# Crude oil down 8%



## james4beach (Nov 15, 2012)

Crude oil is down over 8% so far today. Gasoline futures are down 7% so we should get cheaper prices at the pump any day now. The gasbuddy national chart is already showing the cheapest gas since Dec 2017.

I'm not sure I can believe we're in any kind of energy bull market with crude falling that much in a single day.

Interestingly though, the CAD does not appear to be down at all today (depends on where you start at end) but I'm actually seeing CAD register positive according to yahoo finance
https://finance.yahoo.com/quote/CADUSD=X?p=CADUSD=X

So it seems that we're no longer traded as a petro currency. I never found that correlation to be particularly strong anyway, but it's great to see that a 8% catastrophe in crude doesn't knock the CAD down.


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## Video_Frank (Aug 2, 2013)

james4beach said:


> 8% catastrophe in crude



Definition of catastrophe 
1 : a momentous tragic event ranging from extreme misfortune to utter overthrow or ruin


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## OnlyMyOpinion (Sep 1, 2013)

I'd vote for catastrophe. 

When companies start speaking in favour of the government stepping in to control Alberta production volumes due to "extraordinary circumstances", I'd say we are at the point of catastrophe.

_"Cenovus Energy, is calling upon the government of Alberta to mandate temporary production cuts at all drillers in a bid to ease Canadian bottlenecks that have resulted in Canada’s heavy oil prices tumbling to a record-low discount of US$50 to WTI."

"It’s costing industry and governments an estimated $84 million a day: $54 million to producers, $18 million to Alberta and another $12 million to the feds, according to the provincial government."

"CAPP’s chief executive Tim McMillan says that the real costs could be as high as US$75.6 billion (C$100 billion) annually."
_


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## lonewolf :) (Sep 13, 2016)

Looking @ seasonal chart of oil last 30 years ending 2012

From Oct high to Dec low oil has averaged almost -9% yearly for 30 years.

Never would want to be long oil this time of year.


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## lonewolf :) (Sep 13, 2016)

Also decennial pattern for oil is very negative @ this point in time


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## Pluto (Sep 12, 2013)

https://www.marketwatch.com/story/w...ed-oils-rout-says-prominent-trader-2018-11-14

Interesting perspective. 

If I recall correctly, Josef Schachter on BNN last oct said oil would drop below 60. His reason was the lower demand period between summer driving and winter heating seasons. Anyway, good call.


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## doctrine (Sep 30, 2011)

Pretty much reaching peak negativity. What else could go wrong? Oil sands prices are essentially negative. They still have to pay costs on top of negative prices. This is way beyond operating at just cost.

Interestingly, natural gas is peaking at close to decade highs due to cold temperatures and below average stockpiles.

You can easily argue both natural gas and oil are in clear seasonal trends. This is normally what happens this time of year. Hard to see getting a recovery in oil prices though. There's just too much oil, anywhere from 1-2 mboe/day is now building in stockpiles, thanks primarily to the United States who is producing 2 million barrels a day more than a year ago.

I think people underestimate that growth. 2 million barrels a day of oil production growth in a year. Above and beyond the normal decrease in production from old wells. That is half of Canada's entire oil production, which took decades to build, in 1 year. Oil dynamics are changing the world order.


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## lonewolf :) (Sep 13, 2016)

Decennial pattern oil

The average decline in oil in the 4th quarter of the 8th decade is 35% from the 4th quarter high till it puts in a major bottom in the 4th quarter of the 8th year


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## sags (May 15, 2010)

Rachel Notley is now saying that Alberta needs to upgrade and refine it's own oil. I have thought that for some time, but some people say it will be too expensive.


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## doctrine (Sep 30, 2011)

Alberta already upgrades and refines its own oil; more than enough for all its own needs and that of many of its neighbors. Are you suggesting Alberta puts gasoline and jet fuel in pipelines to California and the US East Coast? 

Energy East could have been under construction had Trudeau not forced it to be cancelled. Same with Transmountain.

Heard some murmurs that the Trudeau government might sink the Transmountain pipeline. They are not at all interested in progressing construction and are looking for a way out, which might just be to bury it, since no one will buy it.


