginal costs -- the expense of retrieving oil once the holes have been drilled and pipelines laid. That number is more like $10 to $20 a barrel in the Persian Gulf, and about the same for U.S. shale-oil producers. The estimated $50 to $69 a barrel break-even point for most new U.S. shale-oil production is less relevant. "

    http://www.bloombergview.com/article...ady-for-20-oil


    Saudis to Non-OPEC Producers: Cut Your Own Output, We're Good
    By Mahmoud Habboush, Wael Mahdi and Anthony DiPaola Dec 22, 2014

    excerpt:
    "Suppliers from outside the Organization of Petroleum Exporting Countries should cut “irresponsible” output, U.A.E. Energy Minister Suhail Al Mazrouei said in Abu Dhabi yesterday."

    http://www.bloomberg.com/news/2014-1...versupply.html

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    Unifor economist Jim Stanford predicted WTI oil would bottom out at US$20 per barrel before recovering on a recent Bottom Line segment on CBC. I think his fellow panelists and Peter Mansbridge thought he was joking, as did I at the time.

    Gary Shilling makes an interesting point. Once the investment has been made, it's better to get something rather than nothing for the oil. It also makes sense to complete projects currently under construction rather than walk away from them. So North American oil production could keep growing for at least another year or two.

    The Saudi and Gulf State faction of OPEC wants North America to cut "irresponsible" output. This is not going to happen for North American production in the short-term (next year or two). Unless these OPEC producers blink, this means the current price trough could persist for at least a year or two.

  76. #276

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    Quote Originally Posted by East McCauley View Post
    Unifor economist Jim Stanford predicted WTI oil would bottom out at US$20 per barrel before recovering on a recent Bottom Line segment on CBC. I think his fellow panelists and Peter Mansbridge thought he was joking, as did I at the time.

    Gary Shilling makes an interesting point. Once the investment has been made, it's better to get something rather than nothing for the oil. It also makes sense to complete projects currently under construction rather than walk away from them. So North American oil production could keep growing for at least another year or two.

    The Saudi and Gulf State faction of OPEC wants North America to cut "irresponsible" output. This is not going to happen for North American production in the short-term (next year or two). Unless these OPEC producers blink, this means the current price trough could persist for at least a year or two.
    The Saudis are threatening to increase production even further. This is standard "shock and awe" tactics to force a rethink among their competitors and their competitors financiers and investors.



    Regarding Shilling on costs, it gets worse - look back to my earlier post quoting Buffett on US Air undercutting the market in bankruptcy. As Buffett has harped on before ('daisy chaining' in his derivatives are WMD article), businesses that think they are immune to problems find that they get blindsided by events as unexpected correlations occur.




    ...and for those that hate any mention of Buffett. Here's Shilling's bio from Bloomberg (but I still don't believe anyone can predict the future - only indicate a possible and sometimes one probable path):

    "A. Gary Shilling, a Bloomberg View columnist, is president of A. Gary Shilling & Co., a consultancy in Springfield, New Jersey. He is the author of “The Age of Deleveraging: Investment Strategies for a Decade of Slow Growth and Deflation.” Shilling earned his master’s degree and doctorate in economics at Stanford University. While on the West Coast, he served on the staffs of the Federal Reserve Bank of San Francisco and Bank of America. Before establishing his own firm in 1978, Shilling was senior vice president and chief economist of White, Weld & Co. Earlier, he set up the economics department at Merrill Lynch, Pierce, Fenner & Smith at age 29, and served as the firm’s first chief economist. He has been cited repeatedly by the Wall Street Journal as one of the top bond-market analysts and stock forecasters. Twice, a poll of financial institutions conducted by Institutional Investor magazine ranked Shilling as Wall Street’s top economist. Futures magazine also ranked him the country’s No. 1 commodity trading adviser. And in 2003, MoneySense ranked him as the third best stock market forecaster, behind Warren Buffett"


    ~
    Last edited by KC; 22-12-2014 at 10:43 AM.

  77. #277
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    Great article in Businessweek about how the oilsands will weather the low price storm.

    Can Canadian Oil Sands Survive Falling Prices?

