# Will oil reach an all-time high of $150 in 2022?



## MrBlackhill (Jun 10, 2020)

Will oil reach an all-time high of $150 in 2022?

You have 7 days to vote.


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## peterk (May 16, 2010)

Seems weird that we'd be talking about $80+ oil being "expensive" back in 2007, and also now in 2022. How could both be true?

Wondering what the right "oil inflation" metric is to think about the expensiveness of oil. Just a plain old CPI adjustment? some sort of BBL produced : GDP ratio? $ spent : industrial output? I don't know how to find or calculate any of that, sounds complicated.

Wondering if complaining about $100 oil is the same as complaining about $1M houses. It's just the new reality, and will take everyone a decade for their brains to adjust to the inflation that occurred. Young people will never know any differently.


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## newfoundlander61 (Feb 6, 2011)

$150 may be out of reach but stranger things have happened in the past in regards to the investing climate.


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## m3s (Apr 3, 2010)

Apparently Alberta has a balanced budget again

Will Alberta start mailing prosperity cheques again soon or will they learn?

How about a pipeline now that warmonger nations have them


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## MrBlackhill (Jun 10, 2020)

peterk said:


> Seems weird that we'd be talking about $80+ oil being "expensive" back in 2007, and also now in 2022. How could both be true?


One thing to note, I guess, is that Crude Oil was at USD$80 in September 2007, which was worth... CAD$80. Today, USD$80 is worth CAD$102.

Interestingly, CAD$80 in 2007 vs CAD$102 in 2022 is almost in line with Canadian inflation.

Also, gas price at the pump was about CAD$1.00/litre in September 2007 when Crude Oil was at USD$80 and about CAD$1.35/litre in December 2021 when Crude Oil was about USD$80 again, which is also pretty much in line with inflation.

But now with prices ranging between CAD$1.55/litre and CAD$1.75/litre, it's truly getting expensive...


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## Mechanic (Oct 29, 2013)

Would be nice if Canada and Canadians could benefit from the wealth we have available in resources. But that would require JT to do what's best for Canadians instead of himself


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## Covariance (Oct 20, 2020)

@MrBlackhill Just to be sure I assume we are betting on WTI?


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## Covariance (Oct 20, 2020)

Mechanic said:


> Would be nice if Canada and Canadians could benefit from the wealth we have available in resources. But that would require JT to do what's best for Canadians instead of himself


I think developed countries for the most part are quickly realizing that energy policy can not be left up to environmental advocates. Will be monitoring Canada's leadership to see if they get it.


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## MrBlackhill (Jun 10, 2020)

Covariance said:


> @MrBlackhill Just to be sure I assume we are betting on WTI?


Yes


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## sags (May 15, 2010)

Burning more fossil fuels for energy independence or addressing a steadily worsening climate change problem.........kind of a devil's choice, I think.


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## sags (May 15, 2010)

Statements that Canada isn't attracting capital investment in oil and gas resources don't appear to be aligned with the facts.

From the CAPP website.....









CAPP Projects Investment in Canada’s Natural Gas and Oil Sector will Rise to $32.8 Billion in 2022 - CAPP | A Unified Voice for Canada's Upstream Oil and Gas Industry







www.capp.ca


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## AltaRed (Jun 8, 2009)

Not terribly meaningful quoted on a nominal basis. Consider it on a real, inflation adjusted basis. $150 won't even be peak oil. Today's price is now just flirting with 2013-2014 peak on an inflation adjusted basis.


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## diharv (Apr 19, 2011)

So many of the economies of the world are tied to the price of oil it seems. If it goes to $150, it will be to the glee of some, and then it will inevitably trigger a recession and then down the price will come again as demand wanes. Rinse and repeat.


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## sags (May 15, 2010)

Recency bias is strong in oil prices and mortgage interest rates.

A whole generation has only experienced low inflation and relatively low oil prices.

I wonder if they are capable of making the necessary personal financial adjustments that people readily made in the past.


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## diharv (Apr 19, 2011)

What are you talking about? Oil hit $147.00 in 2008 and topped $100 many times from 2011-2015.


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## AltaRed (Jun 8, 2009)

Another inflation adjusted plot here Crude Oil Prices - 70 Year Historical Chart

The plot changes somewhat between peak numbers for a given year, annual average, or monthly.

Added: We have been addicted to low oil prices for about 7 years. Little doubt in my mind that any sustained move to $150 oil will trigger more inflation, a recession and central bank intervention of one form or another. It will also hasten fuel transitions. Better add some gravol to your portfolios because if is going to be a roller coaster ride.


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## doctrine (Sep 30, 2011)

sags said:


> Statements that Canada isn't attracting capital investment in oil and gas resources don't appear to be aligned with the facts.
> 
> From the CAPP website.....
> 
> ...


Did you read the article? In 2014, investment was $81 billion in Canada (2014 dollars). Now 8 years later, it is just $32B, up from a pitiful $26B last year. That is a huge reduction. Foreign companies have widely fled Canada's oil patches but the whole world has been underinvesting in oil and gas for 8 years. Russia-Ukraine war is a temporary disruption made worse by almost a decade of neglect in the sector. It will take a decade to fix, and no one has yet started fixing it. All the world is doing is shutting down more oil and gas through the Russian sanctions. It's bad.

For the record, I voted no to $150 this year, but it could happen if the war doesn't stop and the world doesn't find a way to smuggle Russian oil into other refineries. If this was 2 years ago and tanks were overflowing with oil, different story. Today, those same tanks are becoming empty. The world also desperately needs Iranian oil, but that won't ramp up for 6-12 months to a level that even matters.

All time oil prices of > $150 a barrel are an inevitability, with only a question of when and how high they might go before impacting the world economy. It's pretty dismal. No investment. No surplus of inventory. And no real hope the situation changing anytime soon. And this was already the case before the war. Now refineries are scrambling to find oil to buy. The price will go up until it is unaffordable enough to stop using it.


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## AltaRed (Jun 8, 2009)

Oil investment is on the upswing again albeit not significantly so but it will be better targeted. It is not nearly as dire as you make it out to be. Canadian companies don't have to invest anywhere close to $81B per year to keep the pipelines full every year. Permian producers are being more selective in their capital deployment but I still see US production climbing beyond 12 million barrels per day by the end of the year from 11.6 million barrels per day now and 13 million barrels per day at its pre-pandemic peak. The only real question in my mind is how much reserve actually exists in SA and UAE, and when, if ever, we will see increases in Iraq production and a return of Iran crude. Guyana is also rapidly increasing production but from a small base. It will be over 1 million barrels per day in a few short years. Brazil will continue its production increases as well.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Added: We have been addicted to low oil prices for about 7 years.


Yup, we've enjoyed very low oil prices for a while now. I posted numerous times about how cheap gasoline was... the long term charts (say 10 year gasoline) were showing hardly NO increase with inflation, until recently.

We've had an easy ride for a long time and oil & gasoline has been incredibly cheap in this country.

The experience with gasoline also shows the asymmetry in how people react to this stuff. When gas was stable and low for 10 years, you never heard people talking about how great these cheap gas prices were, or how lucky we were to have low oil prices. But when it goes up, people immediately start complaining again.


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## Rusty O'Toole (Feb 1, 2012)

This year is as good a time as any. We know we are in a period of high inflation made worse by keeping workers home and sending them stimulus checks, while crippling the economy in other ways. Plus our government looks on high energy prices with glee. Why wouldn't we continue to be the only oil producing nation on earth that pays high prices for oil?


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## AltaRed (Jun 8, 2009)

Oil is globally priced in a free trade market and citizens of developed OECD countries like UK, Norway, USA are examples that pay world prices net of transportation and quality differentials.


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## Faramir (11 mo ago)

Rationality has been thrown out the window. $10.00 move in one day makes such little sense. As soon as Putin engages in peace talks and pulls out expect oil to collapse.