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## lonewolf :) (Sep 13, 2016)

Trudeau does not get it. If Canada only sells to one customer i.e., the US it is hard to sell oil @ a fair market price


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## OnlyMyOpinion (Sep 1, 2013)

Speaking of Trudeau, what about the current postal strike? A few days ago he was 'pleading' for a resolution. Today 'all options are on the table'. 
The O&G sector doesn't enter his mind, now it seems businesses that depend on timely mail or have parcels stranded in over 500 t.trailers are an oversight. 
Truly a PM who shows no leadership, and is unwilling or incapable making difficult decisions.
All this gov't does is oversee the sprinkling of taxpayer dollars around the world.
Legislate them back to work!


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## james4beach (Nov 15, 2012)

West Texas oil crashed another 8% today. WTIC down 8%, NY gasoline down 8% too.

Unbelievably sharp selloff in oil & gasoline in the last month.


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## gardner (Feb 13, 2014)

lonewolf :) said:


> If Canada only sells to one customer i.e., the US it is hard to sell oil @ a fair market price


While I am confident that this is mostly true, I wonder why it is that all the oil that *is* at tidewater -- trans-mountain oil shipped out of Burnaby, and Hibernia/White Rose oil produced in the Atlantic -- mainly seems to ALSO go to the US, not to Korea or Japan or Germany or wherever it is we think the price should be fairer.


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## doctrine (Sep 30, 2011)

The market is saying that OPEC won't be able to offset the surplus which now has grown in excess of 1 million bpd with new capacity coming on. There are 3 major Permian pipelines plus one from Canada (Line 3) coming online next year, starting mid-year, that will add something like another 1.5+ million barrels a day to world capacity. And there will likely be growth beyond that. Essentially, the US and Canada can grow oil production, on their own, more than enough to meet the total growth in world oil demand.

What is particularly interesting is how quickly this has happened. 2014-2015 was a painful decline but this has been much quicker. WTI was almost $76 just six weeks ago, now $50.40 - a 34% drop in 6 weeks.

I wonder if it can go lower than 2017 ($46) or 2016 ($42). In general, companies have less debt and more cash flow than the last crash. So they can sustain operations longer. It could prolong the price decline. Although again, this is typically the worst time of the year for oil. Things may bottom out here pretty soon.


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## gardner (Feb 13, 2014)

gardner said:


> why it is that all the oil that *is* at tidewater [ ... ] ALSO go to the US


I had a noodle through the figures from the NEB and Trans Mountain's web site. It transpires that Canada's total exports of oil was around 3,320 thousand barrels/day (Mb/d) in 2017. During this time about 200 Mb/d was produced offshore in NL and shipped via Whiffen Head, and the Trans-mountain pipeline delivered 300 Mb/d to Burnaby. In all 500 Mb/d or just over 15% of all of Canada's 2017 exports were available for export anywhere in the world, yet a paltry 0.8% of exports were exported anywhere other than the US. There's something other than the simple "get it to tidewater" problem to be solved here.

https://www.neb-one.gc.ca/nrg/sttstc/crdlndptrlmprdct/stt/crdlsmmr/crdlsmmr-eng.html
https://www.transmountain.com/pipeline-system

Concentration on a single customer, especially the ridiculously glutted current NA market, is certainly a problem. But I have a hard time seeing how increasing the amount of oil available at tidewater is going to help the Canadian export industry when the current tidewater export is virtually all feeding the same uneconomic, glutted market.


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## lonewolf :) (Sep 13, 2016)

Dec pattern oil
The rallies from the Decennial 8th year low in the last 4 years have lasted 2 years with gains of 154%, 233%, 242% & 242%, The drop of 35% is the norm going into the 8th year Dec low. Standing aside on this one. The stock market lags oil by about 10 years 08 was a big drop in oil. The decennial pattern in stocks should bottom in 2022


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## OnlyMyOpinion (Sep 1, 2013)

If you enjoy the acerbic wit of Rex Murphy, here he is speaking at the Manning Network Conference on Saturday.
Once rolling, he is classic Rex Murphy. Posted in this oil thread because that is what he (eventually) gets onto. 
https://www.youtube.com/watch?v=kVyZuUyAASI


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## doctrine (Sep 30, 2011)

gardner said:


> Concentration on a single customer, especially the ridiculously glutted current NA market, is certainly a problem. But I have a hard time seeing how increasing the amount of oil available at tidewater is going to help the Canadian export industry when the current tidewater export is virtually all feeding the same uneconomic, glutted market.