    As oil prices have crashed over the past six months, a lot of attention has focused on what this means for frackers in the U.S., as well as the national budgets of a lot of large oil producing countries, such as Russia and Venezuela. In short, it’s not good. But what about Canada? The country is the world’s fifth-largest oil producer, and only Saudia Arabia and Venezuela have more proven reserves of crude.

    Almost all of Canada’s reserves (and production) are in the form of oil sands, which are among the most expensive types of crude to produce. There are pretty much two ways to do it. One is to inject steam into wells deep underground to heat up a thick, gooey type of oil called bitumen. The other is basically to strip mine large tracts of land and extract a synthetic blend of oil out of the earth and sand.

    Taken together, both methods require about 17 percent more energy and water than conventional oil wells and also result in similarly higher levels of carbon emissions. That’s made oil sands a particular target of environmentalists. Now the Canadian oil sands producers have to contend with an even greater opposing force: economics. If Canadian oil sands are more expensive to produce than most other oil, how can they survive in the face of prices that are nearly 50 percent cheaper since June?

    A few things play to their favor. The first is that their costs are more akin to a mining operation than conventional oil drilling. Oil sands projects require massive upfront investments, but once those are made, they can go on producing for years with relatively low costs. That’s made oil sands, and the companies that produce them, quite profitable over the past few years.

    Suncor Energy (SU) and Cenovous Energy (CVE) are two of the biggest oil sands producers in Canada. Both have profit margins that would be the envy of a lot of major oil companies. At Suncor, earnings before interest, taxes, depreciation, and amortization (Ebitda), a basic measure of a company’s financial performance, has risen from 11.7 percent in 2009 to 31 percent through the first nine months of 2014. Exxon Mobil’s (XOM) Ebitda so far this year is about half that at 14.3 percent.

    That cost structure may give oil sands producers an advantage over frackers in the U.S., who operate on a much shorter time horizon. Fracked wells in the U.S. tend to produce most of their oil within about 18 months or so. That means that to maintain production and rates of return, frackers need to keep reinvesting in projects with fairly short lifespans, whereas an oil sands project, once up and running, can continue to chug along, even in the face of lower prices, since its costs are spread out over a decade or more rather than over a couple years. That should keep overall oil sands production from falling and help insulate oil sands producers from lower prices, at least for now.

    “They’re safer than the frackers,” says Carl Evans, an oil analyst at Genscape. “The sentiment up in Calgary has very much been that growth will push through this price dip, while U.S. production will start to come off highs.” Evans says the breakeven costs for bitumen oil sands projects that are already up and running can be as low as $10 to $20 a barrel. Right now, the price of Canadian oil in Alberta is about $40 a barrel.

    This isn’t to say that future investments won’t get cut if prices stay where they are. But those cuts won’t show up in future production growth for years. A total of 14 new oil sands projects in Canada are scheduled to start next year with a combined capacity of 266,000 barrels a day, according to data published by Oilsands Review. That’s 36 percent more than were started in 2014. Since most of those investments have already been made, those projects are probably safe. Even for projects that are only partially paid for, investors will still probably be loath to stop halfway.

    “You don’t stop a project mid-cap-ex,” says Greg Sharenow, a portfolio manager at Pacific Investment Management Company (Pimco) and former senior energy economist at Goldman Sachs (GS). “We’ll see a pause in new investments, but you probably won’t see shut-ins without real distress,” he says.

    Oil sands companies have also been pretty good at lowering their costs over the past few years. According to Cenovous’s third-quarter earnings report, operating costs have come down 9 percent and 14 percent per year for two of its biggest projects.

    Canada’s falling dollar could end up benefiting its oil sands producers. Over the past 12 months, the Canadian dollar has lost almost 10 percent of its value against the U.S. dollar. That’s bad news for most Canadians since it reduces their buying power, but for oil sands producers, it could end up a net plus. While most of those companies pay their costs in Canadian dollars, they get paid in U.S. dollars because almost all the oil they produce is sold to U.S. refiners. That means their costs have gotten cheaper while their revenues have gained value.