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## james4beach (Nov 15, 2012)

The spot market for oil is $111 right now, so it's only *another 35%* to hit the $150 level.

Oil's standard deviation according to Portfolio Visualizer is 38%. @MrBlackhill my interpretation of the stats is that a +/- 38% move is at one sigma, which is a pretty reasonable move to see. If one sigma is 38% and our target is at 35%, it seems reasonably likely to me that we'd hit that.

Or do I have my stats wrong, does 38% stdev mean +/- 19% instead?

If the stats are saying one sigma is +/- 19% then I think it's a stretch to think we'd see a +35% move.


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## nathan79 (Feb 21, 2011)

james4beach said:


> Yup, we've enjoyed very low oil prices for a while now. I posted numerous times about how cheap gasoline was... the long term charts (say 10 year gasoline) were showing hardly NO increase with inflation, until recently.
> 
> We've had an easy ride for a long time and oil & gasoline has been incredibly cheap in this country.
> 
> The experience with gasoline also shows the asymmetry in how people react to this stuff. When gas was stable and low for 10 years, you never heard people talking about how great these cheap gas prices were, or how lucky we were to have low oil prices. But when it goes up, people immediately start complaining again.


Except it wasn't cheap 10 years ago. You're comparing from a high base (cherry-picking).





__





Table 11.3 Gasoline prices, selected cities, 1995 to 2009







www150.statcan.gc.ca





Take a look at this table and try adjusting the numbers for inflation and see if you can still claim that gas has been cheap over the last 10 years.

Examples:

Vancouver
1995: 55.4 = 98.0 adjusted
2000: 69.1 = 107.4 adjusted
2005: 97.1 = 134.0 adjusted
2009: 104.0 = 133.7 adjusted
Current Vancouver price: 185.0

Toronto
1995: 52.4 = 87.9 adjusted
Current Toronto price: 158.8

Here's a newer table that includes 2010 and 2011. It seems like they stopped updating this table after that year.





__





Table 11.3 Gasoline prices, selected cities, 1997 to 2011







www150.statcan.gc.ca





2011
Vancouver: 132.4 = 163.3 adjusted
Toronto: 124.1 = 153.1 adjusted

So yeah, if you use 2011 as your base year, you're going to get a much different picture than if you use 1995 or 2000.


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## bigmoneytalks (Oct 3, 2014)

nathan79 said:


> Except it wasn't cheap 10 years ago. You're comparing from a high base (cherry-picking).
> 
> 
> 
> ...


Does this include taxes?


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## nathan79 (Feb 21, 2011)

bigmoneytalks said:


> Does this include taxes?


It's the pump price, yeah.


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## sags (May 15, 2010)

Were those high gas prices Trudeau's fault too ?


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## james4beach (Nov 15, 2012)

sags said:


> Were those high gas prices Trudeau's fault too ?


No sags you misunderstand how this works.

If you live outside Alberta, and oil prices go up ... it's Trudeau's fault.
If you live in Alberta, and oil prices go down ... it's Trudeau's fault.
If you live in Alberta and oil prices go *up*, then you whine that you aren't getting filthy rich fast enough, and that's Trudeau's fault too.


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## nathan79 (Feb 21, 2011)

What. I didn't, nor have I ever blamed high gas prices on Trudeau...


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## Thal81 (Sep 5, 2017)

I put the highest prediction of Oil in the 2022 Predictions Contest, at $100. It's looking good right now  Still a long way to go though.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> Oil's standard deviation according to Portfolio Visualizer is 38%. @MrBlackhill my interpretation of the stats is that a +/- 38% move is at one sigma, which is a pretty reasonable move to see. If one sigma is 38% and our target is at 35%, it seems reasonably likely to me that we'd hit that.


Over the past 15 years, yes, oil had an annualized standard deviation of 38%. That's around its annualized arithmetic mean of about -5%.

Considering the annual performance as a normal distribution, that means we should expect 68% of the annual returns to be within -43% and +33%. We should expect 16% of the annual returns to be +33% or higher.


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## MrBlackhill (Jun 10, 2020)

Oil just rose +18% in 2 days, everybody is panicking about war, and this is just the beginning... the beginning of a panic momentum and a majority of you guys think it can't go up another little +33% to reach $150? By the time it took me to write this, we've just went from $110 to $113, and I should almost already say $114 lol!

Edit: 15 minutes later, it touched $114
Edit2: A few hours later, back down to $106 and bouncing back to $110... super volatile!


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## doctrine (Sep 30, 2011)

I would just like to point out gasoline and crude are two different markets. Gasoline is usually discussed in $C, and thus subject to currency fluctuations as oil is priced in $US. Gasoline is also distributed and marketed differently, has local distribution differences relating to infrastructure, and exposed to the vagrancies of the refining market, and of course taxes which can literally vary from city to city. So comparisons of gasoline versus crude need to take a lot more factors into account, otherwise it is meaningless.

That being said, crude is still at least 40% of the cost of gasoline and we are all going to be paying record prices for the foreseeable future. And diesel. Which affects everything.

Oil is still going up after hours today.


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## MrBlackhill (Jun 10, 2020)

I mean, no matter whether or not Russia invades Ukraine within the next week or month, it's not as if everybody will become friends again after this "little event which is now behind us and soon to be forgotten".

I'm trying to keep my portfolio diversified and I'm only at 10% energy, but I'm seriously wondering if I should make some sells and rebalance to 30% energy or take a little bet with my LoC.


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## larry81 (Nov 22, 2010)

Faramir said:


> Rationality has been thrown out the window. $10.00 move in one day makes such little sense. As soon as Putin engages in peace talks and pulls out expect oil to collapse.


Yes it will "collapse" to 90-95 level at wich oil companies are still generating massive profits.


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## doctrine (Sep 30, 2011)

As long as missiles are flying in Russia, the price of oil is going to go up until enough people in the world park their vehicles and stop driving enough to erase the supply deficit.

And if the missiles do stop, we're back to the long term structural deficit and oil companies that make money and pay dividends down to $35.

Haven't sold anything here. I can predict the progress of peace talks by the oil price. And every time I look, the price is higher.


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## larry81 (Nov 22, 2010)

@doctrine, do you think the russian situation have reached a "buy when there is blood in the streets" moment ? I mean, RSX is down 60% in 3-4 weeks...





RSX VanEck Vectors Russia ETF Stock Quote


Stock screener for investors and traders, financial visualizations.




finviz.com





I AM THINKING OF BUYING A CONCENTRATED POSITION.


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## MrBlackhill (Jun 10, 2020)

larry81 said:


> I AM THINKING OF BUYING A CONCENTRATED POSITION.


The MOEX is closed, the value of that ETF is now based on speculation and not NAV.

Also, MSCI and FTSE are removing Russia from their major indexes due to uninvestable market.

All what remains are those Russia ETFs which are moving according to speculations.









Russia ETF draws meme stock-like trading frenzy


Van Eck’s Russia ETF is attracting a surge of interest




www.theglobeandmail.com


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## larry81 (Nov 22, 2010)

Oh thanks for the info, its like there a war out there !


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## james4beach (Nov 15, 2012)

larry81 said:


> Oh thanks for the info, its like there a war out there !


You could buy CEE which is a bit diversified, eastern Europe and Russia.

Think you might put $1 million into that? Or maybe a more reasonable $500,000


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Over the past 15 years, yes, oil had an annualized standard deviation of 38%. That's around its annualized arithmetic mean of about -5%.
> 
> Considering the annual performance as a normal distribution, that means we should expect 68% of the annual returns to be within -43% and +33%


Thanks, I forgot about the mean annual return. I think the movement in your poll is just a wee bit beyond 1 sigma, but I'd give that reasonably good odds of happening, even if there wasn't war!


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> You could buy CEE which is a bit diversified, eastern Europe and Russia.


