# Energy bull market



## james4beach (Nov 15, 2012)

I wonder if this is a real bull market in energy? Or just a war-induced spike in oil prices, perhaps.

When the war started, I bought a small position in HUC which tracks crude oil. It's performing very well but I think XEG is probably the better vehicle, so I switched into XEG.

Looks like a bull market to me:


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## m3s (Apr 3, 2010)

There were definitely smart people calling a rotation into commodities last fall long before the war

Premiums on credit default swaps and the rising interests rates were also coming regardless of war

If anything the war was enabled by the west being financially constrained rather than vice verse


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## Fisherman30 (Dec 5, 2018)

I managed to buy into CPG at $2.00/share just after covid started. Unfortunately I only bought 100 shares because I was laid off at the time. Bought another 100 shares at $7.50. Considering buying more. There's only so much oil in the ground, and we are a very long way away from not needing it.


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## hboy54 (Sep 16, 2016)

I don't really expend any energy trying to predict bull and bear markets. However some things are arguably "different this time":

All the capital investment that has not been made in recent past years, I think a number something like $300B.

Governments by their words and actions want the death of the industry. These words and actions have helped encourage restraint in the industry, but "oops" the population still wants their standard of living, and unfortunately green alternatives are not sufficient yet to make up for the reductions in the fossil fuel space.

There is widespread understanding that for a great many years, production growth lead to excess supply and rampant capital destruction. Shareholders have said "enough" and want their returns.

Perhaps the OPEC reserve capacity is now more fiction than fact.

The investing public is refusing to value the oil and gas industry as it does other industries. It is a higher return activity to buy back shares instead of growing production.

Other factors not coming to me right now?

So while I don't make predictions, I am in no hurry yet to sell down my considerable oil and gas holdings which have driven a portfolio return of about 260% since year end 2019.


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## londoncalling (Sep 17, 2011)

Remember just over 2 years ago when oil futures were negative?

Negative Oil Prices: What Are They and What Do They Mean? | IG EN

My original plan was to sell in the fall but that was with an expected drop in oil due to an end to the war in Ukraine by now. Not sure if the EV market will stall but it is definitely gaining traction.


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## james4beach (Nov 15, 2012)

I looked at the forward P/E ratios of the top holdings of XEG (majority of the fund). Here are the Forward P/E numbers from Yahoo Finance:

Suncor, 7.37
CNQ, 7.93
Cenovus, 7.69
Tourmaline, 8.73

If we believe their forward guidance, this sector has a forward P/E of about 8 which is about as cheap as it's ever gotten, historically. These are value stocks.

Though, I'm worried that the companies may be using optimistic projections in their guidance. Suncor is assuming $97 WTI for example which doesn't sound like a conservative estimate to me.


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## zinfit (Mar 21, 2021)

hboy54 said:


> I don't really expend any energy trying to predict bull and bear markets. However some things are arguably "different this time":
> 
> All the capital investment that has not been made in recent past years, I think a number something like $300B.
> 
> ...


And we have the ESG requirements for many large investors. Foreign investment has been selling their investments in the energy sector and it isn't coming back.


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## zinfit (Mar 21, 2021)

My big positions are in ARC Resources, Enerplus, Whitecap ,Tamarack Valley ,Fang ,ConocoPhillips. and Ranger Oil. I look a Crescent Point and compare it to Enerplus and I take Enerplus. CPG assets are in the Bakken zone in SK and Enerplus has a much larger and richer position in the same formation in North Dakota. In addition they have a strong position in the Marcelus shale formation in the US east. I figure the investors have caught on and Enerplus is up about 30% over the past 2 weeks. Fang, Conocco and Ranger oil all have production in the right places in the US. They are low cost producers and they get the full WTI price. Tamarack has a big position in the highly productive Clearwater formation. They are active in expanding production in that area and with much success. I had a large position in CVE but just sold it and put the proceeds into Whitecap and ARC . They are straight producers. Most of the analysts don't see a lot of upside for the integrated companies at this time with the exception of ConocoPhillips. NG producers in the US look like a place with a lot of upside. Historically the summer is the low season for NG and the fall and winter is the strong season. NG is selling close to $9.00 per BTU. Last year it was getting $2.50 a BTU. Things are setting for a very strong bullish market for NG. That is my rational for having my biggest position in ARC Resources. I started buying Range Resources in the US . It is pretty well a straight NG producer.


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## Covariance (Oct 20, 2020)

My allocation is equal weight CVE, CNQ, WCP and on the US side XOP.


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## OneSeat (Apr 15, 2020)

Finally sold some of my AA ETFs a month ago after they plunged so much. Bought some energy. Made up my loss in less than one month. Watch market facts. Don't hang on to same thing for decades.

Hope I remember to watch the market!


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## james4beach (Nov 15, 2012)

OneSeat said:


> Finally sold some of my AA ETFs a month ago after they plunged so much. Bought some energy. Made up my loss in less than one month. Watch market facts. Don't hang on to same thing for decades.


I thought the whole point of the asset allocation ETFs was to hold them for the long term, without trading in & out


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## cainvest (May 1, 2013)

OneSeat said:


> Finally sold some of my AA ETFs a month ago after they plunged so much. Bought some energy.


I just did the opposite.
In other words, sell high and buy low.


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## doctrine (Sep 30, 2011)

Anyone who thinks oil prices are going to drop below $100 should take a close look at this graph. There is nothing good about it if you are a consumer.

Forward P/E on all oil stocks is ridiculous. For the XEG companies, it is more like a P/E of 4 or less. On a strip basis, it is as low as 3. Yes, that cheap.


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## AltaRed (Jun 8, 2009)

If one is timing the market, this might be as good a time as any to buy AA ETFs. There is a suggestion however that markets have another 10% or more to fall. 10 Investing Rules


> The 10 rules are:
> 
> 
> Markets tend to return to the mean over time.
> ...


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## cainvest (May 1, 2013)

AltaRed said:


> If one is timing the market, this might be as good a time as any to buy AA ETFs. There is a suggestion however that markets have another 10% or more to fall. 10 Investing Rules


That was my thinking. I only have one 2020 discount stock left that I'm letting ride up, the rest went into long term holds with CDN banks & mawer in the past while.

If there is one thing I learned a long time ago is never hindsight trade, as in, who knew XEG was going to $50!


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## londoncalling (Sep 17, 2011)

cainvest said:


> XEG was going to $50!


Larry!


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## OneSeat (Apr 15, 2020)

cainvest said:


> I just did the opposite.
> In other words, sell high and buy low.


If you make a mistake you have to correct it. I made the mistake of not selling my AAs when they were high and when a drop was generally agreed about to happen. So now I am able to buy other stocks (energy and high divs) when they are increasing. Will watch them and sell when I am happy with my profit. Then possibly (probably?) re-buy AAs when they are lower than they are now.

I totally agree with *buy low sell high*. But hanging on to AAs as they go up and down does not maximise that.

I am still amazed that some people who responded to my earlier point seemed happy that they did nothing during the 2020 gulf. I was happy with my profits (big profits) and sold a lot in November/December 2019. Then re-bought in mid 2020. Much more profit than doing nothing.

Watch the facts. Don't just slavishly follow an idea based on past results.


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## OneSeat (Apr 15, 2020)

AltaRed said:


> .............. this might be as good a time as any to buy AA ETFs.
> There is a suggestion however that markets have another 10% or more to fall.


So why buy now?


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## OneSeat (Apr 15, 2020)

james4beach said:


> I thought the whole point of the asset allocation ETFs was to hold them for the long term, without trading in & out


Advertising is rarely 100% correct.


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## zinfit (Mar 21, 2021)

OneSeat said:


> So why buy now?


based on 90$ oil most companies pay off all debt by the end of 2022. In 2023 FCF will be at 30%. Companies will be be buying back stock at 50% and the balance in dividends . What happens with higher price oil? what am I missing. Maybe AltaRed can straighten me out


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## james4beach (Nov 15, 2012)

OneSeat said:


> So why buy now?


Because nobody knows where prices go next. Many of us think stocks are going to fall more, but that's just a guess, and we could be wrong.

The diversified asset allocation ETFs invest across a broad range of assets. They are going to capture the long term "equity premium" as well as the returns of bonds.

Asset prices have recently fallen. When asset prices go down, expected future returns go up.


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## cainvest (May 1, 2013)

OneSeat said:


> I totally agree with *buy low sell high*. But hanging on to AAs as they go up and down does not maximise that.


It may not maximize it but if AA returns back to normal levels shortly it's no big deal. I do buy on value (with new cash or an asset allocation shift) but I don't part with my long term holds unless the business is going sour. For me it's a long game, as in, in two years time I'll look back at the charts and likely see a small valley for AAs.


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## AltaRed (Jun 8, 2009)

OneSeat said:


> So why buy now?


What James said. No one knows and thus investing is for the long term. Not 3-6 month performance numbers. But please be my guest. Many investors chase the current best thing.


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## AltaRed (Jun 8, 2009)

zinfit said:


> based on 90$ oil most companies pay off all debt by the end of 2022. In 2023 FCF will be at 30%. Companies will be be buying back stock at 50% and the balance in dividends . What happens with higher price oil? what am I missing. Maybe AltaRed can straighten me out


You are not missing anything in the relatively short term, but there are two big potential holes in the oil play 2+ years from now. Gas is on a different trajectory.....

The first one is the assumption it could take years for oil supply and demand to balance. That could change in less than 6 months with demand destruction as a result of current high prices PLUS a recession (both would need to occur for early dramatic demand destruction). Demand destruction due to high prices however will, for the most part, be permanently lost because consumers of oil will have made capital decisions to go elsewhere, especially in light of the push to go 'off oil'. Longer term, Russian oil and Iranian oil will be back on the global market even if not acceptable with some OECD countries. Western supply is not really cost competitive with that produced by a number of soverign (state) oil companies.

The second one is an increasingly held belief oil demand has, or will peak, shortly and begin a secular decline. The BP energy outlook is probably the least partisan look at it. About 60%(?) of global oil demand is for land transportation. Much of that will slowly disappear permanently. That means some supply will have to fade from global markets. It does not matter if oil companies will pay off debt, be flush with cash flow and will issue special dividends and engage in share buybacks in the near term. The music will fade as prices fade. Investors are no longer willing to bid up valuation multiples.

I obviously don't know how long the current dance will last but this is still a cyclical trade that will turn yet again.


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## zinfit (Mar 21, 2021)

AltaRed said:


> You are not missing anything in the relatively short term, but there are two big potential holes in the oil play 2+ years from now. Gas is on a different trajectory.....
> 
> The first one is the assumption it could take years for oil supply and demand to balance. That could change in less than 6 months with demand destruction as a result of current high prices PLUS a recession (both would need to occur for early dramatic demand destruction). Demand destruction due to high prices however will, for the most part, be permanently lost because consumers of oil will have made capital decisions to go elsewhere, especially in light of the push to go 'off oil'. Longer term, Russian oil and Iranian oil will be back on the global market even if not acceptable with some OECD countries. Western supply is not really cost competitive with that produced by a number of soverign (state) oil companies.
> 
> ...


you raise many good points. If I am rolling the dice the boom is still good for a year Right now it is the best game in town.


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## zinfit (Mar 21, 2021)

Covariance said:


> My allocation is equal weight CVE, CNQ, WCP and on the US side XOP.


keep Whitecap sell the other 2 and buy Tamarack Valley and Enerplus . There is much. much more upside with these two. Check back in January and we will see who is right.


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## peterk (May 16, 2010)

The notion that an increase in stock prices is not just a response to good company performance and financial metrics, but is meant as a signal of intent by investors about the desire for production growth from their business's operations, or not, is something I've just recently realized. I think this is general to the whole stock market and all industry, not just energy, but is being observed in energy currently and is perhaps most acute in energy due to the capital intensity. That stock prices are as much about_ forward guidance from the market to management regarding how much to spend_, as they are a retroactive assessment of a business's success and prediction of the future. I'm sure that's pretty basic to most of you wizened CMFers, but I just figured it out...

Everyone saying "why is energy so cheap" is just looking at the metrics, not the market acting to pressure management to restrain production growth through lack of capital. Of course that sentiment might change eventually.

My other energy thesis, a bullish one, though pessimistic of humanity... is that non-OPEC oil has pretty much just been given cart-blanche to become an energy cartel by western governments. ESG metrics and targeted media and government attention on energy about climate change is viewed as some sort of new level of "oversight" and pressure towards getting them to "clean up their act". But what's going to happen is that big oil will be able to throttle production and jack up prices _in coordination_ (i.e. a cartel, collusion) all in the name of co-operative climate change action, essentially abandoning the fundamental market concept of seeking maximum ROI through the successful operating of your business, in competition with everyone else. Dangerous territory...


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## AltaRed (Jun 8, 2009)

I don't agree with that theory. Every oilman is in it for themselves. The problem right now is the predictability of oil demand in the future (and thus prices) is the most unpredictable it has likely ever been in the past 100 years. It has always been assumed global demand for oil would trend upward, glitches due to oversupply or a recession being the caveats, but still predictable to some extent and understood. That level of predictability has mostly been thrown out the window. Add to that the pressures of climate change policy, emissions caps and carbon taxes and it becomes increasingly clear the road ahead is unpaved.

Oilmen now can only think about relatively short payout capex investments because so much can turn on a dime fairly quickly. Production growth investment will thus be constrained going forward and thus taking on traditional amounts of debt will be constrained. That may look like cartel like conspiracy but it is not. It is simply being defensive. It is somewhat ballsy for the bigger companies to continue to take the risk of long(er) payout projects, e.g. offshore Norway, Guyana and others.


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## Covariance (Oct 20, 2020)

zinfit said:


> keep Whitecap sell the other 2 and buy Tamarack Valley and Enerplus . There is much. much more upside with these two. Check back in January and we will see who is right.


Will look into your suggestions. Thanks


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## doctrine (Sep 30, 2011)

New high on XEG. It's almost like oil equities have been a predictably inefficient market with stock pricing that did not even remotely reflect fundamentals due to a lack of investment by institutions which kept share prices low.

Imagine what oil prices would be today if China wasn't locked down for the last 3 months, and the US hadn't been dumping its strategic reserve as fast as they can literally pump it out of the ground.

Inventories continue to drop. Prices must rise until inventories stop dropping.


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## londoncalling (Sep 17, 2011)

Trade Data Disappoint (conferenceboard.ca) 

April saw a small decline in exports in energy. I would attribute some of this to planned maintenance shutdowns as well as declining inventories. Gas prices keep climbing ahead of the the summer travel season. Will consumers drive less or make sacrifices in other areas.


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## MrBlackhill (Jun 10, 2020)

I remember creating a poll where I asked if we would reach $150 oil this year. We're now comfortably at $120 with a continuing uptrend.

Maybe I should ask another question... Ok, now that we've seen gas price at $2 in Canada... Will we see $3 somewhere in Canada this year? Maybe in Vancouver? That would be a shock, I guess.


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## londoncalling (Sep 17, 2011)

I doubt we will see $3 this year. I certainly don't want to see it. My guess is demand destruction would occur before $3.


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## zinfit (Mar 21, 2021)

If it settles in at $120 these companies will have enormous FCFs . I hope it stays in the 100-120 range as those prices will be very profitable for shareholders. I agree prices like $150 will bring on demand destruction and Trudeau's windfall profits tax. NG is a different story as it is a essential for a pile of things like electric utility plants and heating homes and offices. It is now jumped into the $9.50 range and its high season is winter. Everyone is focused on oil I think the case is even more bullish for NG. Arc Energy is one of my giant holdings and it really started moving and it mainly a NG stock.. Last I checked had it was up 5% for the day. Arc Energy, Enerplus and Tamarack Valley are my three largest positions and they seem to up every day between 2 and 5% . I have about 250 k in these three stocks.


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## james4beach (Nov 15, 2012)

Let's be clear: there is risk in energy. It almost feels like a crowded trade to me. It sure seems popular and every market technician has identified oil & gas as the only uptrend in the whole market. And people chase rising prices... everyone jumps on the bandwagon.

There are possible scenarios which could end and reverse the trend in energy. Who knows what will happen going forward, but it's not a sure thing. Might be good to check one's diversification and make sure they aren't betting the farm on energy.


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## wayward__son (Nov 20, 2017)

Energy is such an interesting trade right now. All of this has happened with China in various states of lockdown, what happens if that demand comes back. On the other hand, long O&G seems to be the one trade that the central banks are out to wreck at all costs, but can they actually follow through without bankrupting their own governments (recession, tax receipts down, debt service costs up) or losing their constituents. I am not particularly long energy (although I wish I was!) -- just sitting in my usual allocation to Canadian equity -- but it really doesn't feel to me like the central banks are in control.


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## zinfit (Mar 21, 2021)

james4beach said:


> Let's be clear: there is risk in energy. It almost feels like a crowded trade to me. It sure seems popular and every market technician has identified oil & gas as the only uptrend in the whole market. And people chase rising prices... everyone jumps on the bandwagon.
> 
> There are possible scenarios which could end and reverse the trend in energy. Who knows what will happen going forward, but it's not a sure thing. Might be good to check one's diversification and make sure they aren't betting the farm on energy.


not really. The US investor has been pretty much outside this trade and the ESG stuff keeps a lot of funds, ETFs and institutional investors out of fossil fuels.Oil and Gas are trading much, much below historic levels.When the cCFs are at 10% and the price to CFs are above 5 I will buy into that argument. Currently CFs are above 20% and some are at 30% and price to CFs is between 2.5 and 3.


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## Covariance (Oct 20, 2020)

Where to go with this investment? It's hard to ignore the gains we've made and think maybe lighten up. On the other hand, if we ignore entry price and just focus on fundamentals - limited investment, declining production, inventories lower than 5 year historical averages - it looks very positive. For me it comes down to demand. If there is a recession all bets are off. I'm watching the Fed/CB action and other data for signals that indicate major economies will tip in or crash into recession.


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## doctrine (Sep 30, 2011)

Oil prices are up 20% in 6 weeks and oil equities are basically flat. Heck, oil is up today as we speak. There is some retail investor interest, but institutional ownership is very lacking. ESG indexes have verboten the oil companies, and there is plenty of self-sanctioning. There is no substantial bid for oil company shares. Does anyone recall the cannabis mania, or even the unprofitable tech mania of the last two years? There is no mania in buying of debt free oil companies trading at 20-30% free cash flow multiples. There is only disbelief that may be relieved once multiple 10%+ SIB buybacks start to occur.

The only solution being enacted for this supply crisis increasing interest rates, which must go to extreme levels to reduce demand enough to allow inventories to grow. This, of course, is insanity and will lead to insane oil prices.

We haven't yet begun to unravel the supply problem. I still have a target of $20 for XEG this year, and $30 next year.