    When it comes to the U.S. import market, Canadian oil essentially competes with similar grades of heavy crude from Venezuela, Colombia, and Mexico. Recently, Canadian crude’s been winning big. U.S. imports of Canadian oil have doubled over the past decade, from 1.5 million barrels a day in 2005 to more than 3 million barrels a day. Meanwhile, crude imports from Venezuela have gone in the opposite direction, falling from 1.3 million barrels a day in 2005 to less than 800,000. Not only is Canadian crude cheaper; most refiners also tend to think it comes from a more stable supply.
    http://www.businessweek.com/articles...n-shale-oil#p1

  78. #278

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    ^ so is anyone trying to be opportunistic and adding energy or other companies to their stock portfolios, RRSPs, etc?


    Exclusive: Arab OPEC sources see oil back above $70 by end-2015

    BY RANIA EL GAMAL, ABU DHABI Tue Dec 23, 2014
    Excerpt:
    "The delegates, some of which are from core Gulf OPEC producing countries, said they may not see - and some may not even welcome now - a return to $100 any time soon. Once deemed a “fair” price by many major producers, $100 a barrel crude is encouraging too much new production from high cost producers outside the exporting group, some sources say. ...But..."

    http://www.reuters.com/article/2014/...0K10GB20141223
    Last edited by KC; 23-12-2014 at 07:07 AM.

  79. #279
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    Quote Originally Posted by KC View Post
    ^ so is anyone trying to be opportunistic and adding energy or other companies to their stock portfolios, RRSPs, etc?
    Market timing is a mug's game.

  80. #280

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    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by KC View Post
    ^ so is anyone trying to be opportunistic and adding energy or other companies to their stock portfolios, RRSPs, etc?
    Market timing is a mug's game.
    I generally agree, but I've done alright watching the flyers and picking up the odd product on sale. (I got a package of 6 Phillips LED spot lights the other month, all for $15 - a year ago they were $18ea. on Amazon. So, yes the LEDs are rapidly getting cheaper and it may not be a great deal looking back but I was happy with the price so I bought them. Almost every business in the country also works this way in buying and arbitraging inventory, buying inputs and other materials, etc. ) I'll probably look at some boxing day sales too. If I see something I want and don't want to wait for the next round, next year, I might buy something.

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    Waiting for sales of commercial consumable goods is quite different from trying to time swings in the prices of heavily traded commodities and equities.

  82. #282

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    ^ One is mostly regular timing, the other irregular timing - but both markets see price fluctuations where in hindsight you'd say, that was a good price or this or that was a bad or not as good price. So, I'm talking about being opportunistic and trying to buy something for good value and not trying to buy or sell in advance of a short term change in price direction (I mostly can't predict other people's buying and selling behavior), if that is what you mean by "market timing".

    So in terms of acting on a measured sense of good value, I don't see buying commercial goods any differently than buying securities.
    Last edited by KC; 23-12-2014 at 07:14 PM.

  83. #283

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    The news today has the middle eastern oil producers saying they will hold production high even if the oil price continues to sink to forty (or twenty) dollars. (Opec oil output will not be cut even if price hits $20)

    I confess I don't see any purely economic reasons they should want this to happen. I simply don't.

    I can see this happening because some entity wants some other entity to suffer because of lower oil prices, and has the clout to force the issue. Who these entities are and whether they are inside or outside OPEC is of course open to interpretation.

    Regardless, however, the local economy surely cannot thrive at $20 or even $40 oil.

    And regardless of who, how, and why, there is some strange irony in Canada -- or at least our part of it -- and Russia suffering together from the low oil prices.

    For all the spite the last year has brought.
    Last edited by AShetsen; 23-12-2014 at 08:17 PM. Reason: added link

  84. #284

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    What's interesting to me, from an albeit very simplistic perspective, is that if you're the lowest cost producer, cutting production to keep margins high allows you to sell less oil yet still make the same returns, plus as a bonus, it leaves you with a longer lasting reserve. That would seem to be a wise strategy for long term wealth maximization. To me that's the ideal situation.

    To instead maximize your production to capture more market share, clearly drains your reserves faster and if prices fall, it makes you less money in then end, less than cutting production.

    So, why do the latter?

    One view might be that you see technology making your product obsolete and the future value dropping and/or you ending up with stranded assets (unsaleable oil in the reserves). That's possible. I've met people here that figure we should pump while the pumping is good.