The difference is that the tidewater oil in Canada that is selling to the US is selling at world, a.k.a. Brent, prices. The oil in Canada that is landlocked is selling at a heavy discount. Once your oil is at tidewater, it can choose to go somewhere else if they are getting screwed by a particular refinery. In the case of Alberta, there is no real alternative but to take a low price.


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## humble_pie (Jun 7, 2009)

doctrine said:


> The difference is that the tidewater oil in Canada that is selling to the US is selling at world, a.k.a. Brent, prices. The oil in Canada that is landlocked is selling at a heavy discount. Once your oil is at tidewater, it can choose to go somewhere else if they are getting screwed by a particular refinery. In the case of Alberta, there is no real alternative but to take a low price.




doctrine with the exception of the above i am always amazed & delighted by your posts. Their insight, their accuracy.

but i don't believe the above describes the continental situation accurately

the price differential is due to the different qualities of oil, with one of the "oils" not even being an oil at all but rather a heavy bitumen that has to be diluted for transport. This product requires additional refining in specialized refineries capable of processing it. Alberta dilbit has always fetched a price far below brent crude or WTI.

right now a built, long-time existing pipeline/rail network is carrying conventional alberta crude to west & east coast ports, also southwards through central USA to texas ports, at global prices.

a problem at present is the world oil glut, due in part to accumulation of new US production from shale. It's understandable that, in a glutted market, prices for lower-quality dilbit would plunge farther & faster than prices for light sweet crude.

a secondary problem is production & over-supply of this very same unwanted low-quality dilbit in one canadian province that does not have alternative drivers to its economy. For 15 years now, three proposed new dilbit pipelines have been blocked, in both canada & the US. In other words, landlocked alberta dilbit is beset with 2 problems: first, there is not yet any organized transport out of the province; & secondly, an oil-glutted planet does not particularly want its low-grade dilbit product. Or at least, is not willing to pay much for it.

here in cmf forum, it's been altaRed who has supplied correct information regarding what kind of oil is being transported where, when & how. Others have added correct data. Thus we know that the existing transMountain pipe is "not" shipping alberta dilbit, it's shipping conventional crude, as it has for more than half-a-century.

some alberta dilbit does seem to be flowing south through the heart of the continent. Enbridge & possibly keystone. This product will never command the higher brent/WTI price levels though.

in eastern canada, enbridge is piping some alberta dilbit to montreal, where it is being used in one montreal refinery as well as piped onwards to another refinery at quebec city.

we also read that alberta bitumen is being shipped in railcars. It's possible that some dilbit is shipped out of great lakes ports in tankers; this forum needs additional information on that possibility. 

that's all we know. The global situation is closer to gardner's concern, which is that a colossal energy glut from shale production in the US has dropped world oil prices dramatically. The situation has nothing to do with any fantasy that suddenly, if heavy alberta bitumen could be shipped to tidewater via a brand-new pipeline, it would miraculously command prices in line with light sweet brent crude. 

i believe it's also a fantasy to imply that the owners of alberta oil, once they get it to tidewater, can then pick & choose what price level they want & to which world refinery they will ship their product. Shipping oil out of any port is not like calling a cab. It's done through well-established big shipping networks, most of them decades old by now & all contracted years in advance.

i have read that there are some wildcat tankers that sail around picking up oil when opportunities present themselves - for example kurdistan, another landlocked nation with a large quantity of oil to export, sometimes has to use unscheduled tankers in the black sea, in order to get their oil into the mediterranean & onwards to european ports.

but raw resource products like oil, coal, LNG, iron ore, are the first to suffer when the world faces either a recession or a product glut. We certainly have a product glut right now. Plus with all the trump-induced trade tariff turmoil, a global recession could also be in the works.

it's foolish to pretend that only political obstacles stand between alberta & golden prosperity from selling dilbit at $100/barrel. It's dishonest to pretend that if a new pipeline such as keystone XL or transmountain II or energy east could only be built, all canadian problems would be solved. It's fake news to call heavy, dirty, low-grade bitumen "ethical oil" when there's nothing either ethical or un-ethical about it, it's just a product the world doesn't particularly need right now.