Can he? CEE is 73% Russia and that's a US-listed ETF while MOEX has been shut during the last few days, so that ETF will also move based on speculations, not NAV.

That's my understanding.


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## AlexInvestSavvy (Oct 13, 2020)

sags said:


> Burning more fossil fuels for energy independence or addressing a steadily worsening climate change problem.........kind of a devil's choice, I think.


Yes, good point.
Perhaps the situation will drive the adoption of more clean energy use...
(Was going to say "fuel" the adoption, but that doesn't quite work! )


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## Ukrainiandude (Aug 25, 2020)

The more expensive oil is the more reason would be to go electric, the fewer stinky pick ups we will have around to breath that polluted air.
If refilling your pick up at Costco already cost you $150, you might think twice before purchasing another one.


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## damian13ster (Apr 19, 2021)

Yeah, not like electricity prices are going up.....
And people on small income are buying 10 year old winter beaters for <4,000
Not a brand new electric car.

They should at the very least suspend carbon tax. Instead the jackasses are going to rise it further April 1


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## MrBlackhill (Jun 10, 2020)

larry81 said:


> Oh thanks for the info, its like there a war out there !


That's the RSX you wanted to buy.


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## Covariance (Oct 20, 2020)

For the record, I'm in the no vote.

I have a large allocation to oil. I'm just not counting on sustained levels over 100.


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## AltaRed (Jun 8, 2009)

No one should count on 'annual average' levels being over $100 and one should not even assume $100 annual averages beyond 2022. Oil is a commodity that always goes in cycles. The best solution for high commodity prices is high commodity prices. They self-correct over time, with a different cycle for each commodity. Oil will correct too. We just don't know when, why, or how.


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## MrBlackhill (Jun 10, 2020)

https://ca.finance.yahoo.com/news/analysis-want-lower-oil-prices-190720764.html





> On Thursday, JP Morgan analysts said Brent would have to rise to $120 a barrel "and stay there for months to incentivize demand destruction."
> 
> What is more, the bank says if disruption to Russian volumes lasts throughout the year, Brent could end 2022 at $185 a barrel, likely causing demand to fall by about 3 million barrels per day (bpd).





> Global consuming nations have tried to ensure adequate oil supply following the sanctions on Russia, which exports 4 million to 5 million bpd of crude, second-most worldwide behind Saudi Arabia. On Tuesday, the International Energy Agency said it would release 60 million barrels of oil from emergency reserves.
> 
> The market shrugged off that news as the release amounts to less than a day's global consumption, and oil prices continued their upward march after the announcement.
> 
> ...





> Motorists tend to become wary about filling up their cars when gasoline reaches $4 per gallon. The current national average is $3.73 per gallon, according to the American Automobile Association.
> 
> "I do think when we see $4 a gallon, there may be an adverse reaction," said Patrick De Haan, head of petroleum analysis at GasBuddy. "But with a strong economy and prices that remain well below inflation-adjusted records, it doesn't have the same sting."
> 
> RBC's senior analyst Mike Tran said that when adjusting for inflation, the $4-per-gallon price reached in 2008 would be equal to about $5.20 in today's dollars.


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## doctrine (Sep 30, 2011)

larry81 said:


> @doctrine, do you think the russian situation have reached a "buy when there is blood in the streets" moment ? I mean, RSX is down 60% in 3-4 weeks...
> 
> 
> 
> ...


Buying Russian companies, or specifically oil and gas companies that are down some 95% would be pretty gutsy. Of course, you would have to have some confidence that the ADRs you buy won't just be seized by the government, cease-traded, or go to zero if Rosneft and Gazprom restructure. Me, I wouldn't go there because of the regulatory and sanctions issues - and I personally do not want to own any Russian assets. It would be different if I had some confidence what you owned was a real claim on assets that would be honored. I guess the payday is there though if this all blows over in a year or two and sanctions are relaxed.


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## larry81 (Nov 22, 2010)

MrBlackhill said:


> That's the RSX you wanted to buy.


I skipped, another user mentionned that, since russian markets are closed, this ETF valuation is based only on sentiment and not on any underlying assets.

Ill pass and keep focused on XEG


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## james4beach (Nov 15, 2012)

larry81 said:


> Ill pass and keep focused on XEG


larry have you considered the idea of using HEU to amp up XEG to a new level? You must be getting bored with XEG by now. If energy rallies another 50% then with HEU you'd roughly double your money, assuming it continues to be a steady rally.

Might be worth $1 million investment perhaps.


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## doctrine (Sep 30, 2011)

I'm not sure you need more risk than XEG in this sector. The nice thing about XEG is that it holds energy companies with decreasing debt, and less debt than any time in decades at least. So the companies aren't in any real financial stress. Even if oil collapsed, the companies with more debt would struggle first and those are not the XEG ones right now. I am not sure if larry considers this, but I certainly do. I'm much more willing to risk $100k on an equity with low debt and positive prospects than one that is leveraged; I would far rather a +200%/-50% situation with a company that isn't going to 0, than +500%/0, especially for a single industry bet. Oil companies were going bankrupt in 2020 and even into 2021.


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## m3s (Apr 3, 2010)

$2/L in Vancouver

With all the money printing I'm not sure that is really a record or not


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## james4beach (Nov 15, 2012)

doctrine said:


> I'm not sure you need more risk than XEG in this sector.


I was being a bit tongue-in-cheek and I actually think XEG is a great fund. But if Larry really does want more excitement, HEU should do the trick.

I'm actually kind of surprised, given the current energy bull market, that HEU doesn't have more assets under management.

Speaking for myself, I'm happy with the healthy amount of energy/commodities exposure in TSX, boosted slightly with my new HUC position. If the commodity bull market continues these will grow to become an even larger % of the Canadian index.


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## doctrine (Sep 30, 2011)

james4beach said:


> I was being a bit tongue-in-cheek and I actually think XEG is a great fund. But if Larry really does want more excitement, HEU should do the trick.
> 
> I'm actually kind of surprised, given the current energy bull market, that HEU doesn't have more assets under management.
> 
> Speaking for myself, I'm happy with the healthy amount of energy/commodities exposure in TSX, boosted slightly with my new HUC position. If the commodity bull market continues these will grow to become an even larger % of the Canadian index.


Yes, I guess you were, I just take this very methodically because it is a lot of money at stake, as I am sure it is for others; percentage of assets or not, it is far more easy to be "adventurous" with $500, than $50,000. Or bigger sums. I bought and still hold 1000 shares of CNQ at $11, and that's not even my biggest position or percentage gain in the sector.

As for HEU and other funds, it is a symptom of the lack of investment in this market. TQQQ and ARKK attracted tens of billions. Good luck attracting even single $billion in an oil fund these days. Those are extremely rare. Most of what still exists has grown organically.


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> healthy amount of energy/commodities exposure in TSX


I've been forecasting before the beginning of 2022 that this year TSX would beat S&P500, which would itself beat NASDAQ.

So far, so good, and I'm even more confident than even about that forecast.


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## m3s (Apr 3, 2010)

__ https://twitter.com/i/web/status/1499907549746937860


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## m3s (Apr 3, 2010)

Ethanol won't save us. Burning fuel to farm monocrop corn to get a little bit of fuel back makes no sense. Unless you want to subsidize the corn farmers of course


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## doctrine (Sep 30, 2011)

m3s said:


> Ethanol won't save us. Burning fuel to farm monocrop corn to get a little bit of fuel back makes no sense. Unless you want to subsidize the corn farmers of course


This was known to be the outcome for decades, but media wasn't interested in the story. Turning our food supply into fuel, what could go wrong. The corn farmer lobby was all over it though because they knew it would drive up prices, don't blame them at all. Oh whoops, that might be a big deal given we just sanctioned 25-30% of the world's wheat and corn supply.