    Alternatively, you see competition from near permanent production expansion eventually hurting you even more by shutting you out of markets. This seems to be what the Saudis have said and the study above (a number of posts above) indicates. Plant expansion and domestic fracking infrastructure, once in place in a number of nations, could cause long term damage to the Saudis ability to sell oil - even their cheap oil. Future trade rules, carbon taxes, etc. and regulations could have domestic bias and shut out foreign oil. Of course over the long term (maybe 40,50+ yrs) the Saudis would shine but they need to survive the mid-term (say 5-10+ yrs) and so are prepared to sacrifice in the short term (1-5 years).


    Or maybe they want to force the issue in order to expand OPEC to include new members like, say, Russia.


    ~
    Last edited by KC; 23-12-2014 at 08:57 PM.

  85. #285
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    Quote Originally Posted by KC View Post
    ^ One is mostly regular timing, the other irregular timing - but both markets see price fluctuations where in hindsight you'd say, that was a good price or this or that was a bad or not as good price. So, I'm talking about being opportunistic and trying to buy something for good value and not trying to buy or sell in advance of a short term change in price direction (I mostly can't predict other people's buying and selling behavior), if that is what you mean by "market timing".

    So in terms of acting on a measured sense of good value, I don't see buying commercial goods any differently than buying securities.
    Basically all empirical evidence and research on the subject clearly indicates that basically no one can market time effectively over the long run. Any success attempting to do so is basically luck.

  86. #286

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    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by KC View Post
    ^ One is mostly regular timing, the other irregular timing - but both markets see price fluctuations where in hindsight you'd say, that was a good price or this or that was a bad or not as good price. So, I'm talking about being opportunistic and trying to buy something for good value and not trying to buy or sell in advance of a short term change in price direction (I mostly can't predict other people's buying and selling behavior), if that is what you mean by "market timing".

    So in terms of acting on a measured sense of good value, I don't see buying commercial goods any differently than buying securities.
    Basically all empirical evidence and research on the subject clearly indicates that basically no one can market time effectively over the long run. Any success attempting to do so is basically luck.
    Yes, I agree on the studies. However, "market timing" is always loosely defined if at all. My view is that markets can get out of whack every so often and indexing is fine if you can, in your life position, ride out the volatility. However, whether you like it or not - if you invest in equities you almost certainly will time the market.

    One of the first investment books I ever read was Malkiel's Random Walk. Followed by Galbraith's Great Crash of 1929. So I understand one, that indexing is a highly sensible approach, and two, buy and hold works - until it doesn't.

    So the idea of beating the market over the long term is not the same as avoiding periods of high risk in the short term. Something called: Better safe than sorry. I've always been willing to take a lower than market return in order to sleep at night when I think a market or sector's price seems unjustifiable. Additionally, to be opportunistic I've done things like buy Nikkei Put Warrants before the Japanese market crash, sell most of Nortel and buy into companies shorting the NASDAQ before the tech crash, etc. In 2007/08 I sold 10-15 year old equity positions go to 80% plus cash, and then bought back in Mar. 2009... Additionally I currently have equity positions that are over 20 years old.

    On the issue of "luck" there's newer perspectives than those that came out of Fama's original EMH work. So I agree that frequent attempts to "market time" will lead to failure but I see nothing wrong with rare periodic attempts to time the market (Like saying the 1998-1999 broad based interest in tech seemed overdone and so avoiding tech shares). Moreover, I don't agree that beating the market requires "luck". In fact on this I believe even Fama has modified his earlier views.

    A quote I like:

    "Some people stick to elegant theories long after it is apparent that the theories do not explain reality. The Chicago School of Economics has said the financial markets are efficient. They conveniently explain away Warren Buffett’s incredible investment record as aberrational. The second richest man in the country is a value investor; he built his net worth gradually over nearly 50 years of successful investing. And his net worth continues to grow handsomely! Fifty billion dollars are a lot of aberrations! Rather than abandon their theorizing to study Buffett exhaustively to see what lessons could be learned, too many people cannot bear to re-examine their faulty theories." - Seth Klarman

  87. #287

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    Quote Originally Posted by Marcel Petrin View Post
    Basically all empirical evidence and research on the subject clearly indicates that basically no one can market time effectively over the long run. Any success attempting to do so is basically luck.
    This isn't true, when I did my undergraduate degree in finance we were taught markets were efficient, and accordingly models like the CAPM are valid. Then, I did post grad and studied under a professor from a UK university, there are various flaws that prove markets are not efficient, from simple phenom like the JaNuary effect, through to the accuracy or arch models used by hedge funds. The flaw in finance, and economics, is the idea of the rational investor, people aren't rational though, and information isn't perfect (I've seen this in the corporate world). I don't think the average person can beat the market, I myself buy index funds as I like their low fees and high diverdification, but some people can (typically not fund managers).