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## james4beach (Nov 15, 2012)

Covariance said:


> Where to go with this investment? It's hard to ignore the gains we've made and think maybe lighten up. On the other hand, if we ignore entry price and just focus on fundamentals - limited investment, declining production, inventories lower than 5 year historical averages - it looks very positive. For me it comes down to demand. If there is a recession all bets are off. I'm watching the Fed/CB action and other data for signals that indicate major economies will tip in or crash into recession.


The central banks could easily kill all demand. And China's economy isn't so healthy either.

But right now, oil is undeniably in an uptrend. Look at WTI crude for example, it could easily fall 25% and would still be above its 200 day moving average.


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## james4beach (Nov 15, 2012)

It's been several days of declines now in XEG.

Maybe the rally in Canadian energy is over?


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## zinfit (Mar 21, 2021)

james4beach said:


> It's been several days of declines now in XEG.
> 
> Maybe the rally in Canadian energy is over?


The current sentiment is dragging everything down. Oil companies are making Hugh profits at the current prices. Once we get past this current turmoil they will get a real good bounce. The NG companies might have some difficulties because of the closure of the giant Freeport LNG facility.


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## wayward__son (Nov 20, 2017)

The Biden “big oil” surtax if they implement it should be good to help keep the energy bull running for a while longer (lol)


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## Spudd (Oct 11, 2011)

Natural gas just got decimated yesterday! Dropped 15% in one day (using HUN.TO as proxy) and is now below the 50 day MA. This was because an LNG plant in Louisiana had an issue and announced they won't be able to process natural gas for export until the end of the year. I guess this means there will be excess supply domestically now, since some of that gas would have gone to this plant for export, but now it can't. 

Oil still doing OK in my view. It's coming down slightly but still above the 50 day MA and there are several other similar-looking declines in the general upward trending chart.


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## james4beach (Nov 15, 2012)

Spudd said:


> Natural gas just got decimated yesterday!


Do you think the energy bull market could be fizzling out? Oil & gas has been falling hard in the last few days.

Central bank tightening is also likely killing demand. And all the speculators who went long in commodities/energy, expecting high inflation, could now get caught off-side. Maybe they will want to unwind their positions due to Fed hawkishness, driving energy down.

Remember how energy shot up really high on the inflation scare that came right before the 2008 slowdown?


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## Spudd (Oct 11, 2011)

james4beach said:


> Do you think the energy bull market could be fizzling out? Oil & gas has been falling hard in the last few days.
> 
> Central bank tightening is also likely killing demand. And all the speculators who went long in commodities/energy, expecting high inflation, could now get caught off-side. Maybe they will want to unwind their positions due to Fed hawkishness, driving energy down.
> 
> Remember how energy shot up really high on the inflation scare that came right before the 2008 slowdown?


My speculative portfolio is heavily in oil/gas so I hope not. As of yet I have no plans to rotate out. I'm using a momentum strategy in that portfolio, where I take the top two ETFs by performance over the past year. Once a month I evaluate if they need to change. At the moment they are still HUN (natural gas) and NNRG (energy). I don't actually hold NNRG because it's so new it just leaped into the chart last month or something, instead I hold HUN and the #3 which is HXE (also energy). I figured it's not worth changing horses from HXE to NNRG as they are basically the same thing.

Anyway, as per my strategy, since they are still the top 2 ETFs, I will continue to hold them. Yesterday was painful though. But luckily my speculative portfolio is just a small portion, which I use for travel. My strategy doesn't require me to speculate on the future, though it's fun to do.

My speculation is that it's not going to fizzle out just yet. Natural gas is an edge case that was impacted by this plant explosion, but I think the general oil/gas sector has farther to run. However, I'm FAR from an expert, so don't listen to me!


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## doctrine (Sep 30, 2011)

james4beach said:


> Do you think the energy bull market could be fizzling out? Oil & gas has been falling hard in the last few days.
> 
> Central bank tightening is also likely killing demand. And all the speculators who went long in commodities/energy, expecting high inflation, could now get caught off-side. Maybe they will want to unwind their positions due to Fed hawkishness, driving energy down.
> 
> Remember how energy shot up really high on the inflation scare that came right before the 2008 slowdown?


Oil and gas hasn't even corrected yet and we're calling the end of the bull market? Oil is selling at $135-155 Canadian a barrel today - record prices.

Central banks are rapidly tightening in an attempt to suppress demand. If they succeed then what? Are the central banks going to sustain pressure until tens of millions of people lose their jobs, or worse? 2008 wasn't caused by oil prices, it was caused by finance, and as soon as demand came back, the oil bull market ran for another 5 years until one trillion dollars of shale equity was finally destroyed. Do you see anyone ponying up another $1 trillion for another go at shale oil?

There is no supply solution, only solutions that make the problem worse, like threatening oil companies with new taxes or investigations and bad press while we shut down nuclear plants. Worldwide insanity on energy policy.

WTI is $115 and China has been shut down for almost 3 months now and jet fuel demand is 20% below 2019 but roaring back. Think about what is happening.


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## londoncalling (Sep 17, 2011)

I haven't had a chance to look into the Louisiana closure but if it means LNG is stranded domestically will that equate to higher prices for LNG outside NA and lower prices here at home? If that is the case it may do more to curb inflation than the hikes from central bankers.  Demand destruction is a dangerous pursuit which will result in more inflation in the near term and a surprise halt to the overall economy once it arrives. I would prefer to see an increase in supply but that will take a lot of time as well. In the meantime I am holding onto energy. I'd like to add but I expect the drop to be sudden when it does come and the lower my ACB the better as I hold in registered accounts. For now I will take it week by week and quarter by quarter. Once people realize ESG is a marketing hoax (I am all for ESG but not many of the funds practice what they preach) perhaps the big funds will start flogging oil again. BTW Canadian oil is in a much better situation from an ESG perspective than most believe.


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## AltaRed (Jun 8, 2009)

Degraded LNG export capacity simply means potentially higher LNG prices in Europe and lower natural gas prices in North America. It probably will not result in demand destruction since Europe in particular is going to be desperate to replace Russian gas for some time. Even if/when sanctions are lifted, I suspect Europe will not hostage itself nearly as much to Russia again.


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## londoncalling (Sep 17, 2011)

I reread my post and can see that I was not very clear in my statement regarding demand destruction. I agree that it is unlikely the export disruption will not lead to demand destruction. Oil and NG are not one in the same. For additional clarity missing in my previous post: There are a number of those that believe escalating fuel prices will result in people being more selective on travel frequency and options. Or just not buy fuel at all and opt for other modes of transportation. This would hypothetically kill demand. I am not in that camp. As mentioned by doctrine and others China hasn't lifted lockdowns and a lot of workplaces have yet to fully return to work. Apparently, a lot of work spaces were given up and now the game of musical chairs has begun. As far as personal discretionary travel is concerned, I believe at least over the summer and perhaps this winter people will forego other discretionary spending in order to travel. Of course this does not apply to those that are already stretched thin due to low income. They may be forced to cut spending in all areas as a result of high inflation. Energy supply (all sources) in Europe will be a mess for years to come but in particular Nat gas. In hindsight it is easy to see how we got into this mess but solutions don't seem to be immediate. As a result I feel this bull has more room.


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## james4beach (Nov 15, 2012)

doctrine said:


> Oil and gas hasn't even corrected yet and we're calling the end of the bull market?


I'm just trying to stimulate debate and help us consider the other side of the trade. Let's remember that central banks are tightening, and that could take some steam out of commodity prices.

In a place like CMF, there's a danger of "groupthink" since this is a very energy-friendly crowd. Many people here probably want to believe that commodities & energy will remain strong. That kind of bias can cloud trading judgement.

So I think it's healthy to always ask: what's the other way this trade can go?


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## doctrine (Sep 30, 2011)

james4beach said:


> I'm just trying to stimulate debate and help us consider the other side of the trade. Let's remember that central banks are tightening, and that could take some steam out of commodity prices.
> 
> In a place like CMF, there's a danger of "groupthink" since this is a very energy-friendly crowd. Many people here probably want to believe that commodities & energy will remain strong. That kind of bias can cloud trading judgement.
> 
> So I think it's healthy to always ask: what's the other way this trade can go?


Of course it's useful to look at the other side. A serious recession will dampen demand and delay the inevitable crunch. It also allows the rapid dumping of strategic reserves to be more effective. And so down it goes, but all of the same fundamentals are still in place. The market is adjusting to the new reality of slower growth and in a market sell-off, everything goes down. As well this is seasonally the end of the strong demand period and market leaders like energy are easy targets for profit taking and for covering margin-calls. Market selling knows no rationality - sell first, ask questions later.

Once this sell-off and unwinding slows down, I would not be surprised to see energy surging back to new highs as news continues to develop that there is no magic solution to replacing energy and there is not enough of it, and we are years and years away from even changing our thinking, let alone breaking out the drill bits.


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## wayward__son (Nov 20, 2017)

I mean look at this. Energy Secretary for the largest economy and producer of oil and leader of the free world making the rounds with a plan that involves the president writing letters to oil and gas companies demanding that they should "increase supply". Then we have an interlude around big oil making too much money and the denouement is we want to put you all out of business as soon as we can anyway. Oil is going to 200 and Putin must be laughing.


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## AltaRed (Jun 8, 2009)

The current WH administration sure does have this one mucked up. It's unbelievable how incredibly stupid this current behaviour currently is but it really just shows how desperate the political situation actually is at this point. Imagine a windfall profit tax while at the same time admonishing the industry for not spending more capital. Never mind that spending more capital will have no near term effect and that no prudent company will spend money on anything requiring more than a 3-5 year payout, never mind a return on investment.


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## londoncalling (Sep 17, 2011)

This is insane. Biden telling companies to increase production while indicating he is going to tax them further. Barriers to production need to be removed not increased. Some of these companies did a great job while maintaining investment in production when oil was essentially worthless. Crazy days indeed. Recent events show how easily our economic systems can be disrupted. Everyone is talking about increasing supply but if the oil price drops too quickly it is possible that OPEC will cut supply. We often forget that OPEC has political and economic levers they can pull to move the price of oil up or down.


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## wayward__son (Nov 20, 2017)

AltaRed said:


> The current WH administration sure does have this one mucked up. It's unbelievable how incredibly stupid this current behaviour currently is but it really just shows how desperate the political situation actually is at this point. Imagine a windfall profit tax while at the same time admonishing the industry for not spending more capital. Never mind that spending more capital will have no near term effect and that no prudent company will spend money on anything requiring more than a 3-5 year payout, never mind a return on investment.


At what point does it become not-crazy to start worrying that we might get price controls and rationing?


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## Covariance (Oct 20, 2020)

wayward__son said:


> At what point does it become not-crazy to start worrying that we might get price controls and rationing?


If this is a US focused question the Dems are going to lose control of both houses in the fall. Now to then is the window of worry. Thereafter unlikely.


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## AltaRed (Jun 8, 2009)

I don't think price controls nor rationing is in the cards. The last experiment some 40 years ago was pretty much an unmitigated disaster. 

What I think might/could happen is some kind of lump sum credit (or similar) to households to subsidize fuel costs. IOW, those with a big V8 quad cab pick up, big engine sports car, or 3 row SUV need to feel the pain, and those with a Honda Civic/Toyota Corolla may end up with no net household budget damage. After all, it is the lower income folks most likely to be hurt by fuel costs. Those with the audacity to own gas guzzlers need to pay the price. Similarly with house heating fuel, especially those on NG or propane. That can be done by a credit on utility bills (in absolute amounts, not price per GJ used). IOW, whack-a-mole the heavy users to help alleviate the pain for all.

Lest this feel mean.... be aware such a system would affect my household personally. Big house, heated pool, and somewhat thirsty ICE vehicles.


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## londoncalling (Sep 17, 2011)

I don't foresee rationing occurring unless supply dries up completely. I think price controls are a bad idea as well. Putting in price controls without reducing fuel tax will be political suicide. I believe that market forces will act as necessary in most cases. Those that want to consume should be willing to do so at market rate. There are some(not sure how many but I do sympathize) that live in the range that necessary consumption will severely affect their cost of living. There are already people that have to choose how to pay for life's necessities on a regular basis. Anyone participating on this forum is not likely part of that demographic. A lot have gotten used to having enough discretionary income that they have a lot more allocated to wants than to needs. A healthy dose of perspective readjustment may not be a bad thing. Yes it sucks but decisions have consequences. Sometimes they work in your favour and sometimes they don't It's time for those that were not spending with reckless abandon to know their efforts were not in vain. I do not want to see cheques cut by the government to the citizens. I would prefer that real longer term solutions are found to economic problems. Sometimes stimulus is needed(definitely less than has been recently practiced) but you can't spend your way out of every problem. If your only tool is a hammer then every problem looks like a nail.


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## james4beach (Nov 15, 2012)

North American lifestyles are very energy and resource hungry. People have gotten a free ride for a very long time. Energy costs should be much higher. Even gasoline is still pretty cheap in the big scheme of things.

We can easily see gas prices double at the pumps I think. People will adjust; our gas prices are pretty cheap today.


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## zinfit (Mar 21, 2021)

I figure the markets are close to panic mode. Zero rational for the big drop in energy stocks. $118 WTI means they are making a gigantic amount of cash. This current market is taking everything down. There are probably 3 or 4 more hikes by the fed so tightened your seatbelts.

4


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## james4beach (Nov 15, 2012)

zinfit said:


> I figure the markets are close to panic mode.


I'm not sure. Volume on USO is low and XLE looks pretty average too. Typically in a panic, there would be aggressive selling on high volume.

I think fear and panic could still come to the energy space... it might not be here yet. The sector could be fairly or even undervalued but that doesn't mean it can't get a quick 25% to 40% washout. Who knows though.

I am long XEG as I still think it's the most promising sector. I am prepared for high volatility and think a 25% drop could easily come.


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## zinfit (Mar 21, 2021)

james4beach said:


> I'm not sure. Volume on USO is low and XLE looks pretty average too. Typically in a panic, there would be aggressive selling on high volume.
> 
> I think fear and panic could still come to the energy space... it might not be here yet. The sector could be fairly or even undervalued but that doesn't mean it can't get a quick 25% to 40% washout. Who knows though.
> 
> I am long XEG as I still think it's the most promising sector. I am prepared for high volatility and think a 25% drop could easily come.


well you have to have a lot more sellers than buyers to see the declines we have seen. I suspect it is a lot of retail investors who are cashing out. For many fundamentals isn't their strong suit . I expect many of the energy stocks will be buying another 10 or 15% of their stock with this price decline and come the next quarter upping their dividends and may-be paying some special dividends. They have to be sitting on a big pile of cash.


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## zinfit (Mar 21, 2021)

james4beach said:


> North American lifestyles are very energy and resource hungry. People have gotten a free ride for a very long time. Energy costs should be much higher. Even gasoline is still pretty cheap in the big scheme of things.
> 
> We can easily see gas prices double at the pumps I think. People will adjust; our gas prices are pretty cheap today.


So true and the climate change zealots and Trudeau should be rejoicing because higher prices means lower carbon emissions or am I missing something. Isn't that the rational for the carbon tax. It will make fossil fuels more expensive and therefore discourage its consumption.


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## londoncalling (Sep 17, 2011)

zinfit said:


> well you have to have a lot more sellers than buyers to see the declines we have seen. I suspect it is a lot of retail investors who are cashing out. For many fundamentals isn't their strong suit . I expect many of the energy stocks will be buying another 10 or 15% of their stock with this price decline and come the next quarter upping their dividends and may-be paying some special dividends. They have to be sitting on a big pile of cash.


A lot that got in 2020 are more than happy to cash out here based on the overall panic you mention. If we see another 10% down in energy and WTI stays at or near current prices I will be adding to my existing positions. CNQ got clobbered today but that's to be expected with the run the oil stocks have had as of late.


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## zinfit (Mar 21, 2021)

londoncalling said:


> A lot that got in 2020 are more than happy to cash out here based on the overall panic you mention. If we see another 10% down in energy and WTI stays at or near current prices I will be adding to my existing positions. CNQ got clobbered today but that's to be expected with the run the oil stocks have had as of late.


I am with you all the ways. When these stocks report in early August I expect we see blowout numbers . When a person is in a recession/ bear market stick with stocks which have growing revenues and earnings and are very profitable with piles of FCF and small and reducing debt levels.. CMQ should be a screaming buy.


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## Covariance (Oct 20, 2020)

zinfit said:


> I figure the markets are close to panic mode. Zero rational for the big drop in energy stocks. $118 WTI means they are making a gigantic amount of cash.
> 
> 4


Not saying this is my trade - just providing an explanation of why many would be exiting energy producers. This is a classic sector rotation trade of an investor repositioning for recession. Fed action in conjunction with real time signals of economic activity drives a rule based shift of asset allocation. Sell commodities on expectation of lower demand from contraction of economy.


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## AltaRed (Jun 8, 2009)

The big gains have been made so investors will exit when they see storm clouds ahead and there are indeed storm clouds such as demand destruction in a number of ways, some near term (recession) and others longer term, i.e. conversion to electrified land vehicles. On the latter, we often simply think of passenger cars. The bigger and faster transition may be with commercial and municipal vehicles. Most such vehicles never would go far enough each day to need a re-charge.

The oils thus cannot attract the valuation multiples they have seen in the past albeit it doesn't mean they won't see record share prices short term simply due to the cash flow and earnings they will spin off near term.


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## Jimmy (May 19, 2017)

I am tempted to add a little CNQ on the pullback for a st trade. I would like to see oil fall to maybe $100 as forecasts are for $95 for 2023 YE oil. I didn't want to buy when oil was at $120 which seems a peak.

I know they hedge 60% too. Is this a good time to add say a 1/3 of a position ?


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## Covariance (Oct 20, 2020)

Jimmy said:


> I am tempted to add a little CNQ on the pullback for a st trade. I would like to see oil fall to maybe $100 as forecasts are for $95 for 2023 YE oil. I didn't want to buy when oil was at $120 which seems a peak.
> 
> I know they hedge 60% too. Is this a good time to add say a 1/3 of a position ?


I added today, along with WCP. Note: Monday US is closed for a holiday. may become thin this afternoon.


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## londoncalling (Sep 17, 2011)

Oil turbulence could last five years, ExxonMobil boss warns (yahoo.com)

"Woods said the project will "bring balance to the global market"

That's a pretty bold statement. In my experience the market is rarely in balance but that would make the cyclical sector rather boring.


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## AltaRed (Jun 8, 2009)

That balance is LNG, not oil. The Qatar North Field is natural gas. It is the largest in the world and shares it with Iran (called South Pars in Iran). North Dome / South Pars gas field

The new project referred to in Exxon's comments is Qatar Signs Deal With Total For Expansion Of Gas Field In Persian Gulf The expansion of 6 additional LNG trains is world scale.


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## Covariance (Oct 20, 2020)

AltaRed said:


> That balance is LNG, not oil. The Qatar North Field is natural gas. It is the largest in the world and shares it with Iran (called South Pars in Iran). North Dome / South Pars gas field
> 
> The new project referred to in Exxon's comments is Qatar Signs Deal With Total For Expansion Of Gas Field In Persian Gulf The expansion of 6 additional LNG trains is world scale.