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## m3s (Apr 3, 2010)

doctrine said:


> Oh whoops, that might be a big deal given we just sanctioned 25-30% of the world's wheat and corn supply.


I wonder if the ethanol keeps more farmers that would otherwise leave and if we could just stop the ethanol any day and eat the food instead


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## AltaRed (Jun 8, 2009)

The perversity of US policy where 40% of the corn crop is used to make ethanol. Don't get confused about the article. It was written in 2020 when fuel prices dropped through the floor and corn producers were freaking out about potential loss of ethanol market.

Another 40% or so is used as feed. Not much is used for food.Corn Usage


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## MrBlackhill (Jun 10, 2020)

Just saying: Crude Oil touched $130 today.

Oil just did +$40 in a month, and +$30 in a week due to war.

Still 3 days to vote. Those who vote late may have a higher chance to choose the right option, which is... yes.


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## MrBlackhill (Jun 10, 2020)

Gold also touched $2000.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Gold also touched $2000.


Here's a fun little fact for you. Did you know that since the year 2000, gold has outperformed stocks? I'm told it's a terrible investment though.

Imagine a shiny gold bar sitting in a safe, which outperforms all the greatest companies and the brilliant people running them, for 22 years now.


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## Ukrainiandude (Aug 25, 2020)

All time highs adjusted for inflation would be around $200


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## james4beach (Nov 15, 2012)

Big news... Western Canadian Select oil has surpassed $100 for the first time since 2008.


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## larry81 (Nov 22, 2010)

james4beach said:


> Big news... Western Canadian Select oil has surpassed $100 for the first time since 2008.


XEG should be at 20


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## larry81 (Nov 22, 2010)

*Biden to announce ban on Russian oil imports: Source*
The White House added a 10:45 a.m. event to the president's schedule.








Biden announces ban on Russian oil imports, other energy products


He said Americans would deal "another powerful blow to Putin's war machine."




abcnews.go.com





Thank you Brandon !


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## newfoundlander61 (Feb 6, 2011)

I wonder if Keystone XL decision could be reversed.


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## larry81 (Nov 22, 2010)

newfoundlander61 said:


> I wonder if Keystone XL decision could be reversed.


Kenney is on it:








The premier of Alberta is pushing for the revival of the Trump-backed Keystone XL oil pipeline to replace Russian imports to the US


Biden revoked a key permit for the Keystone XL pipeline that would have been able to transport 830,000 barrels of crude oil a day from Canada.




www.businessinsider.com


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## londoncalling (Sep 17, 2011)

US will ramp up Shale production on its own reserves to take advantage of this short term spike if Biden was serious about Keystone it wouldn't have been shelved so quickly after his election. This may have been a bit of a thumb in the eye to the midwestern states for not supporting the democrats in the election. For reference look at the 2020 result map and the Keystone XL route. This infrastructure would have created a lot of employment on both sides of the border. It's too late for keystone. 

Edit: I hope I am wrong on this prediction as I have been every time I weigh in when Keystone rears its ugly head.


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## damian13ster (Apr 19, 2021)

They can't ramp it up that quickly. There are couple of court cases down in US that hold up new permit issuance. Basically Biden tried to overreach and it is in the process of being overturned but hard to get a permit until it does


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## MrBlackhill (Jun 10, 2020)

MrBlackhill said:


> Still 3 days to vote. Those who vote late may have a higher chance to choose the right option, which is... yes.


Now only until tomorrow morning to vote.

Seems like Biden ban affected the poll results. It was 8 vs 20, now it's 12 vs 20.

I've been seeing a few articles even predicting $200 oil...


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## Faramir (11 mo ago)

MrBlackhill said:


> Gold also touched $2000.


Yes but gold has been so out classed by energy. Jealous I didn't get on the oil stock bandwagon.


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## Faramir (11 mo ago)

james4beach said:


> Here's a fun little fact for you. Did you know that since the year 2000, gold has outperformed stocks? I'm told it's a terrible investment though.
> 
> Imagine a shiny gold bar sitting in a safe, which outperforms all the greatest companies and the brilliant people running them, for 22 years now.


Canadian priced gold has fallen behind. I say this as a gold investor. Gold is a dangerous and frustrating market. Most days are down even in a bull market.


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## james4beach (Nov 15, 2012)

Faramir said:


> Canadian priced gold has fallen behind. I say this as a gold investor. Gold is a dangerous and frustrating market. Most days are down even in a bull market.


I'm not sure this is correct. Gold priced in CAD has outperformed Canadian equities, and world equities, since the year 2000.


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## Faramir (11 mo ago)

DOW has tripled. Trying to find out what Canadian price was in 2000. Say $330 and now $2600. I guess you are right. Gold stocks sadly have done miserably.


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## james4beach (Nov 15, 2012)

Faramir said:


> DOW has tripled. Trying to find out what Canadian price was in 2000. Say $330 and now $2600. I guess you are right. Gold stocks sadly have done miserably.


Gold stocks have always sucked. But the bullion has performed very well. According to stockcharts, here are some cumulative % gains since the start of 2000:

XIU (representing the TSX index) +292% ... US stocks have returned about the same.
XGD returned +280% ... about the same as the Canadian index
Pure gold bullion returned +508%

So gold bullion has far outperformed stocks since 2000, but notice the huge underperformance of gold equities (XGD).

These days you can hold CGL.C for gold bullion. This incurs a cost of around 0.6% per year. But even with these expenses, CGL.C would have still returned almost 500% and still beaten stocks by a lot.

Going forward, who knows though.


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## AltaRed (Jun 8, 2009)

Permian shale production increase is mostly hampered by a shortage of oilfield services and crews and select material shortages like frac sand. It can't ramp up much faster than it already is. What we all need is for the Middle East to ramp up all their spare production.. to the extent it exists. It is not in Saudi/UAE/Kuwait interest to hold back other than to incur the wrath of their autocratic compatriot, Putin. It will be telling if they don't (or can't) open up the taps more.


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## londoncalling (Sep 17, 2011)

Spring break up is soon approaching which will also hamper production. Which of the three would be the greatest challenge for drilling companies to find:

1. crews
2. services
3. materials

It's been awhile since I was engaged in this part of the industry but my past experience had been that of the three, bodies to operate were easier to locate and mobilize compared to vac trucks, rigs and materials.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Permian shale production increase is mostly hampered by a shortage of oilfield services and crews and select material shortages like frac sand


I'm curious AltaRed, I think you're retired now, but with this new boom starting have you considered doing a bit of consulting in O&G? It seems to me that you have the right background. Could be a way to make a quick 100K with minimal time commitment.


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## doctrine (Sep 30, 2011)

Problems in ramping up oil production:

-Lack of new capital - no new companies in this space
-Lack of debt financing - banks won't touch it, especially mid/small companies
-Lack of investor demand for growth - had enough of bankruptcies and burning equity; need return of capital;
-Material shortages common to all sectors - steel piping, even semiconductors for advanced rigs and well monitoring;
-Personnel shortages both common to society and unique to industry (who goes into O&G now? no one - and many left permanently)
-*Active* government action against oil and gas companies and investment in entire western world (US federal permit denial, oil pipeline cancellation, "no pipelines act" in Canada)
-Geographic issues as much of economic US drilling plays already done (at a loss)
-Long timeline for major oil projects 5+ years, previously sanctioned projects from pre-2014 already completed with little coming online compared to declines;

I could go on. Few companies want to drill and every government in the western world is acting with hostility towards the industry. US is today negotiating with Iran and Venezuela rather than US or Canada oil right in their own backyard - what message does that send? Europe is no better, they have been shutting down and shutting in production for *decades* now. And we just witnessed tens of billions of equity vaporize in Russia from the world's largest supermajors simultaneously exiting Russia, perhaps forever.

Why would you even believe the government if they asked you to drill? Once the price of oil goes down, you know they will pull the rug out again. Screw that.