  88. #288

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    Interesting details on new pipelines...

    Canadian Oil Surge to U.S. Gulf Puts Mexico on Defensive
    Price war brews between Canada, Latin America over oil for U.S. Gulf
    DAN MURTAUGH AND ROBERT TUTTLE, Bloomberg News, Dec. 28 2014

    excerpt:
    “U.S. refineries built out their capacity to run heavy barrels,” Auers said. “Refineries in the rest of world aren’t built to run heavy barrels.”

    "The lack of alternative markets for heavy crude means Latin American countries will ..."

    “We haven’t seen anything like this,” Schork said. “This would be a first.”


    http://www.bloomberg.com/news/2014-1...defensive.html
    http://www.theglobeandmail.com/repor...ticle22222253/

  89. #289

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    Hilarious - These are more commonly called crisis meetings - "Where's the plan?" :

    "will be meeting actually again right after this interview to continue the discussions that we're having about how to strike the right balance."




    Premier Jim Prentice on floor-crossers, low oil prices, and GSAs
    CBC News Posted: Dec 29, 2014

    "On the fiscal side, we’ve become too dependent on revenues from oil and gas. And they are now $6 billion lower than they were last year. And the expectation is that they will be $6 billion lower next year. And $5 billion lower in the year after that. And so, we’re going to have to grapple with that, we’ll have to deal with it, that’s why there’s a cabinet committee that I chair that will be meeting actually again right after this interview to continue the discussions that we're having about how to strike the right balance.

    But no Albertan should be under any illusions. These are very significant challenges. "
    http://www.cbc.ca/news/canada/edmont...gsas-1.2884332

  90. #290

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    We're a land-locked province; the North Saskatchewan is only good for hauling out beaver pelts by canoe. :P We also don't have much in the way of mineral wealth, for manufacturing cars and the like. Our labour costs are also quite high. Given high labour costs, a lack of locally available source materials, and the increased costs from land-base transportation, goods manufactured in Edmonton specifically and Alberta in general are at a competitive disadvantage.

    The other traditional commodities of the Alberta economy, agricultural produce, wood products, and coal are also bulky, commonly available elsewhere, and not worth that much in the world economy.

    Given the above conditions, what else can Alberta diversify into? We need to spread our economic load away from the boom-bust cycle of oil and natural gas revenue, but what else can we do in this province?

  91. #291
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    Hemp, all strains.

  92. #292

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    ^
    Actually, a reasonable suggestion. Here's a CBC article on hemp production. As noted in the article, we lack a processing facility for it here, but they're planning on building one. A more serious issue is the regulatory hurdles the farmers have to go through to prove they're not farming full THC marijuana, and the social stigma attached to farming any kind of hemp. You can use hemp in a variety of environmentally friendly manufactured and edible goods, with the markup from them being "natural" and "organic" offsetting some of the increased Alberta manufacturing and transportation costs.

    If by all strains, Drumbones, you meant to include THC marijuana, if we can get the feds to decriminalize it, we could do quite well on that, too. Colorado is making a fair bit of money on it after they legalized it. We could have a boost in tourism if we marketed it right, and be a source of export to the rest of Canada (other then BC, as they'd be our primary competitor). Although I'd doubt we'd see a marijuana dispensary on every corner, like liquor stores, I think they'd be come a reasonably large source of smalll businesses. And I could see certain bars and restaurants expanding into edibles and vaporizer based marijuana quite readily, as well *cough*Remedy*cough*.