I prefer to stay engage in oil only for this reason. While linked in some ways the price of the two have different drivers, vol.


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## AltaRed (Jun 8, 2009)

I was responding to Londoncalling's post in which the Exxon comment about 'balance' was directed at LNG. Ultimately 6 more trains of LNG out of Qatar will take some pressure off natural gas prices but that won't be for years. It takes quite some time to build that many LNG trains.


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## londoncalling (Sep 17, 2011)

That makes more sense as to what he meant by balance. Thank you. As you stated we won't see the effects for quite sometime but at least there is capital being spent to address tight supply. I have always found it interesting that commodity companies often start these projects at or near peak prices and by the time they come online we are in a different part of the cycle. At least that has been my personal experience with the mining sector over the years.


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## Money172375 (Jun 29, 2018)

james4beach said:


> North American lifestyles are very energy and resource hungry. People have gotten a free ride for a very long time. Energy costs should be much higher. Even gasoline is still pretty cheap in the big scheme of things.
> 
> We can easily see gas prices double at the pumps I think. People will adjust; our gas prices are pretty cheap today.


For sure. Everyone in Europe has a small 4 cylinder car or diesel. Some have larger cars, rare to see a SUV or truck owned by individuals. 

Feels like we missed an era of ultra fuel efficient gas vehicles. Trying to go from v6/8 trucks to electrics. ultra fuel efficient gas vehicles nEve really got a shot. Heck, our Honda uses about 5-6L per 100km and still puts out 130bhp. And it really doesn’t have any advanced tech.


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## zinfit (Mar 21, 2021)

A couple of comments. RBC is still bullish on energy stocks. They made reference to an experienced energy trader who says $104 for WTI is the demand destruction price. Otherwise the price would be at $150. I note that some of the US energy companies have just doubled their buyback program.They apparently see no better time to buy back their shares at a very low price. I expect the Canadian energy companies will be doing the same. The energy sector should be very interesting. The recent selling doesn't seem to make a whole lot of sense. I paired back my positions and bought some 2 year GICs at 4.3% in case I am wrong.


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## james4beach (Nov 15, 2012)

XEG is now down 25% from its peak.

Is it possible that we're wrong?


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> XEG is now down 25% from its peak.
> 
> Is it possible that we're wrong?


No, we're in overreaction territory due to recession fears. And the "overreaction territory" means the "buy more territory" to me.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> No, we're in overreaction territory due to recession fears. And the "overreaction territory" means the "buy more territory" to me.


Curious how much XEG (or other energy commodities/equities) you hold?

My XEG position is only 0.7% of my total portfolio as outlined here. I figure that I get enough energy equities through the TSX index anyway.

I realize this makes me a lightweight by CMF standards, but I don't want to speculate too heavily on sectors.


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## doctrine (Sep 30, 2011)

RIP XEG bull market. I think the energy trade got overheated and too popular and it's unwinding fast. Call options are worthless, and algorithms are selling and piling on puts as they've decided oil is going to behave like 2008 when oil went from $150 to $40. Retail investors were the only real new investors in the sector and they are the most skittish of all - bye bye.

The physical market is entirely a different story - oil, gasoline, diesel, jet fuel demand is very hot. Oil wasn't even down today and stocks got murdered. Refinery margins are hitting records and capturing the entire minor fall in the price of oil and then some, $75 a barrel for refining diesel is insane. Valuations are too cheap and profits are too high for this to stay around forever.

Most oil stocks are down 30% or more in just 10 days or less. Some are down 40%. A few are down 45%. Murderous...and when oil is $105 still.

Oil stocks are falling as fast or faster than 2020 when the world was actually shutting down while Russia and Saudi Arabia were simultaneously flooding the market with oil and in an all out and very public price war. It couldn't be more opposite of the situation today.


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## james4beach (Nov 15, 2012)

doctrine said:


> RIP XEG bull market. I think the energy trade got overheated and too popular and it's unwinding fast


Too popular for sure. In other forums, I've seen many investors jumping on board the commodities bandwagon and chasing returns.

So yeah, overheated and too popular. But do you really think the XEG bull market is over?

If XEG is in bear mode now, it's actually great news for all of us as it means inflation is going to ease and all kinds of costs and headaches are going to alleviate.


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## zinfit (Mar 21, 2021)

james4beach said:


> Too popular for sure. In other forums, I've seen many investors jumping on board the commodities bandwagon and chasing returns.
> 
> So yeah, overheated and too popular. But do you really think the XEG bull market is over?
> 
> If XEG is in bear mode now, it's actually great news for all of us as it means inflation is going to ease and all kinds of costs and headaches are going to alleviate.


Most of the energy stocks report in early August. I have to believe this will be extremely bullish. These companies will be sitting on a pile of cash.


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## doctrine (Sep 30, 2011)

james4beach said:


> Too popular for sure. In other forums, I've seen many investors jumping on board the commodities bandwagon and chasing returns.
> 
> So yeah, overheated and too popular. But do you really think the XEG bull market is over?
> 
> If XEG is in bear mode now, it's actually great news for all of us as it means inflation is going to ease and all kinds of costs and headaches are going to alleviate.


I don't think it's over, even markets are doing their usual irrational reactions. I don't think we are past the 2nd inning of the energy crisis story. It will take trillions of investment over many, many years to undo the damage and that is just too much to be overcome in the long run - the world isn't going to be "surprised" by magical new production. We are just now approaching "The Wall", where all of the oil production in the world is back producing at full capacity, and oil inventories are still shrinking. We are going to be spending some time at "The Wall" - either this year, or possibly next year, and it's going to be volatile. I think it will look at lot like 2003-2007 where OPEC starts the tap-dance of "there's enough oil" and "markets are well supplied" but are quite happy with soaring prices.

I think $140 is far more likely than $70. But that's just my opinion. There is a panic dumping of stocks on the assumption that energy prices are coming down, and the fact that oil is still at $105 and in severe backwardation reflecting draining inventories with a tight physical market will eventually show the real story. But with techncial and seasonal trends, it could be a few months of short term pain.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Curious how much XEG (or other energy commodities/equities) you hold?


I had higher weight in energy in 2020 to chase easy money and did 4x with that sector in 2 years and then I decided to take my gains as I acknowledged that I don't understand that cyclical sector enough and anyways I don't like that sector. I should've held more for the easy gains that we're having in 2022, but I know that I don't have enough knowledge to time the peak of the easy money, so now I'm only 10% energy, but if I liked the sector and if I was listening to my gut-feeling, I'd probably be 30% energy. Otherwise I can't assess if the current valuation already has the current context priced in or if it's truely undervalued.


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## Covariance (Oct 20, 2020)

My immediate reaction is to go back to one's thesis. Is it a multi-year perspective on oil, or is it a day trader buying/selling on momentum and technicals. Then what's different if anything. Sure Putin pulled ahead some returns. And people rushed in and then ran away. But what's the game plan? Back to basics.


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## londoncalling (Sep 17, 2011)

Even at $80 most Canadian oil cos are throwing off decent FCF. They have no plans to allocate that cash to capital investment as of yet and they won't sit on it. That means share buybacks and dividends for those that are debt free. Those that have debt will pay it down. I agree the share price drop is not congruent with the shift in oil pricing or the sector's current state. Purely profit taking and fear of recession. Oil demand is still increasing and in my view would not get killed as there is more non discretionary driving taking place (transportation of goods, work, etc.) than oncoming supply. We could see actually shortages which would cause even more chaos at the pumps. Current fuel prices are high and don't seem to be coming down at the same pace as the recent pullback in share price. The conflict in the Ukraine does not seem to be ending soon. from a discretionary standpoint, airlines have more demand for travel than they do staff to increase the number of flights. People are sick of sitting at home. They will sacrifice in other areas (retail for example) to get out and explore. I know nobody can predict what happens next but what catalysts would push oil prices back to $70? Perhaps regulatory interference?


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## zinfit (Mar 21, 2021)

Just read RBC report on Diamondback[ Fang] . It is a Permian basis producer listed in the US. They are currently paying 8,4% . Fang announced that 75% of its FCF will be returned to shareholders via share buybacks, discretionary dividends and dividends . RBC expects dividends will be between 12 and 15%. This sort of situation should be occurring in Q3 for Canadian stocks[ my opinion] . The recent drop was based on fear and totally ignored the strong fundamentals of the energy sector. I figure over the rest of year we could see a reversal and new highs for the energy stocks. I saw another big US energy stock announcing a doubling of their already substantial buyback program. I like Buffet's quote about the stock market being a polling station in the short term and a weighing machine in the longterm. I noticed that Berkshire just increased their position in Occidental.


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## Spudd (Oct 11, 2011)

I exited HXE today but am keeping my individual oil stocks and my natural gas ETF. I felt like the technicals looked bad for HXE. This is all in my "gambling" account.


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## james4beach (Nov 15, 2012)

Spudd said:


> I exited HXE today but am keeping my individual oil stocks and my natural gas ETF. I felt like the technicals looked bad for HXE. This is all in my "gambling" account.


I'm sticking with my 0.7% allocation to XEG, and I do consider it a (sector) gamble.


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## james4beach (Nov 15, 2012)

Great news everyone, oil is actually below $100 now!

Gasoline futures are also plummeting so there will be cheaper prices at the pump soon.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Great news everyone, oil is actually below $100 now!
> 
> Gasoline futures are also plummeting so there will be cheaper prices at the pump soon.


Another great indicator of an upcoming recession.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Another great indicator of an upcoming recession.


It could be. Maybe we'll get lucky and maybe a recession actually will put a stop to inflation.

Look at how bond yields are crashing now. I always considered my long energy positions to be a kind of inflation hedge ... in a way it's better for me to lose money on XEG in the big picture.


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## zinfit (Mar 21, 2021)

It looks like a hard recession and there will be no safe havens. I have some comfort in having about 44% of my portfolio in fixed income and a large exposure to ST positions. Will be interested how the market reacts to the next inflation numbers, the next interest rate hike and the upcoming earnings reports especially the energy companies. If the hike is 3/4%it will be very bearish, if the inflation number doesn't come down it will be bearish. Whether Trudeau likes it or not we are heading into a tight money and recessionary situation. He will not be able to spend his way out of this scenario.


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## james4beach (Nov 15, 2012)

zinfit said:


> It looks like a hard recession and there will be no safe havens. I have some comfort in having about 44% of my portfolio in fixed income and a large exposure to ST positions. Will be interested how the market reacts to the next inflation numbers


Things could also flip around dramatically in the coming months, as new inflation and economic/GDP numbers come in.

So I wouldn't come to any conclusions based on a single week. It's possible that inflation concerns and energy could even accelerate towards year end. I think this is a very unstable scenario, anything can happen.


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## rickyv (12 mo ago)

It is some big shot game of fear, Energy stocks are priced by them as recession low value now, no chance yet to see their earning , Are we entering recession now? May be target energy will lower inflation.


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## nobleea (Oct 11, 2013)

Which companies do people think are most likely to include on time dividends to get some of this cash flow to shareholders?


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## james4beach (Nov 15, 2012)

WTI oil is trading close to $95 this morning. Considering that oil had been hovering around $120 last month, I think this is a welcome change.

The 200-day moving average in oil is at $94 so this is an interesting level. Until now, oil has consistently been above the 200-day moving average ... a pretty good indication of a bull market.

But if oil "crashes through" the moving average to around $80, then the energy bull market might be done!


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## Covariance (Oct 20, 2020)

I use fundamental, rather than technical indicators, but none the less they also pointed lower in the short term.


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## james4beach (Nov 15, 2012)

Covariance said:


> I use fundamental, rather than technical indicators, but none the less they also pointed lower in the short term.


Do you think it might be finding a floor here?

A technical trader would be tempted to buy at the support level and possibly gamble on the 200 day average holding.


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## Covariance (Oct 20, 2020)

james4beach said:


> Do you think it might be finding a floor here?
> 
> A technical trader would be tempted to buy at the support level and possibly gamble on the 200 day average holding.


I'm not quite there yet but very close. I'm waiting until after the Fed meeting next week, and insights from SP500 earnings calls in the interim before pulling making any moves. A Fed induced recession is the bear case.


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## james4beach (Nov 15, 2012)

Covariance said:


> I'm not quite there yet but very close. I'm waiting until after the Fed meeting next week, and insights from SP500 earnings calls in the interim before pulling making any moves. A Fed induced recession is the bear case.


Look at how bond yields absolutely cratered today. Very interesting.

Both the US and Canadian 10 year bond yield plummeted.


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## Covariance (Oct 20, 2020)

james4beach said:


> Look at how bond yields absolutely cratered today. Very interesting.
> 
> Both the US and Canadian 10 year bond yield plummeted.


First we saw long term inflation expectations come down, and this week the ECB has finally started to increase rates now as well. Thus we have a concerted group of CBs moving up rates at various cadences. Slow down in global GDP if not outright recession is the expectation. Classic move in long treasuries in response.


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## james4beach (Nov 15, 2012)

I recently looked at XLE (the $37 billion US energy ETF) for fund flows, the pattern of money moving in & out of the fund. It's pretty interesting. Right after the market wipeout in 2020, there was buying happening.

However, ever since mid 2021, there has been quite a bit of selling and very poor investor demand. Even a lot of outflows on a NET basis.

That's really interesting because this means that investors have, so far, missed the massive rally in energy since mid 2021. People are not "on board" and have actually been selling while energy rises. _Investors have missed out on this rally._

Just interesting to see. It could be that investors are correct, that energy is going nowhere, and this rally will fizzle out. Another possibility is that it's just not on investors radar, or they have biases against energy, and are failing to see the bull market in front of them. Only time will tell!


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## londoncalling (Sep 17, 2011)

Long term sentiment is gone and many are expecting EVs to kill oil. Eventually autos will no longer run on ICE. However there is more to energy than oil and there are more uses for oil than fuel. How long it takes to transition from oil as fuel and ween ourselves from plastics may take awhile. I think there will be opportunities to take advantage of this sentiment from both sides. Some think this is oil's last bull run. But I remember hearing that the last time as well. Like you say only time will tell.


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## doctrine (Sep 30, 2011)

james4beach said:


> That's really interesting because this means that investors have, so far, missed the massive rally in energy since mid 2021. People are not "on board" and have actually been selling while energy rises. _Investors have missed out on this rally._


The energy bull market is just getting started, in my opinion. We are perhaps in the 3rd inning. World demand is back to pre-COVID levels. And so is production. More or less. Yet, by some estimates, inventories are _*still dropping, *_by as much as 2 million barrels a day right now. 

So what happens next year? World demand on its own could grow 1 to 2 million barrels a day, plus 1-2 million from China just catching up. Plus 1-2 million barrels a day with air travel normalizing. And the US won't be dumping its strategic reserve anymore. That is an insane gap between supply and demand. And this is assuming Europe banning 5 million barrels a day of Russian imports won't have an impact.

Today, in Europe, natural gas is selling at $600 a barrel equivalent. Power rates are in excess of $1000 a barrel. UK power bills are projected to hit 5000 pounds a year per household. 

Meanwhile, as James points out, there is really no ownership in oil and gas equities. Oil companies, especially in Canada, are trading at ridiculously cheap multiples because of it. If there is an oil spike to $150, many of these companies will be trading at P/Es of under 2 and some maybe even a 1.

To each their own, but I am sure oil hits all-time highs in the next seasonal cycle (Dec 22-Jun 23). There is just no squaring the circle of the massive imbalance. It will take 5 years to solve the oil supply problem and the world hasn't even started, so energy is going to be bid up, and if you look at what Europeans are paying today, you wonder what might happen.


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## m3s (Apr 3, 2010)

doctrine said:


> The energy bull market is just getting started, in my opinion. We are perhaps in the 3rd inning. World demand is back to pre-COVID levels. And so is production. More or less. Yet, by some estimates, inventories are _*still dropping, *_by as much as 2 million barrels a day right now.


Haven't taken the hour to listen yet myself but the title might interest you

Why Buffett is Buying Oil Companies w/ Josh Young (TIP468)


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## Covariance (Oct 20, 2020)

You might want to follow what’s happening in inventory from the impact of the drawdown of the SPR, and the drawdown of the SPR itself. This can only be putting downward pressure on crude, and will need to let up at some point. Probably not before the elections. But eventually it will end.


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## peterk (May 16, 2010)

londoncalling said:


> Long term sentiment is gone and many are expecting EVs to kill oil. Eventually autos will no longer run on ICE.


That remains to be seen. I am astounded by everyone's apparent willingness to accept that just because the government says something will happen 15+ years into the future, that it will actually happen... And that everyone seems to think that government commitments to "electrification" is actually based on some principles of those elected, a true desire to fight climate change, rather than political calculation. The truth as I see it is that it's currently a good way to coalesce the variously dissatisfied "populist" voters who would otherwise be voting for smaller mainstream parties (like NDP, Green) and fringe parties, to stay voting for the big 2.

That's all it is to these politicians, voter calculation; and if that changes in the future with generational shifts, economic realities, and voter sentiment, then the EV push will be dropped like a hot potato. True-believer environmentalists will be left with their head spinning and very disillusioned about what just happened.


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## zinfit (Mar 21, 2021)

Some factors to be considered. A giant US LNG plant has been out of commission and will soon be operational. This will be bullish for NG. The US has been using up its strategic oil reserve at 1 million barrels per day and this will end soon. Then you can add in the energy crisis Europe is facing this fall and winter. It should be also noted that countries like Japan is also looking at NG shortages this fall and winter. I see a lot more signs of a tight supply and high demand market regardless of the recession fears. Winter gets cold and people need energy during that season,. Curious though can oil be used as a secondary source of heat during the winter? I am old enough to remember when people did use oil to heat their homes. I wonder what prices NG will hit this winter? I have a large position in some NG producers. Would be interested in the case for a bear market?


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## m3s (Apr 3, 2010)

I noticed my NG bill in the US already doubled this summer vs last summer. My usage didn't change as it's just for hot water, dryer and stove in the summer. NG was very cheap before though as I understand. Shame Canada isn't ready to capitalize


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## zinfit (Mar 21, 2021)

m3s said:


> I noticed my NG bill in the US already doubled this summer vs last summer. My usage didn't change as it's just for hot water, dryer and stove in the summer. NG was very cheap before though as I understand. Shame Canada isn't ready to capitalize


Yes so right. Since 2015 the US has built eleven LNG plants and they are selling LNG in Europe for $50 per BTU . Canada hasn't built one. Canada probably has larger NG resources then the USA. Another example of how Trudeau's policies have been a classic case of shooting ourselves in the foot.


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## londoncalling (Sep 17, 2011)

Canada fails at developing their resources domestically. Perhaps the tradition of extracting and shipping resources was deeply imbedded in our national psyche since colonization and we just can't shake it. I understand that it is cheaper to export and import if existing plants are in place . However, would it not be a better longer term investment to build infrastructure creating initial and sustainable employment, reducing costs to Canadians and gaining better control of supply and demand? I thought supply chain disruption would spark interest in development at home. I get that we cannot compete with Mexico and other developing nations on cheaper labour. But we should be close on competing with the US who doesn't seem to have any issues getting whatever projects they want up and going. Is it too late for Canada as companies are already established in the US? Is a 1% difference in corporate tax rate that big a difference? 