It's bleak. I'm trying not to be over pessimistic, but in the short term, there's absolutely no solution other than demand destruction through pricing, unless we relieve sanctions against Russia and Iran immediately, and that would still put us in a shortage situation pre-war. We are collectively barreling towards an unstoppable energy crisis. Nothing has changed really except everything is getting worse faster. Listening to Dan McTeague predicting that fuel rationing is coming if this goes on much longer. Perhaps like in BC after the heavy rains.


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## AltaRed (Jun 8, 2009)

james4beach said:


> I'm curious AltaRed, I think you're retired now, but with this new boom starting have you considered doing a bit of consulting in O&G? It seems to me that you have the right background. Could be a way to make a quick 100K with minimal time commitment.


Retired far too many years ago to consider it plus it would no longer be fun. As Doctrine has noted, there are far too many physical and policy obstacles in the way for very many of us to think it a worthwhile endeavor either. What I think Doctrine is missing though is the will of some to use their free cash flow (net of keeping their shareholders happy) to sustain the milk cow. It just doesn't mean much in the way of significant volume growth.


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## diharv (Apr 19, 2011)

"I could go on. Few companies want to drill and every government in the western world is acting with hostility towards the industry. US is today negotiating with Iran and Venezuela rather than US or Canada oil right in their own backyard - what message does that send?"
The largest oil reserves in the world right in the US back yard 2000km away in Venezuela. Unfortunately for the US, the Venezuelan government is basically controlled by the Cubans and Russians.


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## newfoundlander61 (Feb 6, 2011)

The daily increase in oil seems to be settling down the last couple of days.


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## larry81 (Nov 22, 2010)

I voted YES but i might be a little bit biased !


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## james4beach (Nov 15, 2012)

Oil prices have all been solved now? Looks like oil is maybe going to stabilize here?


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## MrBlackhill (Jun 10, 2020)

So it was that easy? We erase Russia's 12% share of the total world oil production and we simply tell others to increase their outputs, job done?

(Sarcasm)


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## doctrine (Sep 30, 2011)

Nothing has actually changed. Inventories are still dropping and the Russians are still dropping bombs. In the short term, the tanks aren't empty, so maybe $120+ is out of line. But if the levels in the oil tanks keep dropping, the current price will not be not be enough to slow demand. The direction of inventories is crystal clear - dropping, rapidly.


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## Covariance (Oct 20, 2020)

MrBlackhill said:


> So it was that easy? We erase Russia's 12% share of the total world oil production and we simply tell others to increase their outputs, job done?
> 
> (Sarcasm)


Others are still buying Russian oil. The Russian oil that would have previously been destined for the US will just go to a buyer in another country (that isn't embargoing Russia oil, eg China). And the oil supply it replaces will now just get sold to the US or elsewhere.


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## james4beach (Nov 15, 2012)

And the US is bringing in oil from Venezuela. I think that's a good move.

Plus OPEC might be convinced to increase production as well. Combined with reduced consumption due to high oil prices, it could be that the US economy keeps chugging along normally.

Not sure what Europe is going to do though.


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## londoncalling (Sep 17, 2011)

I don't foresee a huge amount of reduced consumption due to current high prices due to post pandemic demand for travel. People will forego other areas of spending this summer to enjoy the chance to get out and see the world again. Rest of the week should continue to be full of surprises.


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## wayward__son (Nov 20, 2017)

So the Saudis aren't taking Biden's calls, and the Americans who dont even import much from Russia anyway are going hat in hand to Iran and Venezuela. Rotten politics aside, this doesnt suggest falling oil prices to me.


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## Covariance (Oct 20, 2020)

Someone really needs to take Biden aside and explain the energy market to him.


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## AltaRed (Jun 8, 2009)

The White House is a deer in the headlights when it comes to understanding oil. The real problem is the script is unfolding 180 degrees opposite to intentions and the Dems are running scared with approaching mid-terms. So they will embarass themselves with a policy 'about face' on Iran and Venezuela. Political expediency and credibility shot. What a joke.


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## Covariance (Oct 20, 2020)

AltaRed said:


> The White House is a deer in the headlights when it comes to understanding oil. The real problem is the script is unfolding 180 degrees opposite to intentions and the Dems are running scared with approaching mid-terms. So they will embarass themselves with a policy 'about face' on Iran and Venezuela. Political expediency and credibility shot. What a joke.


Agreed. I expect very shortly an announcement - cut in their gas tax and at the same time increased subsidies for American made EVs.


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## james4beach (Nov 15, 2012)

Nice to see oil prices moderating here. I really hope that my position in HUC goes nowhere.

I would be perfectly happy to lose money on this trade.


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## kcowan2000 (Mar 24, 2020)

james4beach said:


> I'm curious AltaRed, I think you're retired now, but with this new boom starting have you considered doing a bit of consulting in O&G? It seems to me that you have the right background. Could be a way to make a quick 100K with minimal time commitment.


many of us see opportunities to return and fix things up. But two factors work against it: it is harder to adjust than it seems, and we don't need the money.


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## AltaRed (Jun 8, 2009)

Plus I am not going to spend my limited precious time toiling for a client when there are so many more enjoyable things to do.


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## james4beach (Nov 15, 2012)

kcowan2000 said:


> many of us see opportunities to return and fix things up. But two factors work against it: it is harder to adjust than it seems, and we don't need the money.


That's true, you guys already became rich from oil & gas.


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## AltaRed (Jun 8, 2009)

Careful with potential foot-in-mouth disease. I don't think Keith was in O&G. We retired after having worked hard to achieve executive positions in our industries. We don't need to punish our health and wellbeing any further.


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## MrBlackhill (Jun 10, 2020)

AltaRed said:


> after having worked hard to achieve executive positions


Though "achieving executive positions" shouldn't be a required goal to make more money. There are some modern industries that understood this, where their best engineers make more than their managers, directors, executives.


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## james4beach (Nov 15, 2012)

AltaRed said:


> Careful with potential foot-in-mouth disease. I don't think Keith was in O&G. We retired after having worked hard to achieve executive positions in our industries. We don't need to punish our health and wellbeing any further.


Ah ok, for some reason I thought Keith was in the same industry as you.


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## james4beach (Nov 15, 2012)

MrBlackhill said:


> Though "achieving executive positions" shouldn't be a required goal to make more money. There are some modern industries that understood this, where their best engineers make more than their managers, directors, executives.


One of the amazing things about America in the 1940-1980 period, was this was an era where middle class people (and certainly any professionals) were able to become truly wealthy.

There seems to have been a shift which started in the 1980s. These last 40 years are also when the wealth disparity in US & Canada really started to appear. High level management and those who owned corporations became increasingly wealthy, whereas middle class people and average workers increasingly struggled to get ahead.

The disparity is worse in the US though.


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## AltaRed (Jun 8, 2009)

MrBlackhill said:


> Though "achieving executive positions" shouldn't be a required goal to make more money. There are some modern industries that understood this, where their best engineers make more than their managers, directors, executives.


Couldn't agree more. It happens in a number of technologically oriented companies. I was addressing James' specific remark as regards Keith and I.


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## james4beach (Nov 15, 2012)

In the early 1990s, my aunt's boyfriend was an engineer at Motorola in the Toronto area. He worked on chip design and software.

This was an interesting data point for me because, years later, I was doing almost exactly the same work. I can't remember what his salary was in 1990, but I had converted it to today's dollars, and inflation-adjusted it was around 300K today (a couple years ago actually).

There aren't any _purely technical_ engineers in my field who make 300K today, not even the senior ones.

I do know some management/engineer people (in the US) who make around that, but nobody in Canada.