    The trick will be bypassing the social conservatism of the Conservatives at both the provincial and federal levels. The financial incentives might well be enough, combined with cutting off the federal Liberals at the knees. I guess we'll see if that happens any time soon.
    Last edited by Ustauk; 02-01-2015 at 04:14 PM.

  93. #293
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    That would all be good. The hemp industry can take from the cotton industry and pulp and paper in cloth and paper products, and many other products. MJ industry would be good too, just need a premier with a big set of balls to get it rolling, one thing we have plenty of is land. From Lloyd to the Hat, Provost to Rocky, Peace River to Coutts, more farmland than the size of half the worlds countries. I think if the right strains were used we could also grow fruit and grapes in the southern part of the province by moving water around. There is plenty of water, but we let it drain into the salty oceans. Imagination is one thing we need. I think of Holland (Netherlands) at 16,000 sq. miles. Smaller in size than Wood Buffalo National Park and all the things they did with just a small patch of earth. Many things could be done. Wikipedia states that despite it's tiny size the Netherlands is the second largest exporter of foods and agricultural products in the world after only the United States. Now that is amazing.
    Last edited by Drumbones; 03-01-2015 at 04:45 AM.

  94. #294

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    Quote Originally Posted by Drumbones View Post
    That would all be good. The hemp industry can take from the cotton industry and pulp and paper in cloth and paper products, and many other products. MJ industry would be good too, just need a premier with a big set of balls to get it rolling, one thing we have plenty of is land. From Lloyd to the Hat, Provost to Rocky, Peace River to Coutts, more farmland than the size of half the worlds countries. I think if the right strains were used we could also grow fruit and grapes in the southern part of the province by moving water around. There is plenty of water, but we let it drain into the salty oceans. Imagination is one thing we need. I think of Holland (Netherlands) at 16,000 sq. miles. Smaller in size than Wood Buffalo National Park and all the things they did with just a small patch of earth. Many things could be done. Wikipedia states that despite it's tiny size the Netherlands is the second largest exporter of foods and agricultural products in the world after only the United States. Now that is amazing.
    By volume or by value? Interesting comments on the radio yesterday about agriculture. Processed foods are very valuable to the US agricultural/food industry because of the ability to store and ship the resulting products vs. having perishable goods...

  95. #295

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    ^^ & ^^^

    See this thread, post #40, from 2013: http://www.connect2edmonton.ca/forum...ad.php?t=34095

  96. #296

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    Quote Originally Posted by FamilyMan View Post
    I agree with those several comments putting this growth spurt in a cyclical economic setting. Like any cyclical pattern Edmonton/Alberta population will see high and low growth going forward, as in before.

    As for if/when the cycle turns I agree with East McCauley that there are some headwinds brewing.

    1- Developed countries are moving towards renewable energies but more importantly "energy efficiency", growth but with less reliance on energy. Look at the projection below from US Energy Information Administration (EIA):




    2- Developing countries: Yes, they are still in the part of their growth where efficiency is not at the top of their policy agenda, but they are changing too. China, is shifting towards a consumption model of growth slowly but surely. They will never see double-digit growth rate of the past decade as a result. Based mainly on China's reduced appetite for commodities, a "bear" supercycle in commodity prices is underway. Most investment banks are closing their commodities trading desks due to reduced demand. India, not using the central planning government model of China, never realized such frenzied growth as China, and probably never will.

    3- Add to the mix the possibility of extra oil from middle east, after US deal with Iran, and the supply of oil seems overtaking the demand in a few years time. With that, inevitably oil prices drops and with that Edmonton/Alberta economy.

    4- However, I wanted to also point to a tailwind brewing too, which hopefully offset part of these energy-induced economic decline. And that is FOOD.

    As China shifts to a middle-class economy, there is a huge demand for better food, more protein and dairy etc. Here is a chart of what demand looks like as per capita GDP:



    And if history is any guide, we are in for a rise in food prices as China's demands grows, like what happened to industrial metals and energy in the past decade. In fact, it has already started. For instance look at the long-term movement of pork prices (traded in futures markets as lean hog contracts):



    The trend is clear: upwards. And Alberta, has a lot of potential in agriculture sector.

    ^ Excellent post. I brought it in to this thread. Thanks for referencing it. I wonder how aggregated margins would compare with natural resource export margins and royalties.