Corporate Tax Rates by Country 2022 (worldpopulationreview.com) 

It is sad that some consider inclusion into Buy America policy ( small USMCA wins, US EV manufacturing plans) a major victory when we have the capacity to do a lot of it ourselves. US is building out NG facilities while pipelines continue to face red tape, rerouting and stoppages on both sides of the border. Doesn't that just trap Canadian energy exports finding other markets while the US controls the major NA ports for refined energy?


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## Jimmy (May 19, 2017)

I think oil will be a good place to be for the next few years and I don't normally like cyclical commodity stocks. There appears to be a slight supply shortage that will persist. At ~ $100 oil most of these companies have FCF yields of 20-30% according to Eric Nuttal. Many of these companies are just buying back stock /or paying out special dividends so much is going right back to shareholders. I don't see a slight recession or some unexpected supply increase dragging oil much lower than say $85 either adn many of these companies are hedged for price anyway.

Nothing wrong w making a steady 20%/yr on simple businesses like these that even a German shepherd can understand. May start to look at copper producers too


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## zinfit (Mar 21, 2021)

londoncalling said:


> Canada fails at developing their resources domestically. Perhaps the tradition of extracting and shipping resources was deeply imbedded in our national psyche since colonization and we just can't shake it. I understand that it is cheaper to export and import if existing plants are in place . However, would it not be a better longer term investment to build infrastructure creating initial and sustainable employment, reducing costs to Canadians and gaining better control of supply and demand? I thought supply chain disruption would spark interest in development at home. I get that we cannot compete with Mexico and other developing nations on cheaper labour. But we should be close on competing with the US who doesn't seem to have any issues getting whatever projects they want up and going. Is it too late for Canada as companies are already established in the US? Is a 1% difference in corporate tax rate that big a difference?
> 
> Corporate Tax Rates by Country 2022 (worldpopulationreview.com)
> 
> It is sad that some consider inclusion into Buy America policy ( small USMCA wins, US EV manufacturing plans) a major victory when we have the capacity to do a lot of it ourselves. US is building out NG facilities while pipelines continue to face red tape, rerouting and stoppages on both sides of the border. Doesn't that just trap Canadian energy exports finding other markets while the US controls the major NA ports for refined energy?


We should realize the Federal gov't, BC and Quebec along with a well funded pile of professional protestors and militant natives haven't been conducive to creating energy infrastructure. There should be 3 or 4 LNG plants on the east coast and more on the western coast. And we should know that every NG power plant that replaces a coal powered plant reduces CO2 emissions by 50%. Talk about shooting yourself in the foot.


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## m3s (Apr 3, 2010)

m3s said:


> Haven't taken the hour to listen yet myself but the title might interest you
> 
> Why Buffett is Buying Oil Companies w/ Josh Young (TIP468)


Listened to this podcast today

At about 29 min he talks about oil companies in Canada and how Justin Trudeau demonizes the industry. Mentions Canada again a few times later I think

Sounds like Warren B is going heavy on oil. Interesting though how Warren says he would do things differently with a smaller funds

BRK needs massive liquidity


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## milhouse (Nov 16, 2016)

m3s said:


> Shame Canada isn't ready to capitalize


+1
The BC Liberal (in name only) provincial government ran an election campaign in 2013 with a platform of developing the LNG industry in BC. It was a pretty grand idea. Nearly 10 years later and a switch to an NDP government, (correct me if I'm wrong but) I don't think we have one plant operational yet. Red tape, special interest groups, protests, etc. <sigh>.


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## Mechanic (Oct 29, 2013)

Very difficult for energy companies to commit to infrastructure spending on their Canadian assets with current Liberal and NDP governments. There is just no security for them and they have other options for their investments. I don't see anything changing till we get rid of Trudeau and co. EV's aren't taking over anytime soon due to infrastructure constraints too. Not to mention the problems with obtaining enough materials for batteries etc. And I think there will be another problem on the horizon, the waste materials from these large battery packs as they start to reach end of life is going to be a considerable environmental concern.


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## m3s (Apr 3, 2010)

milhouse said:


> +1
> The BC Liberal (in name only) provincial government ran an election campaign in 2013 with a platform of developing the LNG industry in BC. It was a pretty grand idea. Nearly 10 years later and a switch to an NDP government, (correct me if I'm wrong but) I don't think we have one plant operational yet. Red tape, special interest groups, protests, etc. <sigh>.


Pretty sure New Brunswick was supposed to get a LNG port around the same time

I remember it was the all the talk around Saint John for many years. How times change


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## zinfit (Mar 21, 2021)

m3s said:


> Pretty sure New Brunswick was supposed to get a LNG port around the same time
> 
> I remember it was the all the talk around Saint John for many years. How times change


You are right. The first signs of organized opposition started to show up then. Atlantic Canada seems to have an anti-development element and a dependency culture. The exception is the Newfies.


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## m3s (Apr 3, 2010)

zinfit said:


> You are right. The first signs of organized opposition started to show up then. Atlantic Canada seems to have an anti-development element and a dependency culture. The exception is the Newfies.


Yea but the Newfies signed their life away to Quebec a long time ago with from short sighted infinite cheap power deal for Quebec

Now they're burning money trying to transmit from Muskrat Falls without going through Quebec. I was up there years ago and the locals were protesting far worse than anything I'd ever seen in NB. Like real animosity, threats and violence. Oh and the cultural briefing you get on arrival is pretty eye opening. So is the trip out to meet the locals

Newfies are sitting on a gold mine of hydro though. I know how they could monetize it but won't happen. Too backwoods for modern tech


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## james4beach (Nov 15, 2012)

We've got a world that's suffering from way too much CO2 emissions, and yet Canada keeps digging up more hydrocarbons out of the ground, selling them to the world, and directly contributing to more CO2 emissions.

The older generation is completely stuck ... absolutely trapped (mentally) ... in preserving the status quo. Want to drill more, and sell more oil & gas to everyone.

I think that only the young people can see things clearly.

Unfortunately as a nation we still put way too much effort into oil & gas projects when we should be redirecting the engineering and business talent towards more renewable energy, and also into methods and technology to *reduce* consumption.

BRING ON THE PAIN. People have to be forced to reduce their consumption. Humans are smart and will find new ways to manage energy needs. Perhaps the answer is to have far less energy consumption, smaller homes, leaner industries.

I was really disappointed when the Liberals approved Bay Du Nord, the off-shore mega drilling project. These are the kinds of new extractions we should STOP. And yes, we should experience the economic pain and adapt.

For god sake this isn't the 1950s. It's kind of sad to watch people try to pretend we're still living in the world of 70 years ago.

Carbon taxes and gasoline taxes have to be ramped up considerably, to the point that it really hurts. The government has to limit new production and get on a path to *completely ending oil & gas production* in Canada.









Countries Must Phase Out Oil and Gas Production—and Quickly


How fast do we need to phase out fossil fuels to achieve the goals of the Paris Agreement and safeguard our planet's future? A new report suggests a quicker timeline than many governments are planning.




www.iisd.org


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## doctrine (Sep 30, 2011)

james4beach said:


> We've got a world that's suffering from way too much CO2 emissions, and yet Canada keeps digging up more hydrocarbons out of the ground, selling them to the world, and directly contributing to more CO2 emissions.
> 
> The older generation is completely stuck ... absolutely trapped (mentally) ... in preserving the status quo. Want to drill more, and sell more oil & gas to everyone.
> 
> ...


Governments in the US and Canada are actively restricting drilling. Super majors have given up and are building renewable energy. Drill baby drill is gone. Proof is in oil production, which peaked in 2019 in North America for good. Consumption has peaked long before, in the 2000's. Small new projects are not going to replace declining production. Bay du Nord is a nothing burger.

We have implemented the Paris accord in Canada and the US and will actually do far more than the 30% requirement and drop our emissions by up to 45% in just the next 7 years. That will be a lot less energy consumption and emissions.

So we already have the policies you are asking for. What is the problem again? Is -45% emissions in the next 7 years not fast enough? I would think it would be quite an accomplishment and actually exceeds our Paris requirements by a wide margin.


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## m3s (Apr 3, 2010)

james4beach said:


> The older generation is completely stuck ... absolutely trapped (mentally) ... in preserving the status quo. Want to drill more, and sell more oil & gas to everyone.
> 
> I think that only the young people can see things clearly.
> 
> Unfortunately as a nation we still put way too much effort into oil & gas projects when we should be redirecting the engineering and business talent towards more renewable energy, and also into methods and technology to *reduce* consumption.


They talked about this recently in a podcast I listened to

The plasticity of the brain declines with age and people just can't understand new information or how things are changing anymore. And yet these people hold on to the most power and influence to the point of self destruction

It's worse than usual because the outgoing generation is a massive one and has the added group think bias plus they had it the easiest based on 4th turning theory (this generation was born after the last great war)

Change should pick up pace as this large spoiled cohort fade into obscurity


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## AltaRed (Jun 8, 2009)

Post #122 is typical of the lack of understanding of: 1) what it takes economically and physically in time to transition energy sources, especially for global surface transportation and electrical generation, where the changes in infrastructure will be massive, and 2). recognizing that in the meantime, about 80% of the world's oil production is in countries that have no concerns about being politically correct will continue to produce oil as long as the world wants oil. It seems silly for western democracies to stop allowing its golden goose (oil and gas production) from being part of this contribution. The most dramatic scenario for a drop in global oil demand is in the order of 40-60% of current levels of demand of 100 million barrels per day by 2040 or 2050. Why not continue be part of that supply chain rather than relegating it all to the Middle East, Russia and Venezuela/Brazil?

Canada's GDP per capita and balance of trade will depend on the hydrocarbon trade for decades to come whether the politically correct care to recognize it or not. To do anything else could relegate us to dropping out of the top 15 in OECD economies from our current position of #9-10 depending on how one measures it. The Top 25 Economies in the World

Ottawa does not seem to have a vision for business development and industrial growth to replace the commodity industry.

None of the planned oil development projects in western democracies will make much of a dent in the overall supply chain. There is no western nation that has the capacity to increase its supply in any material way. The US might be able to increase its production by 10% over the short term (shale oil) but it is in decline everywhere else. Canada's current production level of circa 4.5 million barrels per day (<5% of the world supply) has little room to grow... perhaps to 5 million barrels per day to fill TMX. NF production will never exceed its peak production despite Bay du Nord simply because of the declines elsewhere on the Grand Banks. European oil production is on permanent decline. Only Brazil and Guyana have realistic potential for material increases in oil production. Venezuela is a permanent basket case with the bulk of its oil never to see the light of day.

While there is some resistance to the transition of ICE vehicles to EVs, it is hardly confined to one demographic. The Internet is full of Gen-Xers and even millennials liking what they currently have in ICEs at affordable prices, e.g. less than $30k, for consumer vehicles. They are not willing to pay for the changes required in the form of higher costs for EVs, home heating and the cost of electricity. It is businesses and industry that will most likely be smart enough to lead the transition in EV last mile delivery vehicles, municipal and transit fleets, and even 18 wheelers. I suspect these will burst on to the scene within the next 5 years as fleets need to be renewed/replaced. I think it is primarily the broad retail consumer base that mostly doesn't want to pay for the change. They really need to look at themselves in the mirror.

Added: This is the type of 'ideological' nonsense that detracts from true progress. Breakingviews - Electric perfection is enemy of hybrid-car good For what it is worth, Norway wouldn't have been able to achieve its EV nirvana without the GDP generated by continued production and development of O&G projects. It is not a contradiction. They truly understand what it takes to fund the transition.


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## cainvest (May 1, 2013)

AltaRed said:


> Post #122 is typical of the lack of understanding


Yup, typical trolling on issues that don't really matter but are popular on social media.



james4beach said:


> We've got a world that's suffering from way too much CO2 emissions


First line says it ... it's a world problem. Even if Canada went zero CO2 emissions tomorrow CO2 is still on the rise worldwide so what would speeding up Canada's game plan really do for "the world"?


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## AltaRed (Jun 8, 2009)

FWIW, Crude Oil Prices Today | OilPrice.com is not a bad place to get topical and current insight into the oil industry. One might dismiss it as being oil centric, and of course it is, but it does not contain as much bias as one might assume for an oil centric site. It tends to simply report on what is being said by a wide range of companies, individuals and politicians.

This current article Aramco Stands Ready To Boost Oil Output To 12 Million Bpd | OilPrice.com provides some insight into Aramco's current views. Some of it might be hyperbole and bluster but then again, maybe not as much as we might assume. I don't think there is as much surplus capacity as the article says nor do I think global oil demand will grow as fast as the article says. Doctrine may well disagree but I think demand growth has more headwinds than is being forecasted and we won't see 2023 demand, for example, at 102.7 million barrels per day.


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## MarcoE (May 3, 2018)

james4beach said:


> The government has to limit new production and get on a path to *completely ending oil & gas production* in Canada.


I agree. But I have two concerns.

My first concern: It will be poor Canadians who are "forced" to sacrifice for the common good. They will suffer to afford higher energy costs. Higher carbon taxes might mean difficult choices for poor Canadians -- do I pay for gas or buy my kids fruits and vegetables? Do I heat my house this winter, or do I pay my mortgage? This will affect single mothers, immigrants, lower-income families, the elderly, and other vulnerable populations. Meanwhile, the wealthy politicians (who pass these laws) will continue to fly around in private jets, and they'll be nice and warm in their mansions all winter. Carbon taxes can increase the divide between the "haves" and "have nots" which leads to social unrest. If poor Canadians can no longer afford gas or heating, but see Justin Trudeau flying on yet another vacation in his private jet, there will be more unrest like the recent protests in Ottawa.

My second concern: Larger countries -- China, India, and many others -- will continue to pollute. And our sacrifice in Canada would make little difference on a global scale. The question is... how do we get the entire world on board? There have been some attempts at international cooperation in this area, but it seems we haven't made enough progress globally.


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## AltaRed (Jun 8, 2009)

Actually the 'carbon tax rebate' in its various forms addresses at least some of the financial burden (MarcoE's first point) though it is highly unevenly applied, e.g.to the voting public rather than to businesses. IOW, a primarily political move rather than an economic one. Unless there is an 'equivalent' carbon tax applied to imports, we are simply disadvantaging Canadian business and industry. A typical political clusterf**k. The latest example to hit fertilizer and the agriculture industry is an example of a government gone mad. Ideological nut jobs.

As to MarcoE's second point, this issue has been around since the beginnings of the IPCC. Most countries will only do what is the low hanging fruit and most won't give up GDP in the form of O&G production, export revenue and/or energy security. Both Germany and the Netherlands, as primary examples, have been grossly negligent in their management of their energy portfolios. Never mind world conflicts. Imagine the consumption of oil in both Russia and Ukraine today and the pollutants being spewed into the air and on to the land. It makes our government ministers look absolutely naive and foolish at this time, living on another planet.

Oil is going to be around for a very long time and to the dismay of the ideological folk, there will be a significant number of ICEs still fueling up in 2050. It simply takes that long to make global transitions. Canada better be still producing O&G rather than importing it at significant cost.


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## james4beach (Nov 15, 2012)

cainvest said:


> First line says it ... it's a world problem. Even if Canada went zero CO2 emissions tomorrow CO2 is still on the rise worldwide so what would speeding up Canada's game plan really do for "the world"?


Wealthy countries are usually world leaders in policy change. The things the G7 does sets the tone for the rest of the world. It does matter what Canada does, there is global impact.

Canada absolutely should diminish oil production as we are one of the world's top oil producers. Of course this does have to be a group effort among nations, but we should be doing our part.

What discussions do you think were happening when countries started to end slavery? Probably looked a lot like this thread.

Change isn't easy.


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## james4beach (Nov 15, 2012)

MarcoE said:


> My first concern: It will be poor Canadians who are "forced" to sacrifice for the common good. They will suffer to afford higher energy costs.


If you think that's hard, think about what happens if scientific & economic forces cause the lingering hold outs to suddenly adapt to the new reality they find themselves in.

The behaviour-shaping incentives like carbon taxes are meant to influence public behaviour in the right directions. This does people a favour by getting them to adapt.


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## cainvest (May 1, 2013)

james4beach said:


> Wealthy countries are usually world leaders in policy change. The things the G7 does sets the tone for the rest of the world. It does matter what Canada does, there is global impact.


Canada is doing their part just not fast enough by your standards. I don't think many want to throw their country under the bus but rather give it time to change to limit hardships.

One question for you ... let's assume for a minute that some major CO2 polution output countries don't follow our lead within 10 years but actually increase their output ... what then? 

Do you propose ...
1> Throw you arms up and say "oh well" there goes the planet?
2> Impose financial sanctions on them over CO2?
3> Go to war with them over CO2?
4> Any other options?


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## Mechanic (Oct 29, 2013)

I hope everyone is aware just how small Canada's contribution to emissions is on a global scale. Natural gas is a much cleaner fuel and is burned to produce electricity in many parts of the world. Canada has decided not to tap into it's wealth of NG resources due to the wishes of our current government. NG prices have now gone through the roof due to Russia's actions and many countries are now burning oil and coal to produce their electricity, which is a lot more damaging to emissions than NG.


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## AltaRed (Jun 8, 2009)

This is a case of Europe letting ideology get ahead of practicality. It's called 'over driving one's headlights'. 

I think Canada should do its part to be in concert (harmony) with what other western democracies are doing but not to take a leadership position. As already said, our emissions really do not count in the overall scheme of things. Other countries, and especially NGOs, already know we can be played due to the ineptness that exists in Ottawa. It's been that way for decades. We need some backbone.


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## m3s (Apr 3, 2010)

Mechanic said:


> I hope everyone is aware just how small Canada's contribution to emissions is on a global scale.


I don't disagree but a troubling stat is CO2 emissions per capita 

Canada is the worst of our peers and we are only better than countries that have dirt cheap oil (Qatar, Kuwait, Bahrain, UAE) We could at least strive to get our CO2 emissions per capita down below the US and Russia for example.

Having lived in Europe they do a lot of things well that also improves efficiency and comfort like better built homes. If Europe had more nuclear power they would be much more energy independent

The ship has sailed long ago and we could have been more like Norway


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## Sam Sun (12 mo ago)

Just skimmed over a few of the recent posts, and can't believe what I'm reading.
There are emissions, there is pollution, there is carbon, and then there's CO2. Happily I didn't see the common error of interchanging carbon and CO2.
But really, who still thinks that CO2 is harmful to anything? Up to a limit of course; ie CO2 levels in submarines have to be monitored and reduced as needed. However, open fresh air is a long, long way from being too high in CO2.
Pollution is entirely different, and I'm all for cleaning up smoke belching vehicles and industries. How about start with an easy one, tractor pulls and big rig racing, popular in Europe.
I won't bother posting any links because if anyone doubts what I'm saying and wants to know more, need only google "CO2 safety levels" or something similar and will find volumes of info. Also, listen to some of Patrick Moore's talks will be educational.
Okay then, can't help myself - just one short video clip, and I'll say no more.