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## AltaRed (Jun 8, 2009)

I have a cousin whose young 20something son made a killing in a software application he developed in Silicon Valley about 15? years ago. I don't recall his employment status at the time but he was on a work visa. He was able to come home, buy a huge house near Edmonton for cash, a MB vehicle and start a heavy electrical equipment business fabricating and selling things like motor control centers to industrial customers. 

Technical folk still have significant opportunities depending on the structure of their contracts, employee or otherwise. Just like mineral land men and/or geologist in the O&G/mining industries who made the deals and took a royalty percentage from successes. A grunt working as a full fledged employee in a faceless corporation mostly do not have those 'uplift' possibilities.

P.S. FWIW, don't get the idea I was some wealthy executive making boatloads of money. At best, a senior manager/junior executive with stock options, the latter of which was the 'uplift' to my salary that made a difference.


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## kcowan2000 (Mar 24, 2020)

james4beach said:


> Ah ok, for some reason I thought Keith was in the same industry as you.


I spent my whole career in technology. My first project was automating a couple of Imperiol Oil refineries so I developed a working knowledge of that industry but the money came from stock options and then judicious investments. Apple, Lululemon and Jones Soda were my greatest winners. Most of my career was in Toronto, although I have spent 8 years in Edmonton and 25 years in Vancouver. My 10 "dependents" are all in Toronto.


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## james4beach (Nov 15, 2012)

kcowan2000 said:


> I spent my whole career in technology. My first project was automating a couple of Imperiol Oil refineries so I developed a working knowledge of that industry but the money came from stock options and then judicious investments. Apple, Lululemon and Jones Soda were my greatest winners. Most of my career was in Toronto, although I have spent 8 years in Edmonton and 25 years in Vancouver. My 10 "dependents" are all in Toronto.


Wow, so it was a tech career. Neat!

I'm in tech as well. It's been a very boom-and-bust ride for me, and I think I'm used to it now (this is why I hold a lot of GICs). I'm not even 40, but I've already gone through two pretty wild "booms" where each time, my total compensation went very high, and then plummeted.

It might even be happening now. Since I started consulting, I first saw booming contract business with very strong income in 2020 and 2021. But in the recent few months (as the NASDAQ crashes by the way) I'm seeing a sharp decline both in my revenues, and even my clients have become less communicative and more vague about their business activity. I'm getting the sense that a tech bust is under way, yet again.

Six months ago, there was so much money being thrown at me that I couldn't even find the time to get the work done. I even considered hiring another person. And yet today, it's looking like money may have dried up.

Thank goodness I know how to invest.


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## kcowan2000 (Mar 24, 2020)

Yes I consider my success a combination of working smart, taking advantage of opportunities, and luck. My earnings grew from starting salary for a Masters degree in process engineering to a retiring allowance for a CEO, a ratio of 40x plus stock appreciation.

By then, the annual portfolio returns exceeded any earnings potential.


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## james4beach (Nov 15, 2012)

kcowan2000 said:


> Yes I consider my success a combination of working smart, taking advantage of opportunities, and luck. My earnings grew from starting salary for a Masters degree in process engineering to a retiring allowance for a CEO, a ratio of 40x plus stock appreciation.
> 
> By then, the annual portfolio returns exceeded any earnings potential.


Did you experience boom-and-bust cycles too, during your career? And if so, any advice to someone like me from the perspective of managing your finances to handle the cycles?


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## scorpion_ca (Nov 3, 2014)

kcowan2000 said:


> Yes I consider my success a combination of working smart, taking advantage of opportunities, and luck. My earnings grew from starting salary for a Masters degree in process engineering to a retiring allowance for a CEO, a ratio of 40x plus stock appreciation.
> 
> By then, the annual portfolio returns exceeded any earnings potential.


What is your lessons learned? What would you do differently if you can go back in time?


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## peterk (May 16, 2010)

james4beach said:


> That's true, you guys already became rich from oil & gas.





AltaRed said:


> Careful with potential foot-in-mouth disease.


James you jumped all over me in a heartbeat for suggesting that there's a sizeable army of millennial tech workers who are extremely well off for their age, and are practically the only cohort of employees left in a hollowed out economy, along with government workers, who can reliably afford an upper middle class lifestyle from now and into the future.

But you constantly come around here asking what do energy sector participants have to complain about? They're all super rich anyways right? As far as I can tell your only examples of rich energy sector workers are a couple of upper echelon CMF retirees, and me, who is certainly not rich, and am an outlier anyways for my peer group.


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## james4beach (Nov 15, 2012)

peterk said:


> But you constantly come around here asking what do energy sector participants have to complain about? They're all super rich anyways right? As far as I can tell your only examples of rich energy sector workers are a couple of upper echelon CMF retirees, and me, who is certainly not rich, and am an outlier anyways for my peer group.


I have classmates from engineering who went into oil & gas, and many ended up with incomes that are well above average. So I have plenty of examples of rich energy sector workers. I call them "rich" because they make a lot more money than others in their field (and much more than I do).

Within my peer group, many of the oil & gas people I know don't think of themselves as rich (and even complain a lot) though they are making well above average incomes. I find this funny because for example the guys who went to Calgary and work in energy are easily making 30% to 50% more total compensation versus those who worked in other power/utility companies or electrical fields.

The oil & gas workers are one of the most privileged groups in Canada. @peterk the median engineering salary in Canada is something like 75K right now. People in oil & gas make much more. How are they not a privileged group of high income earners? Don't they have all the tools available to get farther ahead, much further ahead than others in Canada's middle class?


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## james4beach (Nov 15, 2012)

(WTI) oil is down to $97.50 tonight... that's down 25% from its recent high.

Western Canada Select is down to $88

What do you think @MrBlackhill do we need another poll asking if oil might drop to $75 this year? That would only be another 25% decline, seems possible.


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## Covariance (Oct 20, 2020)

james4beach said:


> (WTI) oil is down to $97.50 tonight... that's down 25% from its recent high.
> 
> Western Canada Select is down to $88
> 
> What do you think @MrBlackhill do we need another poll asking if oil might drop to $75 this year? That would only be another 25% decline, seems possible.


lol. Why not take it further? Who thinks it will drop below $80 and then back above $100 before year end?


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## MrBlackhill (Jun 10, 2020)

james4beach said:


> What do you think @MrBlackhill do we need another poll asking if oil might drop to $75 this year? That would only be another 25% decline, seems possible.


Haha! This poll managed to slowly move up to 40% "yes" as oil continued to move up to $130 rapidly and all those articles predicting $185 or $200 oil.

Now we are back down, but that doesn't mean $150 is out of reach for this year.

After all, $96 is...

37% higher than 3 months ago
32% higher than 6 months ago
47% higher than 1 year ago
This just tells there's cycles on many timeframes and a move back up +50% over the next 9 months definitely isn't out of reach. I'm not saying the trend will continue, but Russia-Ukraine is not over. And the hot season is coming and mandates are dropped. People wanna got out, travel and live!


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## Covariance (Oct 20, 2020)

MrBlackhill said:


> Haha! This poll managed to slowly move up to 40% "yes" as oil continued to move up to $130 rapidly and all those articles predicting $185 or $200 oil.
> 
> Now we are back down, but that doesn't mean $150 is out of reach for this year.
> 
> ...


Perhaps you should share your survey data with Thaler. Helps to prove some of the Behavioural finance theories. Eg anchoring and adjustment, representativeness bias.


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## kcowan2000 (Mar 24, 2020)

james4beach said:


> Did you experience boom-and-bust cycles too, during your career? And if so, any advice to someone like me from the perspective of managing your finances to handle the cycles?


Sure. In the early days it was company product cycle, so the choice was to strategically sell the winners and avoid the losers that often paid better. I had a friendly bank manager who understood my irregular cash flow. Stocks were not a big factor, just some buy and hold.


scorpion_ca said:


> What is your lessons learned? What would you do differently if you can go back in time?


I always took risk in job changes after assessing the potential of the new assignment and turned down a few. I passed up a major RE opportunity because the disruption to family was too large. Might have been richer but without family.