    FamilyMan said it:

    "3- Add to the mix the possibility of extra oil from middle east, after US deal with Iran, and the supply of oil seems overtaking the demand in a few years time. With that, inevitably oil prices drops and with that Edmonton/Alberta economy."
    "4- However, I wanted to also point to a tailwind brewing too, which hopefully offset part of these energy-induced economic decline. And that is FOOD.
    As China shifts to a middle-class economy, there is a huge demand for better food, more protein and dairy etc. ... "


    Funny, years (YEARS) ago, when our ag sector was suffering I sent an Ag minister a letter suggesting an idea to aid our farm sector without direct government assistance (sort of a REIT/Royalty Trust financing scheme for suffering farmers that would leave them whole). I thought it was a quite good and workable idea. I mentioned the growth in China and their pending dietary shift. I suppose in the last decade or so the export growth has pretty much eliminated any such need.

    Interestingly, my letter was addressed as a citizen (no mention of what I did or my employer) but I was a government employee and a couple days later I got a wrong number call from a staff member of that very minister's office. I took that as either a very improbable coincidence or an indication that I should cease and desist. (As I always say, beware - whatever you say or do WILL be used against you.) End of story. However, anyone interested on the investment side of this can read various investor comments via annual reports and presentations by companies like Sprott One Earth farms, Leucadia National, Seabord, etc. who all relatively recently have jumped on the China-protein bandwagon.





    Here's just one recent example of what FamilyMan points out as happening...

    High on the Hog: A new breed of 'silky' pork
    BY J. ANDREW CURLISS
    The News & Observer (Raleigh, N.C.)December 29, 2014

    excerpt:
    "Japan, a leading destination for the state's products, illustrates this shift clearly. Late last year, in an unnoticed milestone in a decadelong trend, pork from North Carolina jumped ahead of tobacco as the state's top direct export to Japan.

    The growth has been staggering. At the turn of this century, the value of pork shipped from North Carolina to Japan was below $30 million a year in today's dollars. It now tops $250 million.

    North Carolinians no longer manufacture as many tables, towels or blue jeans as they once did. But the world buys the state's food, which generates jobs and income. That has helped cement agriculture as a leading state industry that accounts for almost one of every five paychecks. ..."


    http://www.macon.com/2014/12/29/3502...-breed-of.html
    Last edited by KC; 03-01-2015 at 02:36 PM.

  97. #297

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    My fear is Alberta policy makers don't grasp the urgency of need to diversify our economy. The mentality is this boom-bust cycles will go on forever. However I see ominous signposts everywhere I look (not materializing tomorrow or next year but the next decade or two).

    Europe is working to decouple its energy needs from fossil fuels. Germany already produces more energy from renewables than from any other source (http://www.bloomberg.com/news/2014-1...gora-says.html). Mayor of Paris is proposing to ban all diesel cars from central Paris by 2020 ( http://uk.reuters.com/article/2014/1...0TR0BA20141207). So the largest economies in EU will have much less demand for oil in a decade or two.

    In Asia, a side effect of pushing Russia out of global markets is they went right into the lap of Chinese. Major pipelines are planned to send Russian oil and gas to China, and perhaps feed other Asian countries. That also takes time to materialize, but when those markets get filled with Russian (and Middle East too, as you can see how they fight to keep their market share) we are only left with our traditional partner US. And we all know the story in US: shale.

    So in short, I fear we only have 1-2 more business cycles to substantially diversify or face the consequences when it is too late to do anything about it.
    Last edited by FamilyMan; 03-01-2015 at 05:15 PM.

  98. #298
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    It is so easy to say we need to diversify the economy. How do you propose to do it?

  99. #299

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    Read 2 posts above...

  100. #300

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    I'd guess that you could any oil executive whether or not Alberta should try to diversify its energy export markets, they'd say yes, of course, it's a "no brainer"... well worth the considerable cost and effort. So if the logic applies to one or two of our products, why would it not also apply to our whole economy?

    That said, we know from the 1980s experience that diversification efforts often fail, so following that experience you'd think that banking proceeds from oil and gas exports would have been ranked at the top of all priorities. Like income replacement theory in insurance speak, or saving for a rainy day in common sense speak.

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