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## AltaRed (Jun 8, 2009)

Canada is burdened by small population numbers making per capita data a tough row to hoe on virtually every level. Russia has approximately 4 times our population but less than 3 times our O&G production levels, making CO2 emissions from O&G production and processing on a per capita basis difficult to beat no matter how hard we try to reduce those emissions, e.g. CO2 sequestration, using electricity to run processing plants, pumps and compressors, etc, etc. Any country burdened with low populations, both in total numbers and density, will find that hill near impossible to climb.

Beating the USA at 10 times the population will be even harder given their total population and level of commodity production/processing of all types.


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## m3s (Apr 3, 2010)

AltaRed said:


> Canada is burdened by small population numbers making per capita data a tough row to hoe on virtually every level. Russia has approximately 4 times our population but less than 3 times our O&G production levels, making CO2 emissions from O&G production and processing on a per capita basis difficult to beat no matter how hard we try to reduce those emissions, e.g. CO2 sequestration, using electricity to run processing plants, pumps and compressors, etc, etc. Any country burdened with low populations, both in total numbers and density, will find that hill near impossible to climb.
> 
> Beating the USA at 10 times the population will be even harder given their total population and level of commodity production/processing of all types.


Convenient to leave out Norway? We have 7x the population and they also produce O&G

"Due to an energy-intensive process of extracting its heavy oil, Canada has the highest carbon emission intensity per barrel of oil equivalent produced, while Norway has the lowest due to its carbon pricing mechanism and ban on flaring"

As far as silly things like tractor pulls I can assure you we have far more of those having lived and traveled around europe. Their parking is too small for the average NA vehicle

AltaRed knows a lot more about the oil industry than I and I'm not an environmental extremist by any stretch

Also just to add Texas has monetized flaring with mobile BTC mining. I'm not a fan of crypto mining but hey if it uses that wasted energy that money can be spent cleaning up this mess why not


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## james4beach (Nov 15, 2012)

cainvest said:


> One question for you ... let's assume for a minute that some major CO2 polution output countries don't follow our lead within 10 years but actually increase their output ... what then?


Then we will have done the right thing, even if others haven't (though we'd have to not only cut down on production, but also on consumption obviously).



m3s said:


> We could at least strive to get our CO2 emissions per capita down below the US and Russia for example.


We don't even make a serious effort here, to be honest.

And look at what Alberta did, the moment gasoline got a little bit expensive. They cut back on taxes to make the product cheaper, exactly the wrong thing to do. The higher price should reduce consumption. But this is what our North American car and suburb culture gets us.


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## cainvest (May 1, 2013)

james4beach said:


> Then we will have done the right thing, even if others haven't (though we'd have to not only cut down on production, but also on consumption obviously).


Right .... So your idea is to bring additional financial pain to Canadians and our O&G business just so we can say "Hey, we did our part" without actually making any significant difference with the world CO2 issue.


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## AltaRed (Jun 8, 2009)

m3s said:


> Convenient to leave out Norway? We have 7x the population and they also produce O&G
> 
> "Due to an energy-intensive process of extracting its heavy oil, Canada has the highest carbon emission intensity per barrel of oil equivalent produced, while Norway has the lowest due to its carbon pricing mechanism and ban on flaring"
> 
> ...


The post I was replying too mentioned USA and Russia which I addressed specifically.

I agree Norway with 1/7th of our population and 40% of our oil production rate is doing a fine job of their GHG emissions on a per capita basis. Their O&G business is, however, far different than ours, producing far more "per well" from their offshore fields into relatively few processing platforms than Canada does with its tens of thousands of conventional wells AND of course, our more energy intensive bitumen. It will never be comparable until (or if) we shut down all of our conventional wells scattered in hundreds of low productive fields. Every oil 'battery' and gas 'conditioning' installation has to have a flare for safety reasons should there be an equipment failure and that is part of the problem.

The only way countries that rely on individual land based wells can make significant reduction in their GHG footprint is to actually shut them down on an economic basis with increasingly punitive GHG taxes at the wellhead. That is likely to never be the case in non-western democracies. They simply have no intention to be that CO2 emission friendly. Fortunately, in our case, only 10% of Canada's current oil production is from conventional wells that will continue to decline over time, albeit all of our gas production is from individual wells. The matter is a complex one. It will take more political will in AB and SK and BC to raise GHG emission taxes on hundreds of small operations in a myriad of small O&G companies. It will effectively put them out of business.

What we need in the oil sands is a SMR to produce the electricity to run oil sands operations and provide the heat for bitumen processing instead of natural gas. It will take political loan guarantees and a backstop for the big operators to collectively sign up for a 30 year amortization of such nuclear reactors. For now, the best these operators can do is to be as efficient as they can be using co-generation (as they are now) to produce at least some of their electrical and heat needs. CO2 sequestration can only be part of the solution and while billions are being spent on this, I think a SMR needs to get far more attention.

Added: To put this all into perspective, CER – Canadian Crude Oil Exports: A 30 Year Review puts the Candian O&G industry into perspective with respect to the rest of our economy over the 1990-2019 period. Some of the graphs (Figures 5, 7 and 9) are compelling as regards how much the industry brings to the table for a relatively small amount of capital investment. The 2019 end point doesn't reflect the high O&G prices that have surged since late 2021 either. The effects would be even more dramatic. Canada's economy cannot really survive without the O&G export business no matter how one wishes to spin it. At least not until Ottawa can replace it with something else.


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## james4beach (Nov 15, 2012)

cainvest said:


> Right .... So your idea is to bring additional financial pain to Canadians and our O&G business just so we can say "Hey, we did our part" without actually making any significant difference with the world CO2 issue.


Uh, it does make a difference. We're one of the largest producers in the world and dig millions of barrels out of the ground.

Every single barrel dug out of the ground turns into CO2 emissions. If we're not digging it up, we're leaving carbon trapped in the ground -- it's quite a direct benefit to the climate.

This is a lot like asbestos. When wealthy countries start an initiative to end asbestos, WE set the tone. Sure there are other countries, perhaps India (can't remember) who still dig up asbestos and use it... that's on them. But wealthy countries usually have the power to set world standards and norms. Over time, asbestos mining has declined worldwide. Canada stopped mining and exporting it a long time ago.

We pretty much have a dangerous substance here, oil.
We are one of the top producers in the world, the 4th or 5th largest producer last time I looked.

Just think about the process. You have a dangerous substance. You currently dig it up and export it to the world. And you're not a small player, you're one of the largest providers of this dangerous substance.

You should stop digging up and providing this dangerous substance to the world.


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## AltaRed (Jun 8, 2009)

I assume J4b's comments in post #142 are meant to incite (and/or insult) rather than to reason. Anyone with adequate oxygen flow to the brain knows better than to go down that path.

Oil will be produced to meet whatever demand exists at any given time now and in the future. Only reductions in demand will reduce supply on a global basis and that is where the effort needs to be placed. Globally, we will still be producing in the order of 40-60 million barrels per day of oil in 2050 to meet a wide range of demands.. The amount will depend on the degree of global success in the rate of transition of energy sources. Circa 5% of that (about Canada's current global share) will almost certainly come from Canada, if for no other reason than our own security of supply, and most of that will be from Fort Mac area with some from Cold Lake and Peace River. It might even be a higher percentage due to the drying up of oil fields in many other locations in the world, e.g. west and north coasts of Africa, Pacific Rim, and Europe which are already into decline. North America will do what it can to be O&G self-sufficient.

FWIW, Mexico's oil production has declined to the point (about 1.8 million barrels per day) where it is oil neutral on an 'all in' basis. It still has to export much of its crude to the USA for refining and to receive refined products in return even though in theory, it has enough refining nameplate capacity to meet its needs. Its 6 refineries have only 38% utilization due to lack of operational performance and the new regime is investing funds to refurbish these refineries AND to bring into service a new refinery of some 340,000 barrels per day. They plan to have all this functioning by the end of 2023 (no further crude oil exports in exchange for refined product imports). Mexico is smart enough to understand their petroleum based product needs and they clearly do not plan much, if any, effort to reduce oil consumption to meet climate goals. It is a prime example of a country doing what it feels is best for itself.

Added: China dominates global refinery CDU capacity additions by 2026 does not even mention Mexico's 7th refinery which will come into service sometime in 2023 (originally 2022). Clearly a number of countries see oil product demand increasing in the future, not decreasing. Either they are collectively exceptionally naive on the energy transition or they believe the idealism of climate change enthusiasts is far overstated.


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## cainvest (May 1, 2013)

AltaRed said:


> I assume J4b's comments in post #142 are meant to incite (and/or insult) rather than to reason.


Of course he is ... after all who would say those things and yet own stock in such a "dangerous substance".


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## Gator13 (Jan 5, 2020)

Prior to the pandemic, passenger air travel was producing the highest and fastest growth of individual CO2 emissions. 

There are so many people who talk the talk, but don't walk the walk.

Remember Neil Young leaving 5 RV's idling outside while he was inside during his environmental awareness tour.


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## AltaRed (Jun 8, 2009)

AltaRed said:


> Added: China dominates global refinery CDU capacity additions by 2026 does not even mention Mexico's 7th refinery which will come into service sometime in 2023 (originally 2022). Clearly a number of countries see oil product demand increasing in the future, not decreasing. Either they are collectively exceptionally naive on the energy transition or they believe the idealism of climate change enthusiasts is far overstated.


Building on this last point in my prior post, a number of the countries adding refining capacity are being pragmatic and realistic about the future. While many, like China and India, are promoting renewable power and EVs, they also know Rome was not built in a day. Just like horses were not suddenly banned in 1920 with the advent of the automobile in large quantities, these countries know the transition is decades in the making. Mexico knows that too with their refining additions. Norway knows they need to continue to encourage oil and gas production to meet global demands and to pay for their efforts in reducing petroleum demand at home. It will ultimately be no different in the USA. It is only rampant idealism in countries like Germany that cut off their lifeline. Why should Canada follow a German-like example?


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## afulldeck (Mar 28, 2012)

AltaRed said:


> It is only rampant idealism in countries like Germany that cut off their lifeline. Why should Canada follow a German-like example?


We shouldn't, it has never made any sense at all.


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## MrBlackhill (Jun 10, 2020)

Capitalism doesn't care about climate change, about the increase in wildfires, about the draughts, the drying of lakes, about temperatures going up to 50 degrees.

Until their own houses burn, until they are themselves restricted in water consumption, the rich don't care. Even there, they won't care as they have the money to build a new mansion elsewhere and buy bottled water.

Then, someday, their great-great-grandchildren will suffer, but they still won't care because they'll be dead anyways, huh.


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## doctrine (Sep 30, 2011)

This discussion is somewhat inflammatory. But regardless of why, the world is heavily restricting production, processing, and transportation of oil and natural gas. Regardless of how much a country wants to burn it, be it China or whomever, there is now effectively a fixed or nearly fixed perhaps soon declining supply in the world. Nothing is going to change this in the next 5 years minimum.

So, I think there is an interesting intersection between those who hold oil equities and those who want to see the world transition away from oil. Oil companies know what is coming (massive disconnect between supply and never ending demand) and shareholders are happy to do what you are supposed to do to make money in such assets with a limited lifespan - sit back and pay whatever cash is generated out.


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## Covariance (Oct 20, 2020)

MrBlackhill said:


> Capitalism doesn't care about climate change, about the increase in wildfires, about the draughts, the drying of lakes, about temperatures going up to 50 degrees.
> 
> Until their own houses burn, until they are themselves restricted in water consumption, the rich don't care. Even there, they won't care as they have the money to build a new mansion elsewhere and buy bottled water.
> 
> Then, someday, their great-great-grandchildren will suffer, but they still won't care because they'll be dead anyways, huh.


Echo of Lenin, "The Capitalists will sell us the rope with which we will hang them."


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## AltaRed (Jun 8, 2009)

.Except, of course, the capitalists ultimately win and Lenin starves. Capitalism isn't nearly as harsh as post #148 makes it out to be. Capitalism works on economics AND some sense of social community. 

It is business that is likely to lead the way with EVs since they look farther into the future and understand what government policy, e.g. increasing carbon taxes, will do. Once production gets going in a significant way, there will be millions of fleet vehicles that will go EV, replacing old ICEs with EVs without hesitation. I expect a massive swing of the pendulum getting underway as soon as the first vehicles come off the vehicle production lines. 

Corporations do care about forest management and the loss of commercial timber stands.They care about logistics disruptions on land, air and sea for feedstock and marketing of product. They care about agricultural disasters and loss of yield which increase their feedstock prices. Many/most of them care about it far more than the general population at large. 

Consumers are a mixed bag. Some will be more environmentally conscious than others and it is not necessarily restricted to demographic or class. The one percenters may well be oblivious to the changes that are unfolding but I see many examples of the other 99% shifting their priorities to be more GHG conscious. Heat pumps replacing NG home heating, trading in their ICE for a Tesla et al, adding solar panels to their roofs, etc. It is the upper middle class that has the resources to take the lead in all those examples.


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## MrBlackhill (Jun 10, 2020)

AltaRed said:


> .Except, of course, the capitalists ultimately win and Lenin starves. Capitalism isn't nearly as harsh as post #148 makes it out to be. Capitalism works on economics AND some sense of social community.
> 
> It is business that is likely to lead the way with EVs since they look farther into the future and understand what government policy, e.g. increasing carbon taxes, will do. Once production gets going in a significant way, there will be millions of fleet vehicles that will go EV, replacing old ICEs with EVs without hesitation. I expect a massive swing of the pendulum getting underway as soon as the first vehicles come off the vehicle production lines.
> 
> ...


They care when it's about money, when it's strategic, making them look good... bringing them more money. Also, EVs are cute but how come there isn't more investments in real solutions like public transportation? People wearing ties enjoy showing off their "environmental-friendly" choices going to work in their Tesla Model X but I haven't seen many of them using the subway.


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## AltaRed (Jun 8, 2009)

The majority of people don't want to take public transportation in most of North America. What I know of the TTC in TO and my experience is very dated (the '80s), but no one wants to ride crowded, non-air conditioned cars. That is the case for most subway systems in North America. FWIW, I actually enjoyed riding the GO Transit trains from Oakville into Union Station once the air conditioned double deckers went into service. There was no way I was going to suffer on the previous vintage of cars.

The point being any public transit system needs to be comfortable, fast and efficient and it needs to be built without regard to whether it pays for itself or not for the first 5-10 years. It also needs to be fully electrified.


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## MrBlackhill (Jun 10, 2020)

AltaRed said:


> The point being any public transit system needs to be comfortable, fast and efficient and it needs to be built without regard to whether it pays for itself or not for the first 5-10 years. It also needs to be fully electrified.


Which needs investments. But people prefer throwing their money at Tesla and other EV instead of investing in public transportation.


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## MarcoE (May 3, 2018)

james4beach said:


> If you think that's hard, think about what happens if scientific & economic forces cause the lingering hold outs to suddenly adapt to the new reality they find themselves in.
> 
> The behaviour-shaping incentives like carbon taxes are meant to influence public behaviour in the right directions. This does people a favour by getting them to adapt.


I think one of the problems is lack of alternatives.

Take a typical, middle class Canadian. Call her Diana. Diana is 43, a single mother with three kids, and works in Toronto, earning $50,000 a year. Because she can't afford Toronto rent with her salary, she lives in the suburbs. She'd like to live closer to work, but she simply can't afford it. In her suburb, there is no good public transportation available. The trains are too expensive, overcrowded, hot, and slow. The train station is also far from her house -- getting there can be an entire commute on its own. By the time she drops her kids off to school, the last train is gone. So she takes her Toyota, fills up gas, and drives for an hour into the city. She'd like an electric car. But all she could afford is a $5,000 beat-up old Corolla. Something like a Tesla is beyond a dream for her; it costs more than she'll save in a lifetime.

Now multimillionaire politicians, sitting in their mansions in Ottawa, decide that Diana is causing global warming. "We'll force her to change!" they say, then impose more carbon taxes. Suddenly Diana finds herself paying more for gas. She has to begin skipping meals and giving the food to her kids instead. She has to move out of her house (which had room for the kiddos) and rent a basement apartment instead, where everyone is crammed together and miserable. She's poorer than ever. That dream of owning a Tesla, or moving closer to work, is even farther out of reach. Meanwhile, the multimillionaire politicians forgot all about her. They're off on another Bahamas vacation. They took their private jet.

This won't work. Rich, powerful politicians punishing Canadians like Diana won't solve this problem. It'll only hurt the most vulnerable in our society.

The solution must be to make things easier for Diana and millions of Canadians like her. To put money into better public transportation. Into affordable housing. Into better, greener, cleaner technology. These things are hard to do, take serious leadership, lots of money and innovation, and time.


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## james4beach (Nov 15, 2012)

AltaRed said:


> I assume J4b's comments in post #142 are meant to incite (and/or insult) rather than to reason


No, I'm serious. We should get on the path to ending oil production. It won't be tomorrow, nor should it be, but the time has come to stop expanding Canada's oil production.

Digging oil out of the ground and releasing it to the world is a harmful activity. Oil production is inherently harmful to the world.

The barrel of oil in the ground is carbon trapped in a molecule. The barrel of oil, once out of the ground, is CO2 release waiting to happen. It's a harmful substance that needs to be left in the ground.

Just like the asbestos, by the way. It's not very different, other than asbestos causing more direct and immediate harm, whereas the hydrocarbon causes indirect harm that's a bit harder to observe (but not actually too hard).



AltaRed said:


> Clearly a number of countries see oil product demand increasing in the future, not decreasing. Either they are collectively exceptionally naive on the energy transition or they believe the idealism of climate change enthusiasts is far overstated.


The rest of the world can, and should, influence them to not do harmful things like increase oil production & consumption. But of course not everyone is going to immediately get on board with a new plan.

When some countries abolished slavery and stopped "producing" or "consuming" slaves, there were obviously some countries that benefited financially from continuing with the slave trade, or making use of slaves in their own economies. This is just the disruptive nature of change. Hiccups will happen, and not everyone gets on board right away.

*That's no excuse* for Canada throwing its hands up and saying, well gee, I guess we'd better power ahead with the oil business then.


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## james4beach (Nov 15, 2012)

MarcoE said:


> Take a typical, middle class Canadian. Call her Diana. Diana is 43, a single mother with three kids, and works in Toronto, earning $50,000 a year. Because she can't afford Toronto rent with her salary, she lives in the suburbs. She'd like to live closer to work, but she simply can't afford it. In her suburb, there is no good public transportation available. The trains are too expensive, overcrowded, hot, and slow.


The nation should assist lower income people to help bridge these gaps, while the transition unfolds over several decades.