Of course, with the benefit of hindsight, I could have been richer. But I never played the woulda shoulda coulda game. I could have joint ventured more real estate but it took away focus from the job.

1980, 1990, 2000, and 2008 were all major cycles during which I did not panic. Stayed the course and toughed it out.


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## Faramir (11 mo ago)

Thanks for your input. A warning do not buy the Horizon products that are suppose double the loss or gain in gold stocks, or betting against the market.


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## Sam Sun (12 mo ago)

Believe it or not? As you wish.








Flotilla Of 12 Tankers Carrying Russian Oil Are Approaching The US


Flotilla Of 12 Tankers Carrying Russian Oil Are Approaching The US At a time when the mere thought of Russian vodka or caviar, let alone oil or gas




www.nationandstate.com




"At a time when the mere thought of Russian vodka or caviar, let alone oil or gas, prompts uncontrollable shaking and revulsion, Reuters reports that no less than 12 tankers carrying Russia-linked cargoes of crude and refined products were approaching the United States on Wednesday, as suppliers rushed to deliver ahead of the U.S. government’s deadline to wind down Russian energy purchases, data from traders and Refinitiv Eikon showed."


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## james4beach (Nov 15, 2012)

And here comes oil again... rally resuming?


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## doctrine (Sep 30, 2011)

james4beach said:


> And here comes oil again... rally resuming?


More like, selling pressure ended for all of those long contracts, and ended to the downside perhaps as markets notoriously overshoot. Nothing fundamental has changed on the oil market, it is tight and there is a lot of uncertainty later in the year. Is $100 the price that balances supply and demand? Not with Russia dropping bombs and no Iran deal, but those could change. But if one believes that OPEC will quickly come to the rescue with more supply, which in the end includes Iran and Russia, I would suggest taking a look back at the last 3 weeks. Not one statement on supply boosts, not one finger lifted, no blinking as Brent hit $140. The March monthly OPEC meeting barely lasted 10 minutes. OPEC knows the market situation better than anyone.


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## Faramir (11 mo ago)

The big question is what happens NOW in the Ukraine. Who can predict. NATO creating no fly zones in the Ukraine would be an insane move, but THAT would probably set oil on a new surge. But we might also get to Defcon 1.


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## MrBlackhill (Jun 10, 2020)

Oops, here we go again, with oil. New high by the end of the month?


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## mattw (May 14, 2013)

hope it does briefly. Buying leaps far out of the money on the day oil was negative might actually pay off for me.


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## james4beach (Nov 15, 2012)

My position in oil (HUC) is doing too well. I would still prefer to lose money on this trade so that we don't end up with oil prices that cripple the economy.


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## doctrine (Sep 30, 2011)

Nothing has changed in this market, except the supply situation is slowly worsening. US refineries are at 91% of capacity last week (high), and inventories of gas and diesel both dropped significantly. Gasbuddy reported a new high in US gasoline consumption going back to 2017 at least. Oil products in the US have been dropping 5M to 10M barrels a week almost every week this year (11M last week). They are also dropping everywhere else in the world, except maybe Iran and Russia. Despite higher prices, US shale oil production has not increased in 4-5 months, primarily because of capital discipline, cost inflation, and supply/labour constraints.

So enjoying new 52 week highs on CNQ, TOU, ARX, and WCP today. CNQ was also a new all time high. TOU only a couple bucks from its 2014 all time high.


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## james4beach (Nov 15, 2012)

This whole situation is reminding me a bit of early 2008.

Everyone was worried about runaway inflation back then too, and oil was rallying. People crowded into the long oil, long commodities trade and nobody was considering possible deflation. Then the US economy sharply contracted and everyone was caught off side.

It became a very *crowded* trade.

Similarly today, there are signs that China is slowing -- it's been a slow motion trainwreck. Their property market started crashing last year and now it's not in the headlines, but China is slowing and losses in real estate are mounting. Their government has been trying to bail out the RE market, developers, builders, but it's a pretty big catastrophe according to credit analyst firms like Fitch and S&P.

Meanwhile everyone is expecting very high inflation and has piled back into commodities. Like in 2008, _this has again become such a crowded trade_ that even I (despite my disciplined asset allocation) joined the party. I couldn't help myself.

It would only take a sharp contraction in China and supply chain resolutions to bring down US inflation readings, could tank oil and commodities.

We can't predict the future but I think there's a significant danger here of a market shift that could cause severe pain. Oil and commodities MIGHT tank, and bonds would rally. Nobody seems to be positioned for that possibility. I'm getting nearly daily emails from friends who are abandoning their bonds.


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## londoncalling (Sep 17, 2011)

That is a possible scenario. Commodities are typically uncorrelated with the price movement of the rest of my portfolio. This morning I saw the likes of CNQ, CCO and NTR down about 5-10%. Now CCO and CNQ are down about 2% and NTR is still down 5%. That's volatility for you. I think if we see a drop like we did in 08 from $180 to the mid $50s in 09 there will be a lot of panic. I have tried to keep my sector allocation the same but move to positions that are less volatile to smooth out the bumpy ride. I am trying to lower my cash position to its target. Most of the positions I am wanting to add to hold are trading in their upper range (Insurers, Consumer defensive) as those stable dividend payers have seen recent attention. Like many others I foresee the Canadian market doing better than the US over the next while but am having a harder time finding attractive names in Canada at the moment. This is likely hindsight bias as the names I am looking at I have already established positions with the exception of ATD.


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## james4beach (Nov 15, 2012)

Call me crazy but I still feel great about my Canadian index (and 5-pack) positions. We have a well diversified economy, political stability, plus resource exposure on top.

I think my Canadian equity weight is now higher than my US weight due to recent outperformance.

Also, I want to remind people that the XIU performance since inception in 1999 is now *7.9% CAGR* which is pretty amazing. That's what you can get in the dumb old Canadian index, despite buying at the 1999 peak.

Who would complain about that? My only mistake was failing to continuously hold XIU all this time. I've done far too much trading in & out.


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## Ukrainiandude (Aug 25, 2020)

james4beach said:


> well diversified economy


Buying and selling houses to each other is hardly a well diversified economy.


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## OneSeat (Apr 15, 2020)

james4beach said:


> .......................... political stability............................


Maybe for a few months. Wish I knew what fancy socks' goals really were.


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## james4beach (Nov 15, 2012)

Ukrainiandude said:


> Buying and selling houses to each other is hardly a well diversified economy.


Oh come on, we do much more than that. We've also got a mortgage and home renovation industry.


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## wayward__son (Nov 20, 2017)

Energy people: what are you making of the news that the US is apparently planning to tap a third of its strategic petroleum reserve? Feels a bit drastic to me if it's really being done just to deal with inflation. Or does it get replenished easily in due time


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## AltaRed (Jun 8, 2009)

I think tapping the SPR at this time is likely a legitimate reason to do so. I think it is less about keeping down the price of petroleum products which is simply window dressing and vote buying for political purposes, but more to alleviate what will be an actual shortage of product likely requiring rationing in the not so distant future. Demand is already falling off in Europe due to industry shutting down due to cost and availability and if that starts to cascade elsewhere, there will be less resolve by the International community to hold the line on sanctions.


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## james4beach (Nov 15, 2012)

Looking at oil futures, you can see that oil for the next few months is plummeting, but in the future (December and onwards) hasn't moved at all


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## doctrine (Sep 30, 2011)

In 6 months when the SPR is down to 400 million barrels, from a peak of 700 million barrels just ~3 years ago, the only thing that will have changed is we are still short oil, and the SPR has been drained more, and oil is still likely >$100 a barrel. Joe Biden and the democrats have a political emergency in the polls, and this may work but doesn't solve the structural problem. 