By the way, Costa Rica and Denmark created the Beyond Oil & Gas Alliance.

This is an alliance of governments to agree to phase out (and end) oil production. Several countries are on board with this idea... Denmark, France, Costa Rica.

However the four largest oil producers haven't joined. That's the US, Russia, Saudi Arabia, and Canada.

Guys, I'm not saying we need to end oil production today. But we at least have to acknowledge that *oil production must end within the next few decades*. Canada is one of the world's largest oil producers, so it really is important that we get on board. We're a heavyweight, one of the top producers in the world!

We have to commit to a timeline to end production / stop granting exploration permits.

~ ~ ~ ~ ~ ~ ~ ~ ~

Kudos to Quebec though, for joining the Beyond Oil & Gas Alliance. They are the first North American member. While they currently have 182 active exploration permits, they have committed to permanently ban all O&G exploration and extraction in Quebec. Definitely a forward thinking province with modern values. Not only that but they actually did what they promised: Quebec is the first jurisdiction in the world to explicitly ban O&G exploration and production ... quite amazing @MrBlackhill

Denmark is a hero, too. Denmark is the largest oil producer in Europe, and they have committed to *ending* all oil & gas production in 30 years. They're already such an amazing country, showing advanced values and ethics, and this is yet another illustration of how they are the kind of society that modernizes and moves towards the future.

I'm positive that most Canadian jurisdictions will eventually outlaw oil exploration and production. Oil & gas are fundamentally harmful products (combust to produce CO2), so we shouldn't be producing them.


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## Covariance (Oct 20, 2020)

US opened the Strategic Petroleum Reserve (SPR) which is a Gov't inventory to be used in emergencies. The plan announced earlier this year (March) was to draw down 180 million barrels over six months. After a quick ramp up a steady flow has delivered, or sold for delivery around 125m thus far.

It will be quite interesting to see how the market reacts in November when this supply stops. I supposed they could always extend it.


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## MarcoE (May 3, 2018)

Is there any good technology for cleaning CO2 out of the atmosphere? Along with weaning our world off fossil fuels (which we're making some progress on, albeit not enough) is there any serious effort to clean up the existing pollution? Maybe we need to dedicate more resources to clean up operations?


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## MarcoE (May 3, 2018)

james4beach said:


> When some countries abolished slavery and stopped "producing" or "consuming" slaves, there were obviously some countries that benefited financially from continuing with the slave trade, or making use of slaves in their own economies. This is just the disruptive nature of change. Hiccups will happen, and not everyone gets on board right away.


Sadly, there is still slavery in the world.  There are still active slave markets in North Africa. Qatar uses slave labor extensively. China has an unofficial but huge slave market. In the west, we're just good at looking away. "That's over there, not our problem." One of the problems with global warming is that we can't do that. If only part of the world gets on board, and the other part still pollutes (the way some countries still have slaves), that affects the entire planet. It's a tricky situation for sure. It might be unrealistic to ever stop using fossil fuels entirely on a global scale, but we can still make progress, especially in countries with good leadership and a will to change.


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## AltaRed (Jun 8, 2009)

James, you are out of touch with reality and your posts on this matter are not serving you well. Global oil production will never cease, at least not for some centuries to come. There are far too many industrial uses that are essential to the functioning of society at large. From petro-chemicals to aviation fuels to name just a few. Somewhere in the range of 40% (40 million barrels per day) per this 2018 chart World oil final consumption by sector, 2018 – Charts – Data & Statistics - IEA. Non-heating and non-road use will likely only continue to grow in volume from here as our global population demands it..Global focus on reducing road use should continue to be the focus. The top ~20 oil producers will be producing oil to meet world needs long after our great grandchildren have come and gone.

You are far from fact on Denmark's oil production in Europe. It is tiny relative to Norway and the UK and declining fast. There are no economics to continue to develop and produce new oil in mainland Europe. Oil Production by Country 2022 Talk is cheap when one has nothing at stake. Current members of the Beyond Oil & Gas Alliance are either non-producers, or produce only fractional amounts of O&G. California, as associate member, is the largest oil producer of that group but has production in permanent decline. It has not made any moves to restrict oil production in its jurisdiction.

Added later: My post mentioned only oil production. For completeness, here is the status for natural gas Natural Gas by Country 2022.


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## cainvest (May 1, 2013)

james4beach said:


> Guys, I'm not saying we need to end oil production today.


That is basically what the Paris Agreement is doing right?

If your plan is to change faster then find better ways that are financially feasible to reduce O&G consumption by the majority of our population. If consumption drops so will exports obviously.

Imagine if car makers produced cheap small electric cars (or small PHEV at the very least) for daily commuting and the gov used positive/negative reinforcement to get people to buy those. On the plus side I'm seeing many more daily commuters riding e-bikes to work when the weather is nice.

We already have fed/prov incentives for home insulation. How many people take part in that for basically "free insulation"?

Manitoba finally announced a solar rebate and when combined with the fed grant it might give a reasonable ROI to install now. I'm looking into the costs for a small 3-4KW solar system to reduce my Nat gas usage.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Global oil production will never cease, at least not for some centuries to come


I also doubt it will cease, but I *do* think it's going to reduce dramatically on the global scale as it moves towards being phased out. Perhaps this is where we differ.

I think humans will adapt to find better solutions for energy (out of necessity to survive), whereas you expect oil use to largely continue -- by the sounds of your posts.

Again, I think of other hazardous chemicals like lead & asbestos. Of course there will be some production that continues, but civilization has largely moved on. It's also possible we don't move on, in which case the planet will become increasingly unlivable as it doesn't matter how "efficiently" one burns a barrel of oil. At the end of the day, each barrel of oil means high CO2 emissions during combustion.


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## Mechanic (Oct 29, 2013)

Europe energy crisis: Diesel imports from Russia and Asia surge


There are seven tankers currently laden with Asian diesel heading for Europe, as the continent's energy crisis intensifies.



markets.businessinsider.com


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## james4beach (Nov 15, 2012)

Mechanic said:


> Europe energy crisis


You've posted an example of something which is going to further drive countries away from fossil fuel dependence. The more painful this current experience becomes for Europe, the more likely that the young generation works towards getting away from oil & gas.

I already know that the older generation will make no effort to change anything significant ... I don't expect you to change. It's the younger generation, and especially kids today, who will be phasing out fossil fuels in the economy.


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## AltaRed (Jun 8, 2009)

james4beach said:


> I also doubt it will cease, but I *do* think it's going to reduce dramatically on the global scale as it moves towards being phased out. Perhaps this is where we differ.
> 
> I think humans will adapt to find better solutions for energy (out of necessity to survive), whereas you expect oil use to largely continue -- by the sounds of your posts.


The circle chart from a previous post World oil final consumption by sector, 2018 – Charts – Data & Statistics - IEA tells the story. You can do the math on how much oil consumption can be reduced by, for example, 2050. Maybe by 60% from 100 million barrels per day to 40 million barrels per day, assuming ALL land transportation by road, off-road and rail convert to electricity? Did you not understand what I have been saying for at least a year, maybe 2-3 years?

There still will be ICE vehicles on the roads by 2050. That is a certainty given not everyone on this planet is going to buy BEV by 2035, and given off-road construction and frontier applications with no access to portable non-fossil fuel electricity of any kind. One has to be a bit pragmatic and logical about what is feasible to be credible. No one will listen otherwise.


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## cainvest (May 1, 2013)

james4beach said:


> I already know that the older generation will make no effort to change anything significant ... I don't expect you to change. It's the younger generation, and especially kids today, who will be phasing out fossil fuels in the economy.


You have this backwards.


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## AltaRed (Jun 8, 2009)

It would be better to find European data since they have higher penetration of EVs, but for now, here are a few links to US data.....
In the American EV Market, What Drives the Interested and Holds Back the Hesitant? Price and living arrangements may be a factor for the low Gen-Z rate.
U.S.: EV purchase likelihood by consumer age group | Statista Can be skewed by desire versus actually committing.
How well do you know the next wave of EV buyers? Again may be skewed by desire versus actually committing

Ultimately, the far better data would be demographics of actual BEV registrations.


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## james4beach (Nov 15, 2012)

cainvest said:


> You have this backwards.


Can you explain what you mean, because this doesn't make sense to me.

Are you saying that the current generation is phasing out the oil industry? But I see that oil sands production continues to steadily increase (barrels produced per year). It's not decreasing.

And you think the kids of today, when they get older, are going to *increase* oil & gas production and consumption? It doesn't seem likely to me, as kids of today generally seem to understand that fossil fuel usage is a major contributor to climate change and instability.


Here's what I think is going to happen instead: today's kids are going to grow up in a world with a more unstable climate, suffering the various effects of climate change. Then they're going to look back at history and see what actions their ancestors took, ever since CO2-linked climate change was recognized in the 1980s. They will learn that the major oil companies knew about the problem, but suppressed it, and fought a propaganda campaign (similar to the tobacco industry). Then they will wonder why in 2022, over 30 years since the problem was recognized, Canada happily kept up oil production, increased Oil Sands production, and didn't make any meaningful effort to get out of the oil biz. Why didn't they put in high carbon taxes that actually have teeth?

I think our descendants will be very disappointed that we didn't make any tough decisions to sharply drop off our contribution to global CO2. They will see that we did the absolute least we can do, instead of having the guts to aggressively phase out oil dependence / production.


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## james4beach (Nov 15, 2012)

I want to emphasize a point. Canada's CO2 emissions problem really isn't about individual consumption; it doesn't really matter if our population drives gas-powered cars or not. Our CO2 numbers aren't high due to our individual consumption. (Industrial uses and factories, yes, but not individual cars).

In Canada, *the oil & gas production industry* is the biggest cause of CO2 emissions, especially once you properly calculate CO2 by including the huge amounts eventually emitted through our exported oil.

Moving to electric vehicles really won't make the big difference. We need to wind down the Oil Sands. Obviously it can't happen immediately, but we need to phase out Alberta's oil & gas industry.


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## Covariance (Oct 20, 2020)

@james4beach in general younger people consume more energy for two reasons. First there are more of them. Second, as people age they consume less in general.


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## MrBlackhill (Jun 10, 2020)

Covariance said:


> @james4beach in general younger people consume more energy for two reasons. First there are more of them. Second, as people age they consume less in general.


How old are we talking about? Because obviously young families have to drive to work everyday and then drive their kids to their activities, as opposed to old people who are retired and have no kids at home.


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## cainvest (May 1, 2013)

james4beach said:


> Can you explain what you mean, because this doesn't make sense to me.


Simply put, it's the older generations that teach the younger ones to change.


james4beach said:


> It doesn't seem likely to me, as kids of today generally seem to understand that fossil fuel usage is a major contributor to climate change and instability.


Yes, because the schools, media, parents, etc have raised the kids to accept and (hopefully) push forward environmental issues. Remember CO2 is only one of many environmental issues that need to be dealt with. Think way back to when the 3 R's started ... now it is totally common place to recycle though reduce and reuse sadly didn't seem to gain as much traction.



james4beach said:


> Here's what I think is going to happen instead: today's kids are going to grow up in a world with a more unstable climate, suffering the various effects of climate change. Then they're going to look back at history and see what actions their ancestors took, ever since CO2-linked climate change was recognized in the 1980s.


Yes, when the current kids grow up and gain power they can add to what was already started and teach their kids about "new life" standards that will be pushed forward.


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## cainvest (May 1, 2013)

james4beach said:


> I want to emphasize a point. Canada's CO2 emissions problem really isn't about individual consumption; it doesn't really matter if our population drives gas-powered cars or not. Our CO2 numbers aren't high due to our individual consumption. (Industrial uses and factories, yes, but not individual cars).


Got any % numbers to back that claim up?
Many sources show significant polution (CO2 included) from transportation in north america.


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## james4beach (Nov 15, 2012)

Covariance said:


> @james4beach in general younger people consume more energy for two reasons. First there are more of them. Second, as people age they consume less in general.


You're looking at the wrong thing by focusing on personal consumption.

The trend in *personal* consumption is already down... the emissions are reducing. Regular citizens have already caught on for the need to reduce consumption, or technologies we use are already improving and reducing our personal consumption. Whether you're a young individual or old individual isn't the big issue here.

The issue is that the oil and gas *industry's production* is a major contributor to Canada's CO2 emissions, and this number keeps increasing.

When I refer to young vs old, I'm talking about policy/management of the industry. Clearly, young people recognize the CO2 problem and will push the industry to reduce emissions. There is definitely the political will across this country, among young people.

Meanwhile, the old generation currently in power are increasing oil production and increasing CO2 emissions. It's actually trending in the wrong direction -- up!

Has nothing to do with personal consumption. Everything to do with the O&G industry, allowing production to increase.


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## Covariance (Oct 20, 2020)

MrBlackhill said:


> How old are we talking about? Because obviously young families have to drive to work everyday and then drive their kids to their activities, as opposed to old people who are retired and have no kids at home.


Good question. The link below shows us Canadian population by age. My comment up thread was arbitrarily using a retirement age cutoff of 65.






Age Pyramids


Age pyramids are dynamic applications that allow users to see the evolution of the age structure of the Canadian population over a given time period and for selected geographies.




www12.statcan.gc.ca


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## james4beach (Nov 15, 2012)

cainvest said:


> Got any % numbers to back that claim up?
> Many sources show significant polution (CO2 included) from transportation in north america.


I can definitely back it up, see the following deep dive. I'm happy to point you to the government's page. Here are the emissions by sector. The O&G sector is the top emitter at 27% of total emissions, while Transport is 24%.










Obviously 2020 is an outlier so you have to ignore that as you look at this. Looking near the bottom of the graph, you can see the steady pattern of increases (going back to 1990) in both the Transport and Oil and gas sectors. These are two main contributing sectors to our CO2 emissions.

Delving into Transport sector emissions

If you look at the breakdown of the Transport sector, on that page, you'll see at 2019 they were at about 185 megatonnes. The increasing trend in emissions appears to be entirely due to passenger trucks (includes SUVs) and freight trucks.

Note again -- cars don't matter. Going to Tesla cars won't make a lick of difference in our CO2 emissions. Regular car emissions have been steadily declining for 30 years anyway!

Delving into O&G gas emissions, found on the same web page

Using 2019 (can't use the pandemic year), that was about 200 megatonnes, the largest source of Canada's emissions.

The mix of what's emitting has shifted over the years. While looking at this you have to keep in mind that the nation's goal is to reduce emissions, so even a steady level of emissions is undesirable.

The O&G industry has a pattern of rising emissions over the years, ex-2020. And the 2021 production was a new high compared to 2018, so very likely, O&G emissions have probably hit a new high, not pictured here.

The problem is the trend. This is the largest % of our greenhouse gas emissions, and there has been NO success in reductions. Increasing production only makes this worse.

Big picture, what are the largest CO2 emitters, the problem areas?

As you can see from that govt page, when you break things down, we have the following problem areas nationally. All of these are major sources of emissions, and are failing to come down. In order of magnitude, the biggest problems are

Oil and gas sector, tied to absolute production levels
Freight trucks
Passenger trucks and SUVs
Passenger cars are not an issue. Choosing between a Toyota Corolla or Tesla EV is not an issue, it's absolutely _meaningless_ in the big picture.

Trucks and SUVs are a nagging issue that must be solved. And the oil sector is a major problem, especially since the emissions keep increasing. These are the things that are making Canada fail to meet global reduction standards.

*Carbon taxes *are meant to target consumption, and should discourage people from choosing trucks and SUVs.


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## Covariance (Oct 20, 2020)

james4beach said:


> You're looking at the wrong thing by focusing on personal consumption.
> 
> The trend in *personal* consumption is already down... the emissions are reducing. Regular citizens have already caught on for the need to reduce consumption, or technologies we use are already improving and reducing our personal consumption. Whether you're a young individual or old individual isn't the big issue here.
> 
> ...


Bigger picture. Consumption is the only thing that matters. It’s not a planned economy. Energy is produced because people want stuff and they consume it. Individual consumption is what drives the use of energy across all the sectors in your post 177, save and except for commodities, products and services that are exported.


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## james4beach (Nov 15, 2012)

Covariance said:


> Bigger picture. Consumption is the only thing that matters. It’s not a planned economy. Energy is produced because people want stuff and they consume it.


Consumption/demand is not the only thing that matters. Oil production is completely within our control. We aren't money-addicted mindless zombies who always do whatever leads to the most $ in our pocket. If that was the case, our society would permit all kinds of high profitable, yet horrible, activities. We'd have slavery. Hard drugs would be manufactured by industry and there would be a vibrant hard drug economy.

Why doesn't Canada start up a land mine industry? There's plenty of demand for those as well, in other unstable countries. Come on man. You can't excuse high energy production (a harmful activity) just because "people want it".

Society places limits on harmful activities. This has always been the case with resource extraction and development as well.

Oil production has to be limited. It's causing way too much greenhouse gas emissions and is an embarrassment to Canada. Other countries are achieving their emissions reductions, and we're not.


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## Covariance (Oct 20, 2020)

james4beach said:


> Consumption/demand is not the only thing that matters. Oil production is completely within our control. We aren't money-addicted mindless zombies who always do whatever leads to the most $ in our pocket. If that was the case, our society would permit all kinds of high profitable, yet horrible, activities. We'd have slavery. Hard drugs would be manufactured by industry and there would be a vibrant hard drug economy.
> 
> Why doesn't Canada start up a land mine industry? There's plenty of demand for those as well, in other unstable countries. Come on man. You can't excuse high energy production (a harmful activity) just because "people want it".
> 
> ...


The point is it’s a deflection to single out a producer when people should take personal responsibility for their own consumption in general and specific product/service choices. Energy is used to deliver and/or produce almost everything people consume. Consume less, waste less. In general. I have lived and worked in many countries around the world. It is shocking how much excess and waste there is in North America. Start there.


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## cainvest (May 1, 2013)

james4beach said:


> The O&G sector is the top emitter at 27% of total emissions, while Transport is 24%.


Only 3% difference .... I'd still call 24% significant!



james4beach said:


> The increasing trend in emissions appears to be entirely due to passenger trucks (includes SUVs) and freight trucks.
> 
> Note again -- cars don't matter. Going to Tesla cars won't make a lick of difference in our CO2 emissions. Regular car emissions have been steadily declining for 30 years anyway!


Of course it is not just cars, so many people are driving trucks/SUVs which is why it's on the rise.



james4beach said:


> Passenger cars are not an issue. Choosing between a Toyota Corolla or Tesla EV is not an issue, it's absolutely _meaningless_ in the big picture.
> 
> Trucks and SUVs are a nagging issue that must be solved.


Again, why are you focused on cars alone? It's about what people are daily driving ... a car, truck or SUV is all the same thing here and it is significant!

Interesting to note that when consumer use for gas fell in 2020 (pandemic) it also went down for the oil and gas industry so obviously consumption has a impact on both areas.


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## doctrine (Sep 30, 2011)

james4beach said:


> Consumption/demand is not the only thing that matters. Oil production is completely within our control. We aren't money-addicted mindless zombies who always do whatever leads to the most $ in our pocket. If that was the case, our society would permit all kinds of high profitable, yet horrible, activities. We'd have slavery. Hard drugs would be manufactured by industry and there would be a vibrant hard drug economy.
> 
> Why doesn't Canada start up a land mine industry? There's plenty of demand for those as well, in other unstable countries. Come on man. You can't excuse high energy production (a harmful activity) just because "people want it".
> 
> ...


Good news for you, James. Canada will be cutting absolute production. Reducing carbon emissions by 45%+ in 7 years means oil production will have to drop, because emissions intensity cannot be cut that fast, not even close, it's impossible. Might see 20-30% gone in just a few years. Remember Canada has to grow about 10% in population too by 2030, so it is effectively a 50% cut in emissions in just 7 years, quite impressive. Many assets will be left stranded shortly.


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## james4beach (Nov 15, 2012)

Covariance said:


> The point is it’s a deflection to single out a producer when people should take personal responsibility for their own consumption in general and specific product/service choices. Energy is used to deliver and/or produce almost everything people consume


I think you're misinterpreting the figures as they are reported. You are speaking as if the eventual emissions from that barrel of oil are attributed to the producer -- but that's not how the reports are counting it.

These stats already show the emissions as used by the consumer of it, which is what you want. So for example, when the oil sands produce a barrel that ends up in the Transportation sector (trucks), it's the Transportation sector who's responsible for that CO2.

But the oil & gas industry itself is a big consumer of petroleum, while it extracts and manages the resource. It's part of their industry operating. We aren't penalizing them for the barrels that get sent to a consumer; that becomes the consumer's responsibility and is reported with their figures.

The stats show that the oil & gas industry itself is a massive greenhouse gas emitter, because of all the oil & gas consumed in the process. If they could magically find a way to use super efficient processes or new tech that didn't consume oil & gas in the process, then they *could* produce oil without CO2 emissions! I'd love if this could happen, but it hasn't happened yet.

So the big chart I showed in post #177 already correctly attributes responsibility to the right party.

If the CO2 from the produced oil WAS counted on the oil & gas industry's ledger, it would be off the charts high, since Canada is the #4 or #5 largest oil producer in the world. But don't worry, that CO2 isn't being attributed to us.


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## Gator13 (Jan 5, 2020)

Prior to the pandemic, passenger air travel was producing the highest and fastest growth of individual CO2 emissions.


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## londoncalling (Sep 17, 2011)

doctrine said:


> Good news for you, James. Canada will be cutting absolute production. Reducing carbon emissions by 45%+ in 7 years means oil production will have to drop, because emissions intensity cannot be cut that fast, not even close, it's impossible. Might see 20-30% gone in just a few years. Remember Canada has to grow about 10% in population too by 2030, so it is effectively a 50% cut in emissions in just 7 years, quite impressive. Many assets will be left stranded shortly.


These contradictory targets are impossible. I agree that we need to curb demand to cut production. Cutting production alone will don nothing aside from destroying economic stability for the country. Oil and gas exports have kept our head above water in 2022. Any province that received transfer payments in the past can thank carbon intensive commodity/resource production. 

I am not sure how far gone we are from a climate perspective. I believe we need to find solutions to these dire problems but the solution must be international. Which is highly unlikely As already noted upthread cutting production while paying to import energy to hit a target is stupid, wasteful and signal flaring. Global demand needs to change and will. It is important but do we need to sink the entire country to do so? How about instead of telling Joe and Jane Q. Taxpayer they will be legislated into compliance, government leads by example. How much of their travel and work is done with little regard to the carbon impact. Anybody see the irony in the G7 meetings carbon expense which helped lead to this announcement? Not sure why Canada (gov't) decided this was the soapbox for this country to stand on. There are so many other places we could choose to set the world leading targets to aim for like education, innovation etc.


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## AltaRed (Jun 8, 2009)

Significant emission reductions per barrel could be achieved if Ottawa wanted to get serious about collaborating with the oil industry to do so. There could be accelerated depreciation on capital spent on, for example, carbon sequestration (accelerated tax credits), or even backstopping (but not funding) a SMR faclity. The fact is their ideology cannot seem to handle rational thought and they will lose out on what could be a win-win proposition.


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## Covariance (Oct 20, 2020)

james4beach said:


> I think you're misinterpreting the figures as they are reported. You are speaking as if the eventual emissions from that barrel of oil are attributed to the producer -- but that's not how the reports are counting it.
> 
> These stats already show the emissions as used by the consumer of it, which is what you want. So for example, when the oil sands produce a barrel that ends up in the Transportation sector (trucks), it's the Transportation sector who's responsible for that CO2.
> 
> ...


I understand the reports. The point is all of these tie back to people consuming products and services. Trucks don’t drive around in circles (transportation). They deliver things that people purchse, or parts/commodities used in the chain to make stuff that people buy. Oil coming out of the ground is transformed into something else - electricity, heat, plastics, etc and used by people who buy it.

The responsibility is with the people consuming all this stuff and their waste.


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## peterk (May 16, 2010)

cainvest said:


> Yes, because the schools, media, parents, etc have raised the kids to accept and (hopefully) push forward environmental issues. Remember CO2 is only one of many environmental issues that need to be dealt with. Think way back to when the 3 R's started ... now it is totally common place to recycle though reduce and reuse sadly didn't seem to gain as much traction.


Well Reduce and Reuse wasn't great for consumerism and the stock market --- so that got dropped --- and it turned out that Recycle was mainly just send it to a dump in Asia, but pretend like we don't. (Plus a few grifting projects I'm sure for the government to build an inadequate amount of recycling facilities).



MrBlackhill said:


> How old are we talking about? Because obviously young families have to drive to work everyday and then drive their kids to their activities, as opposed to old people who are retired and have no kids at home.


More anecdotes from me -- My wealthy millenial relatives (dual 100k salaries and house worth 4x what they paid) who are environmental extremists (the kind who attend green rallies on the regular and are vegans for the reduced emissions) just bought themselves a slightly used large V6 vehicle for their family. Even though they could easily afford whatever EV or PHEV offerings are out there.

The lack of demand destruction as predicted by some over the next 10 years is going to be epic, me thinks.


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## MrBlackhill (Jun 10, 2020)

peterk said:


> My wealthy millenial relatives (dual 100k salaries and house worth 4x what they paid) who are environmental extremists (the kind who attend green rallies on the regular and are vegans for the reduced emissions) just bought themselves a slightly used large V6 vehicle for their family.


Yes, unfortunately, some people talk more than they act.

We also make $200k+ as a household and we still own a 2014 Hyundai Accent Hatchback. We barely use it because in Montreal most things are at a walking distance of less than 30 minutes, otherwise at a biking distance of less than 30 minutes, otherwise we go for bus/subway, so we basically use the car only to visit the family outside the city or some vacation roadtrips. We average about 5,000 km a year.

We'll probably keep that car for another 10 years and then most likely buy a Korean EV.


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## cainvest (May 1, 2013)

Covariance said:


> The responsibility is with the people consuming all this stuff and their waste.


Yup, drop the demand by people not buying and the supply is reduced or eliminated ... simple.



peterk said:


> Well Reduce and Reuse wasn't great for consumerism and the stock market --- so that got dropped --- and it turned out that Recycle was mainly just send it to a dump in Asia, but pretend like we don't. (Plus a few grifting projects I'm sure for the government to build an inadequate amount of recycling facilities).
> e epic, me thinks.


Recycle had it's growing pains for sure, likely could still be better.


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## m3s (Apr 3, 2010)

peterk said:


> Well Reduce and Reuse wasn't great for consumerism and the stock market --- so that got dropped --- and it turned out that Recycle was mainly just send it to a dump in Asia, but pretend like we don't. (Plus a few grifting projects I'm sure for the government to build an inadequate amount of recycling facilities).


I follow "Buy It For Life" subreddit

I like the concept of buying high quality stuff that lasts - the stuff I have found was well worth the upfront cost because the quality makes it more enjoyable to own and there is pride in ownership of high quality items that last

It's not good for consumerism though and it's getting much harder to find such items


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## james4beach (Nov 15, 2012)

Covariance said:


> The responsibility is with the people consuming all this stuff and their waste.


True, and that's why I always fight hard against consumerism and wasteful lifestyle. But I still think you are glossing over the responsibility that exists on the production side. I also take issue with the kind of logic you're using, because this is the kind of excuse that resource extractors use to try wash their hands of any environmental responsibility.

I have seen that argument used disingenuously for too many years, and I've also seen that excuse from people who are greedy and profit-motivated, who simply don't want regulation or environmental protections.

Oil sands production has seen some efficiency improvements, which is great, but it's still a *choice* how much to extract and produce. The more production, the higher the CO2 emissions due to all the machinery and pumps involved.

Eventually it may be possible to produce more while keeping emissions under national guidelines. That would be the ideal solution to this. My gripe isn't so much with the number of barrels produced, but the environmental impact of the industry. The oil sands industry is emitting a ton of CO2 and also has other environmental impacts which are causing harm to Alberta.

If there was a magic solution that could reduce all those environmental impacts and reduce CO2 emissions, then I really wouldn't mind high production.

But this hasn't happened yet. So far, CO2 emissions and other environmental impacts have remained elevated. We need to make immediate reductions in CO2 emissions, so reducing production is really the only option at the moment.

*The oil & gas industry has a responsibility to reduce their CO2 emissions*. They haven't done this yet and we're running out of time.


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## AltaRed (Jun 8, 2009)

james4beach said:


> But this hasn't happened yet. So far, CO2 emissions and other environmental impacts have remained elevated. We need to make immediate reductions in CO2 emissions, so reducing production is really the only option at the moment.
> 
> *The oil & gas industry has a responsibility to reduce their CO2 emissions*. They haven't done this yet, and Canada has fallen behind other developed countries in our obligations to reduce CO2.


Of course and they are doing so on a per barrel basis but maybe not as quickly as they could be. You are making wild armchair assertions without substance or fact and are not listening like so many others. Anyone can be an Internet troll. There could be more government support, or at least less obstructionism, in helping get even more done per what I have already posted. One potential concern, though it may be just rhetoric as part of the UCP leadership campaign, is the possibility of the AB government doubling down in its bunker mentality in dealings with Ottawa. Hopefully it is just rhetoric or Notley's NDP will dump the UCP in AB's 2023 election.

The reduction story so far. Oil sands on path to total emissions reductions - Canadian Energy Centre And this older article This oil sands crude has lower GHG emissions intensity than the U.S. average - Canadian Energy Centre By the way, R&D for PFT (Paraffinic Froth Treatment) first started in the '90s and I think was first applied to Shell's Muskeg River oil sands project. It takes a long time to validate and verify a technology before billions can be committed to introducing it to commercial operations. Rome was not built in a day and it won't be in emissions reduction either.

Added later: Your chart in post #177 provides data (actual data analytics unknown - much of it likely estimation and extrapolation) for the entire industry. It is well known the conventional O&G industry has not done all that much to reduce emissions (yet), but the big 5 or so in the oil sands have made substantial commitments and making more to reduce their carbon intensity significantly. How to deal with conventional O&G is problematic given the number of companies involved and the squeeze it will bring on a wide variety of popular names (such as Whitecap, Arc Resources, Tourmaline, etc, etc, etc.). It may well take higher taxes on fugitive emissions (such as gasket and valve stem leaks) and combustion (line heaters, glycol heaters, oil battery heaters,etc, etc.). Much of the conventional O&G industry has been under the radar since it has been easier to pick on the big oil sands producers. This is where the USA has its major problems as well, i.e. the conventional land based O&G industry.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Of course and they are doing so on a per barrel basis but maybe not as quickly as they could be. You are making wild armchair assertions without substance or fact and are not listening like so many others. Anyone can be an Internet troll.


I'm getting a bit tired of you calling me an internet troll but perhaps that's how you guys are trained in the oil & gas business, to dismiss any criticism as crazy. This industry has a cultural problem.

I am observing a clear reality: the oil & gas industry is the largest greenhouse gas emitter in Canada.
Not only are they the largest emitter, but their TOTAL emissions also have failed to come down over the years.
They have increased production over the years, nullifying any effect of efficiency improvements.
These three ^ are facts.

They certainly should keep working on efficiency improvements, that's a great idea. I fully support the idea of bringing down emissions in the industry.

But let's stop all the CAPP lobbyists talk, shall we? At the moment, emissions are too high. What they can -- and should do -- is reduce production. There is a responsibility to bring total emissions down, and reducing production is the only way it can be done in the near term.

Potential new tech, or new collaborations, which may be fruitful in ~ 10 years is not going to help the emissions obligations Canada has. Production has to be cut.


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## james4beach (Nov 15, 2012)

The O&G industry keeps getting special treatment in Canada. Here's a recent news article. The Environment Minister recently gave the O&G sector more time to hit their reduction targets.

Here's the concern I have,



> Getting Canada to its target of net zero emissions by 2050 would require a 42 per cent cut in oil and gas sector emissions. Some in the oil and gas sector have expressed concerns about keeping up with that commitment.


Others point out that the industry keeps lobbying for, and getting, more deferrals and exemptions. And just wait if a Conservative government gets in, they will probably get rid off any pretense of reducing O&G emissions.



> Environmental advocates say that the oil and gas sector, which accounts for 27 per cent of the country's emissions, is moving too slowly and should not be rewarded with an extension.
> 
> "They are not reducing their emissions. They are climbing and they need to go in the other direction," said Tim Gray, executive director of Environmental Defence.
> 
> "It's part of a pattern whenever a new climate focused initiative is released by the federal government. The oil and gas industry immediately starts their lobbying campaign to weaken it or defer it."


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## AltaRed (Jun 8, 2009)

You are entitled to your opinion but that is all it is, an opinion. Accept there are a range of equally valid opinions and then there are facts. The facts are that carbon intensity is coming down in the O&G industry, at least the oil sands industry, and while much more has to be done, the industry will survive this in an appropriate fashion. Production may well come down by 2030 and should to the extent global demand comes down, but it will be in conventional light and heavy oil production from a hundred or so different companies, not oil sands production.

Added: Even the Liberals will blink come 2028 or so when Canada's GDP would be so threatened, and public debt servicing will be so great, they will have no choice but to be more realistic and pragmatic. What is needed now is more collaboration between Ottawa, Edmonton and the O&G industry to be singing from the same song sheet to get emissions per barrel lower and faster. 

<OT> Pierre will hopefully fix that starting in 2025.</OT>


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## james4beach (Nov 15, 2012)

The Liberals are too oil-friendly, way more than I thought when I voted for them. They've done nothing but accept excuses from the O&G industry and give them special treatment. And then Trudeau goes off and approves a new off shore drilling project.

Apparently the emissions reductions targets apply to everyone in Canada except the top emitters. Who knew!

Maybe we need a federal NDP in power to really put some teeth into environmental regulation.


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## AltaRed (Jun 8, 2009)

We know the Bay du Nord project is a concession to NF (whether or not it actually happens) but it is also in line with exactly what Norway is doing. There is no reason why Canada should sacrifice itself any more than the many other O&G producing countries, i.e. it is encouraging that some sanity shows itself from time to time.

If you want Canada to become a banana republic, aka most Latin American countries, by all means, elect an NDP government. It has done wonders for Venezuela.


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## doctrine (Sep 30, 2011)

londoncalling said:


> These contradictory targets are impossible. I agree that we need to curb demand to cut production. Cutting production alone will don nothing aside from destroying economic stability for the country. Oil and gas exports have kept our head above water in 2022. Any province that received transfer payments in the past can thank carbon intensive commodity/resource production.


Certainly there are consequences for our climate targets, but I am just stating what they are. Under our current rules oil production will fall at least 25% by 2030 even with improving emissions intensity by 20%, which is more than they have improved in the last 10 years.

Like AltaRed, I am personally convinced the government will blink. The short term economic consequences will be too great. And perhaps if the energy crisis smashing Europe apart spreads, concerns over climate may diminish.

I mean, imagine your power and heat bill going up 1000% in 12 months. And then it starts going up 10% a day. This morning, it went up 25% before breakfast started. That is happening in real time in Europe, an energy crisis caused by lack of fossil fuels and I do not think the world is ready for it. We are also lulled into a false sense of security by OPEC. Their interests are not aligned with ours.


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## AltaRed (Jun 8, 2009)

There is another factor. Dilbit (blended bitumen) and/or Mayan Heavy and/or Orinoco upgraded bitumen feedstock is essential to some PADD 2 and PADD 4 refineries in the USA. Given that Mexico will halt oil exports (Mayan heavy) in 2023 as a result of them re-conditioning existing refineries and starting a new one, and given Venezuela appears to be a basket case for decades to come, Canadian dilbit will be a precious supplly to the USA for decades to come. It does not take a genius to figure out how heavy handed the White House could become with Ottawa if Canadian oil sands production was to decrease materially. That doesn't even consider that with the decline in both Alaskan and California production, west coast refineries in WA and CA will be clamoring for even more deliveries via TMX.


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## Covariance (Oct 20, 2020)

james4beach said:


> True, and that's why I always fight hard against consumerism and wasteful lifestyle. But I still think you are glossing over the responsibility that exists on the production side. I also take issue with the kind of logic you're using, because this is the kind of excuse that resource extractors use to try wash their hands of any environmental responsibility.
> 
> I have seen that argument used disingenuously for too many years, and I've also seen that excuse from people who are greedy and profit-motivated, who simply don't want regulation or environmental protections.
> 
> ...


Understood. Not trying to let anyone or any companies off the hook. I just get my back up when people think cutting a source of supply will magically cure a demand issue. People consuming will continue to do so and just shift their source.


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## nobleea (Oct 11, 2013)

It's like the failed war on drugs. Attacking the production side achieved nothing without addressing the addiction and mental health side of the demand equation.


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## Synergy (Mar 18, 2013)

james4beach said:


> True, and that's why I always fight hard against consumerism and wasteful lifestyle.


That's somewhat ironic considering that flying is more damaging to the environment than most other activities. The eye of the beholder I guess...


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## Covariance (Oct 20, 2020)

m3s said:


> I follow "Buy It For Life" subreddit
> 
> I like the concept of buying high quality stuff that lasts - the stuff I have found was well worth the upfront cost because the quality makes it more enjoyable to own and there is pride in ownership of high quality items that last
> 
> It's not good for consumerism though and it's getting much harder to find such items


I will explore this. Thank you.


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## james4beach (Nov 15, 2012)

North American oil continues to fall!

WTI is now around $85, an amazing decline since the $120 levels. And yeah, my XEG position is falling, but that's fine. For me this was always an inflation and war hedge... I don't mind losing money on this.

Early this year, who would have thought we'd be down to $85 oil at this point? This shows how unpredictable markets are.


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## zinfit (Mar 21, 2021)

Sold off a fair chunk of my energy stocks. $85 is a technical number. When it broke this level I decided to sell 30% of my energy stocks.