All it does is reinforce that oil companies are correct not to increase production. Let the SPR drain out, as well as other inventories, and continue to pay down debt, pay dividends, buy back stock, and wait to see what the next move is in 6 months. 

I'll also point out the SPR has already been draining by 0.5 mboe/d since late last year with no effect. This is effectively only an additional 0.5 mboe/d, against 1.5 mboe/d net loss of Russian exports, and a pre-existing 1 million boe/d deficit on the markets. And might cause just as much oil to come out of capital spending plans for later this year.


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## james4beach (Nov 15, 2012)

The US can produce enough oil to meet their needs. Oil companies just don't care about the interests of the American people and economy.

The companies could produce more and make it available domestically, but that doesn't maximize profit so they won't do it.

Luckily Americans love capitalism more than life itself so I'm sure they will be totally on board with the decisions made by oil companies.


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## AltaRed (Jun 8, 2009)

The US never got more than about 13 million barrels per day of OIL supply at pre-pandemic peak in 2019 per Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day) 

It is smoke and mirrors that the USA was a net OIL exporter at any time. What the USA did do was to get close to neutral on total hydrocarbon supply and demand of oil, gas liquids, ethanol and biodiesel per Short-Term Energy Outlook - U.S. Energy Information Administration (EIA) and they have the ability to import/export as needed in the future to remain balanced.


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## doctrine (Sep 30, 2011)

james4beach said:


> The US can produce enough oil to meet their needs. Oil companies just don't care about the interests of the American people and economy.
> 
> The companies could produce more and make it available domestically, but that doesn't maximize profit so they won't do it.
> 
> Luckily Americans love capitalism more than life itself so I'm sure they will be totally on board with the decisions made by oil companies.


US isn't even close to oil independent - and a lot of the oil they produce is light oil and is exported, as US refineries were built decades ago and tuned to heavier oil. If they drilled, that oil would just go overseas - they need heavy oil.

And I thought oil was the enemy of the American people and the planet? The US, and Canada, have committed to a 45% reduction of carbon emissions in just 8 years, how could any oil company drill in that environment? Maybe Americans love the environment more than profits.

That aside, the oil situation is desperate. If it wasn't, the US wouldn't be depleting their entire strategic reserve.


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## AltaRed (Jun 8, 2009)

doctrine said:


> And I thought oil was the enemy of the American people and the planet? The US, and Canada, have committed to a 45% reduction of carbon emissions in just 8 years, how could any oil company drill in that environment? Maybe Americans love the environment more than profits.


The bozos in Ottawa and Washington have their heads so far up dark places, their sphincters are choking off oxygen to their brains. They can't have it both ways. Any hydrocarbon development expenditure that has more than approximately a 2-3 year payout is not worth developing any more. Not only won't costs be recovered for longer payout projects but they won't get a proper Return on Capital for shareholders.


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## james4beach (Nov 15, 2012)

AltaRed said:


> The bozos in Ottawa and Washington have their heads so far up dark places, their sphincters are choking off oxygen to their brains. They can't have it both ways. Any hydrocarbon development expenditure that has more than approximately a 2-3 year payout is not worth developing any more. Not only won't costs be recovered for longer payout projects but they won't get a proper Return on Capital for shareholders.


Long term benefits (CO2 reduction) do require short and medium term pain. But luckily, industry is very good at adapting and will always find new ways to make money.

I'm actually astounded that gasoline is so cheap these days.


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## AltaRed (Jun 8, 2009)

Industry can adapt to some degree at the right prices but that doesn't take care of real shortages. The problem is the idealists in Ottawa and Washington are over-driving their headlights, pushing change without understanding what it takes to make the changes and without regard to the consequences in the meantime.

For example, Biden is making a big deal of asking Congress to legislate oil companies to turn on unused wells and drill lands for the 9000?6000? permits outstanding on federal lands. He either is being purely political or does not have a clue (dense as an anvil) on what the number even means and why. There are likely a significant number of leases (permits) drilled which will never produce a drop because there is no economics on completing a dud well and putting it into production, and/or the geologists have determined there is no oil to drill for on some of the lands. The best lands have already been drilled in the Permian basin. Diminishing economics as one moves away from the sweet spot.


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## james4beach (Nov 15, 2012)

Uh oh, this rally in oil doesn't look like it's cooling off at all. Rather, just looks like an uptrend combined with extreme volatility.

Approaching the highs again. Using DBO to illustrate, since it's a basket of different expiry months of oil futures rather than just the front month / spot price.


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## sags (May 15, 2010)

The good news is the Provincial and Federal governments are raking in the cash with higher revenues from royalties and sales taxes.

Ontario is having an election, so Doug Ford just announced he will cut fuel taxes......a promise that he made before the last election and never kept.

Of course, the cuts won't come until AFTER this next election.

What was it President G.W Bush famously said......._you fool me once......shame on you.....you can't fool me again._


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## doctrine (Sep 30, 2011)

The #1 policy reaction worldwide to high oil prices by governments has been to cut taxes. This helps to stimulate and maintain demand and is supportive for oil prices.

The #2 policy action has been to release strategic reserves, removing the last shock absorbers in the system. Biggest SPR release in history results in oil prices 9 months to increase almost $5 since the announcement. An SPR release does not result in any net new oil production, supplies continue to decrease structurally.

The world is stuck in an energy crisis where the only actions being taken either do nothing or make it worse. OPEC has no interest and maybe no ability to boost production, and western countries are actively preventing it, and supermajor internationals are moving in reverse. 

XEG closed at a new 52 week high. IMO, oil prices have nowhere to go but up.


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## AltaRed (Jun 8, 2009)

There certainly is a lot of political expediency/stupidity going on enacting measures which will just make matters worse, and as you say, just delays the inevitable anyway. AB has the dumbest solution of all but Jason isn't known for his intellect. He is all ideology (and skating for his political life).


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## MrBlackhill (Jun 10, 2020)

I posted this poll at the peak of a crazy run up by oil back in March 2022.

See how sentiment got 40% of us into thinking we'd reach $150? Recall the headlines with numbers like $150 oil and even $200 oil?

I thought we'd reach $150. I think many of us forgot that 2022 would also be a fight against inflation, which would lead to recession fears, which means lower oil price.

I guess we'll have to wait after the recession to see oil at $150. Maybe in 2024 or 2025?


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## AltaRed (Jun 8, 2009)

I doubt we will see $150 oil over the next 5-10 years except for spurious short term aberrations due to certain geo-political events, e.g. Iran sponsored militia successfully taking out Saudi or UAE production facilities, as the Yemeni Houthi rebels tried a few times with marginal impact. The current havoc being created by the rogue Russians will result in more nations being more strategic about their O&G imports and hasten the transition to renewables. It is also spurring more short term development, albeit that will only moderate natural declines in current production that I have talked about before.


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## doctrine (Sep 30, 2011)

MrBlackhill said:


> I posted this poll at the peak of a crazy run up by oil back in March 2022.
> 
> See how sentiment got 40% of us into thinking we'd reach $150? Recall the headlines with numbers like $150 oil and even $200 oil?
> 
> ...


I voted no, because oil inventories weren't that depleted yet, and oil demand wasn't fully back. And in hindsight, it is hard to overstate how meaningful 6 months of Chinese lockdowns have hurt, and combined with nearly 200 million barrels of oil dumped from the US strategic reserve, which is still being dumped out today, combined with seasonal weakness and economic recession, it all seems reasonable to me.

Oil prices will be back, and they can come back faster than you think. China will re-open and drop zero-COVID. The US will stop dumping its reserves. And artificial suppression of demand by central bank action will only be tolerated so long when unemployment starts to rise. And there is zero sign of oil inventories increasing. The supply situation has not been fixed and there are signs, like in US shale, that the structural supply problems are becoming worse, not better.

There are potential black swan events out there too, including Russia and OPEC. I am very optimistic about making money on the way back up again.


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