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## londoncalling (Sep 17, 2011)

james4beach said:


> North American oil continues to fall!
> 
> WTI is now around $85, an amazing decline since the $120 levels. And yeah, my XEG position is falling, but that's fine. For me this was always an inflation and war hedge... I don't mind losing money on this.
> 
> Early this year, who would have thought we'd be down to $85 oil at this point? This shows how unpredictable markets are.


I for one did not expect it but I also didn't rule it out. I am content to have energy continue to spin off free cash, eliminate debt, do share buybacks and payout special divvies. I am prepared to milk it for as long as I can. I still feel this pullback is temporary and interest rate related. Demand has not disappeared and depending on what happens in Europe we may be wishing for $100 a barrel and $1.90 gas within the next 6 months. I would prefer oil at $70 but if it goes back to $100 I will enjoy the change in share price of my energy holdings.


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## doctrine (Sep 30, 2011)

james4beach said:


> North American oil continues to fall!
> 
> WTI is now around $85, an amazing decline since the $120 levels. And yeah, my XEG position is falling, but that's fine. For me this was always an inflation and war hedge... I don't mind losing money on this.
> 
> Early this year, who would have thought we'd be down to $85 oil at this point? This shows how unpredictable markets are.


It is unpredictable but it is certainly explainable. The US is pumping out its strategic reserve for another two months. But the real factor is China, which continues zero COVID lockdowns and is consuming 2 million barrels a day less of oil. Did everyone think that 300 million people in China would be locked down in September 2022? But both of these major factors will eventually end, and oil inventories are still low, and there is no new magic production well of oil. These two events alone account for 3 million barrels a day of delta inventory draw when inventories are even so still flat to declining slightly. Status quo will not remain for much longer, although until it does, its hard to see oil doing much of anything. But imagine those two events both ending, and for some reason a bad actor decides to cut another 2-3 million barrels, like they did with natural gas. The risk to oil are all quite sharply to the upside.


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## Covariance (Oct 20, 2020)

doctrine said:


> It is unpredictable but it is certainly explainable. The US is pumping out its strategic reserve for another two months. But the real factor is China, which continues zero COVID lockdowns and is consuming 2 million barrels a day less of oil. Did everyone think that 300 million people in China would be locked down in September 2022? But both of these major factors will eventually end, and oil inventories are still low, and there is no new magic production well of oil. These two events alone account for 3 million barrels a day of delta inventory draw when inventories are even so still flat to declining slightly. Status quo will not remain for much longer, although until it does, its hard to see oil doing much of anything. But imagine those two events both ending, and for some reason a bad actor decides to cut another 2-3 million barrels, like they did with natural gas. The risk to oil are all quite sharply to the upside.


Bang on. Or heaven forbid a hurricane.


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## james4beach (Nov 15, 2012)

Wow, oil is under $80, this is tremendous!

This is great news from an inflation perspective. Just a few months ago we had the risk of run-away energy prices, pushing up the cost of everything. Now we're seeing a huge easing of this key inflation pressure.


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## Covariance (Oct 20, 2020)

james4beach said:


> Wow, oil is under $80, this is tremendous!
> 
> This is great news from an inflation perspective. Just a few months ago we had the risk of run-away energy prices, pushing up the cost of everything. Now we're seeing a huge easing of this key inflation pressure.


Yup. Good news for consumption. Also good for those with the thesis that oil is not going away anytime soon. These levels keeps users on board while generating exceptional cashflow for producers. Demand destruction and widespread issues occur when the price gets to high.


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## m3s (Apr 3, 2010)

Norwegian and French oil companies claiming military drones spotted near oil rigs

Fire up the oil sands


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## londoncalling (Sep 17, 2011)

m3s said:


> Norwegian and French oil companies claiming military drones spotted near oil rigs
> 
> Fire up the oil sands


Nord Stream leak: West shores up pipeline security, blaming 'sabotage' - BBC News 

Someone just upped the ante. Perhaps more appropiate for the lounge thread on war with Russia but definitely bullish for energy prices. bad news for fuel prices and inflation.


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## m3s (Apr 3, 2010)

Just reminded me of a Call of Duty oil rig mission so I looked it up

It was set 22 Oct 2022


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## Covariance (Oct 20, 2020)

What's the take on OPEC+ cut?


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## londoncalling (Sep 17, 2011)

Seems ludicrous when I filled up today at $1.85/L. Oligopolies and cartels are good for shareholders but not consumers. It's why I continue to hold O&G companies. We may see gas prices that Europe has experienced for years. Not good for those that live outside large urban areas that have decent public transit. The cut will put a floor under oil prices. OPEC knows we are entering the Twighlight era and need to squeeze out as much profit as they can. Should remain profitable for years to come but the business model has changed. I am getting calls weekly from employers in this sector looking for workers. Tough sell to young workers when all they see is oil has no future.


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## AltaRed (Jun 8, 2009)

The OPEC+ cuts are the traditional 'bird in had is worth two in the bush'. Also, nothing has changed from the old saying.... 'the cure for high prices is high prices'. Seeking less costly alternatives or cutting back to reduce costs is the basis of demand destruction. Good luck with that, you bozos!


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## doctrine (Sep 30, 2011)

It also doesn't make sense to me that the US keeps pumping out its strategic reserve below $80 when there is no short term supply crisis. It's not surprising that OPEC would therefore cut to support prices. The whole world is pumping at 100% of capacity with no material new investment and supplies are still dwindling. Sooner or later, supply restraints being managed by pricing are what we will be living with, artificial or not. US shale growth was supposed to be 1+ million barrels a day this year and so far is sitting at maybe 200k to October. There is no magic supply bullet.


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## AltaRed (Jun 8, 2009)

It is indeed stupid (beyond stupid) drawing from the SR but the WH is running scared with the mid-terms just a month away and Americans are self-absorbed. The tune might change shortly thereafter.


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## Covariance (Oct 20, 2020)

Revisiting the discussion around the SPR, and in particular the WH recent news on replacement of the SPR down the road (next year?).

Am I over simplifying the price impact of the replacement announcement? Isn't the WH just putting a floor under the futures price by offering to enter into orders for delivery well into next year? With no real impact on supply levels.


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## AltaRed (Jun 8, 2009)

SPR volume replacement can partially support a 'floor' price since combined fill capacity rate for all sites is just under 500,000 barrels per day (about 4% of current US production capacity, or 0.5% of global production), but there are other major factors, mostly geo-political, affecting supply/demand variation more than that. 

The whole SPR saga is mostly a political statement for the voting American public, most of whom are dense as an anvil when it comes to energy matters.


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## doctrine (Sep 30, 2011)

Covariance said:


> Revisiting the discussion around the SPR, and in particular the WH recent news on replacement of the SPR down the road (next year?).
> 
> Am I over simplifying the price impact of the replacement announcement? Isn't the WH just putting a floor under the futures price by offering to enter into orders for delivery well into next year? With no real impact on supply levels.


I see the SPR release ending as a more significant factor. The reason is that oil inventories are still dropping despite the release and oil is still sitting here at $85 ($115+ Cdn). Once the release stops, you could see prices moving materially higher, especially early next year. There will be more decision points then that come before refilling ever becomes relevant. If prices spike, maybe the US decides to dump more oil rather than refill. That would be still stupid, but if stupidity didn't stop the first release, maybe it won't stop the next (releases maybe made sense for 2 months, until it was clear Russia was still able to export). Maybe they will run out of money (or support) to fill it. 

I cannot understate how stupid it is to be releasing barrels today with oil at $85, when Saudi Arabia is holding barrels back, and still talking about refilling the SPR. So much stupidity, the only certainty to me is eventually the game of musical chairs and oil moves a lot higher.


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## AltaRed (Jun 8, 2009)

The stupidity is mid-term elections.... See the last sentence of my prior post on why.


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## doctrine (Sep 30, 2011)

AltaRed said:


> The stupidity is mid-term elections.... See the last sentence of my prior post on why.


Yes, that is the cause right now, but if oil spikes early next year, I could easily see more releases brought forward. Politics never stops and there are always elections on the horizon, 2024 isn't that far away. So the US has one last big bullet left. I give it a 50% chance of being used next year.


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## londoncalling (Sep 17, 2011)

Politics will reign in the US until after the mid terms. After that we may see energy policy that is actually around economics and supply. I appreciate the detail in the posts above from members that have great insight into how energy markets work. I am not sure if the energy bull will continue but I don't see lower fuel prices in NA's short term or long term future. Even after the end of the conflict overseas, environmental policy will have us see elevated fuel prices that have been in European countries for years.


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## AltaRed (Jun 8, 2009)

I agree it would be a rare instance for oil/nat gas prices to fall back to depressed levels ever again, a few short term aberrations potentially excepted (if Saudi's share slips too much). Carbon taxes, reducing CO2 emissions in production and processing, etc, etc. have raised capital and operating costs.


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## Faramir (11 mo ago)

The problem oil has is a worldwide recession and one that gets deeper. China and the USA seem to be headed for further pain.


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## MrBlackhill (Jun 10, 2020)

I'm posting this here to have comments.

_The controversy this week was not so much about the gargantuan dollar amounts earned but what the world’s largest energy companies chose to do with them. Exxon Mobil Corp., Chevron Corp., Shell Plc and TotalEnergies SE are handing almost $100 billion to shareholders annually in the form of buybacks and dividends while reinvesting just $80 billion in their core businesses this year, according to data compiled by Bloomberg. 

“Can’t believe I have to say this, but giving profits to shareholders is not the same as bringing prices down for American families,” President Joe Biden tweeted Friday in response to Exxon’s dividend increase. 

Meanwhile, Democratic US Representative Ro Khanna called energy profits “obscene,” and introduced legislation to prohibit fuel exports, a move he said would lower prices at the pump. Senator Chuck Schumer called the earnings “unconscionable.”_









Oil Giants Face Backlash for Handing Record Profits to Investors


Big Oil’s record profits are a huge hit on Wall Street but increasingly provocative in the corridors of power from Washington to London as politicians lash out against executives for funneling windfall profits to investors.




www.bloomberg.com


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## doctrine (Sep 30, 2011)

G7 countries signed up to the Paris accord which calls for reducing oil consumption. The oil companies are just doing what is asked of them. Of course, this is going to result in oil prices that are stratospheric. We have only seen Chapter 1 this year. There are many more chapters to come. Threats of windfall taxes are a reality in this situation, especially if oil spikes above $200. Could see export bans in certain countries; the US had an export ban on crude for 40 years that only recently ended, but which doesn't make sense now because they can't refine much of the shale oil they now produce. and won't allow new refineries to be built. Nationalization is another risk for sure. I don't think it is a serious risk in Canada or the US, for all the rhetoric, it is mostly non-credible threats. We produce so much oil that is a net benefit, and in Canada in particular, royalties proportionally increase to oil prices. Governments will be rolling in so much cash they won't need to bother. Would not want to own an oil company in Europe though, no way.

The first 6 months of 2023 are going to be extremely volatile. The odds of an all time oil price are very high.


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## zinfit (Mar 21, 2021)

doctrine said:


> Yes, that is the cause right now, but if oil spikes early next year, I could easily see more releases brought forward. Politics never stops and there are always elections on the horizon, 2024 isn't that far away. So the US has one last big bullet left. I give it a 50% chance of being used next year.


Milton Friedman once stated that it is very rare for good economics and politics to coincide .That goodness that we have central banks that know how to provide strong medicine to counter the excesses of governments.


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## zinfit (Mar 21, 2021)

Apparently there has been a big drop in the price for NG in the EU. Apparently they did a outstanding job of storing NG for the winter. I sold my gas oriented stocks. Will probably reduce the rest of my energy stocks after the US Fed meeting in December.


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## doctrine (Sep 30, 2011)

zinfit said:


> Apparently there has been a big drop in the price for NG in the EU. Apparently they did a outstanding job of storing NG for the winter. I sold my gas oriented stocks. Will probably reduce the rest of my energy stocks after the US Fed meeting in December.


EU will be okay this year, because they paid 600% more for their energy than any year in history to outbid the rest of the world to secure supplies. 

One note, oil normally the strongest from December into May as oil demand steadily rises into summer driving season. To each their own, but I would be a buyer from now until December and then wait until the typical April-May panic to sell into high prices. One of the more predictable patterns out there.


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## AltaRed (Jun 8, 2009)

That might not hold this coming year, not if a significant recession cuts global oil demand by 1-2 million barrels per day, as it did during the financial crisis. 86.3MMBLs/day in 2007 and 84.3 MMBLs/day in 2009. There is probable reason to believe oil prices will have headwinds throughout 2023.


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## hboy54 (Sep 16, 2016)

Today's trading is interesting. My 4 oil and gas are up 2 to 4-1/2% on a day when WTI is down 1/2%. Is the sleeping generalist investor beginning to wake up?


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## Faramir (11 mo ago)

I never followed the oil market so I'm at a loss how the stocks move with the oil price. Oil price at multi-month lows yet SUNCOR for example is at a 3 month high.


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## zinfit (Mar 21, 2021)

Faramir said:


> I never followed the oil market so I'm at a loss how the stocks move with the oil price. Oil price at multi-month lows yet SUNCOR for example is at a 3 month high.


they reported very good results and the markets like that especially when they been the streets numbers.


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## james4beach (Nov 15, 2012)

I'm still long XEG (and also hold ARX & ENB) and don't intend to sell any time soon,

But guys, I'm still worried that XEG isn't hitting new highs.


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## doctrine (Sep 30, 2011)

james4beach said:


> I'm still long XEG (and also hold ARX & ENB) and don't intend to sell any time soon,
> 
> But guys, I'm still worried that XEG isn't hitting new highs.


Oil was $120+ when XEG hit the 2022 high. So XEG has been hanging in quite well, certainly helped by massive buybacks and dividends by companies still able to reduce debt.

There are some bullish technical signs. Some individual oil companies have passed their June highs, like ERF, TOU, and NVA. The index is also dominated by SU and they are still down 19% from the high, so that has a big impact. SU is very unloved and I think justifiably so given better alternatives available. 

I try not to be too bullish and look for bearish commentary. But I just don't see it, outside from massive recession, and even then, inventories have come down a lot and it is just a coiled spring waiting to be unleashed.


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## james4beach (Nov 15, 2012)

Another interesting technical point here on XEG, it's again down to its 200 day moving average.


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## james4beach (Nov 15, 2012)

Today was a big drop in XEG and the price has fallen below the 200 day moving average


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## Covariance (Oct 20, 2020)

I expect more volatility as we oscillate between expectations of recession/slower growth (lower oil demand) and China recovery along with "supply management" by OPEC+ (balance between supply and demand).

In a way, this is a metaphor for the entire equity market. Caught between pessimism and optimism


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## james4beach (Nov 15, 2012)

Covariance said:


> I expect more volatility as we oscillate between expectations of recession/slower growth (lower oil demand) and China recovery along with "supply management" by OPEC+ (balance between supply and demand).
> 
> In a way, this is a metaphor for the entire equity market. Caught between pessimism and optimism


I'm just concerned that the oil/energy chart does not look too bullish any more. The same is true for commodities in general, if you look at DBC.

Seems like good news on the inflation front though.


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## m3s (Apr 3, 2010)

What a missed opportunity for Canada.

Of all the money printing and free handouts we could have paid some east coasters to build the LNG facility that was supposed to happen a decade ago









German Facility, Built at Breakneck Speed, Accepts Gas Shipment From U.S.


The shipment arrived at the import terminal for liquefied natural gas in the port town of Wilhelmshaven, a facility that was built in less than a year to help Germany avert an energy shortage.




www.wsj.com


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## hfp75 (Mar 15, 2018)

m3s said:


> What a missed opportunity for Canada.


Yah cause the people in Ontario and Quebec are utopian idiots, that keep voting Liberal.


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## Faramir (11 mo ago)

hfp75 said:


> Yah cause the people in Ontario and Quebec are utopian idiots, that keep voting Liberal.


Yes but the latest poll shows Quebecer's don't think of themselves as left wing. Not as much as those in BC. Weird considering PQ is the ultimate welfare state.


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## Faramir (11 mo ago)

Oil collapsed but the broad market did not. Strange. We are looking at a double dip recession at minimum.


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## Covariance (Oct 20, 2020)

m3s said:


> What a missed opportunity for Canada.
> 
> Of all the money printing and free handouts we could have paid some east coasters to build the LNG facility that was supposed to happen a decade ago
> 
> ...


From what I recall Canada's plan is to export Green Hydrogen. It is not commercially feasible and is therefore more in keeping with Fed Libs thinking.


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## m3s (Apr 3, 2010)

Covariance said:


> From what I recall Canada's plan is to export Green Hydrogen. It is not commercially feasible and is therefore more in keeping with Fed Libs thinking.


We were supposed to build LNG export from Saint John NB over a decade ago

Maybe that was the plan before 2015 liberals came to be


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## james4beach (Nov 15, 2012)

XEG had another one of these corrections, down to the 200 day moving average.

Now it's looking like commodities might be picking up steam again. Perhaps XEG is going to bounce off this trend line and rocket higher? Most analysts seem to think we're in an energy bull market, though I still have concerns that the charts don't look too bullish.

I continue to be long XEG as my sector bet. I revisit that decision (sector gambling) once a year, and I'm glad that I rotated out of tech and into energy last year.


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## Faramir (11 mo ago)

Yes, there is talk even now of a recession being avoided, which is not "technically" true. But we have seen broad market rally since the start of the year, which should be good for the demand on oil, if its telling us the correction is over. I am willing to concede the "correction is over for now" meaning a month maybe on this rally. Just not 100% convinced a recession is behind us - of course I'm always talking about the US/world economy, not Canada, which has its own pattern.


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## doctrine (Sep 30, 2011)

This is the seasonal strong period for energy. Oil and gas prices often go up until the summer driving season, when the complaints start. 

There are many incredibly strong reasons to own oil (growing demand, weak supply, China reopening, inflation peaking, low valuations, energy service cost inflation, lack of investment for a decade). There are only a few weak bearish reasons - severe recession (unlikely), green transition (non-existent in 80% of the world where 100% of oil demand exists). 

IMO, there is a high certainty that oil is heading back above $100, and maybe $120, this year, barring more black swan events. Of course I'm going to make a lot of money if this happens, and probably just less money or maybe I have to wait another year. And if there is a strong pivot on interest rates on dropping inflation and a weak or no recession, there are explosive scenarios too. But for the next 5 months, it looks like a A1 trading idea to me. I think it makes sense to ride it out at least until the late spring.


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## londoncalling (Sep 17, 2011)

doctrine said:


> I think it makes sense to ride it out at least until the late spring.


In 2022 I said I would hold until Q3 and revisit. Although we saw a bit of a pullback energy is still trending upwards for the reasons you provided above. Plan to hold into the summer but will be mindful of any reversals in supply/demand. Still a lot of tailwinds for energy. I expect more buybacks, special dividends, debt elimination and free cash flow generation in 2023.


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