.


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## gardner (Feb 13, 2014)

humble_pie said:


> Alberta dilbit has always fetched a price far below brent crude or WTI.


This is true of WCS for sure. But Syncrude is an "upgraded" product of similar quality to WTI and its price has also cratered to C$32 in the last few days. Considering how quickly and cheaply it can be piped to refiners in the US midwest, it should have a price much closer to Brent, FOB Sullom Voe.
Also, WCS is of very similar quality to Mexican Maya blend, whose price is also much higher.

Personally, I think it is mainly NAFTA article 605 that traps us into selling all of our oil to the Americans, and that is the real problem. The glutted American market means that their own oil prices are trapped at uneconomically low levels. Their statutory inability to export either their own, or even imported Canadian oil means there is no world outlet for their overproduction. And Canadian oil, even oil sitting in Burnaby or Whiffen Head, is trapped in the same stupid situation.

http://rabble.ca/columnists/2017/06...rgy-sovereignty-and-gives-us-control-over-our


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## OnlyMyOpinion (Sep 1, 2013)

Pricing suffers from both the quality differential and lack of alternate markets. 

I won't pretend to know better than the producers and a pipeline company that were willing to commit volume and capital to the proposed expansion. They see an opportunity to export larger volumes to Asia and have put their money (and immutable patience) on the table.

Yes most heavy product does currently export to the US. Historically that was the cheapest and most profitable. Limited unrefined product does ship to SK and China through Westridge though. Asia was identified as a viable market, hence the expansion plans. Only limited unrefined product currently makes it to Westridge (see destination link). How does one grow their exports to Asia without capacity? It is a chicken vs egg scenario. 
To say that if a market existed we would already to selling to it ignores the obvious - if you can't reliably deliver sufficient product, your customer will shop elsewhere. 

Product - Westridge Marine Terminal
Product Destination- Westridge Marine Terminal


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## humble_pie (Jun 7, 2009)

gardner said:


> This is true of WCS for sure. But Syncrude is an "upgraded" product of similar quality to WTI and its price has also cratered to C$32 in the last few days. Considering how quickly and cheaply it can be piped to refiners in the US midwest, it should have a price much closer to Brent, FOB Sullom Voe.
> Also, WCS is of very similar quality to Mexican Maya blend, whose price is also much higher.[/url]



i'm not knowledgeable in the area of oil pricing at all ... but i've always thought that just about every drop of oil ever delivered to a customer was already pre-contracted? i mean pipelines don't just deliver oil to terminals in, say, burnaby BC or galveston TX & then start auctioning the product off at spot prices to whatever tanker happens to be in harbour & is willing to pay the most 

where did that $32 price for syncrude come from? i'd always thought that, in north america, oil futures are brokered on the nymex & all futures are accounted for. Is there also an OTC spot market in oil that hasn't been pre-sold? wouldn't that differ from port to port, certainly from country to country? (sorry about this ignorance on my part)

i also have a bit of trouble wrapping my head around syncrude's product as an "upgraded" crude of similar quality to WTI. Where is syncrude doing this upgrading? this forum under altaRed's guidance has gone over & over & over the refineries in canada that are capable of handling even a small quantity of dilbit. There are precious few of them. 

syncrude does own one of these refineries but it's located in montreal, quebec. Valero has another one at levis, quebec. IIRC altaRed believes there's another one in the Irving refinery farm at st john NB. I've seen some references to sudbury although nothing indicating a high capacity to handle dilbit. Transmountain can ship some dilbit to US refineries on the pacific northwest coast. Transcanada has AFAIK always been able to ship a limited quantity of dilbit to texas via existing Keystone.

what's missing from all these small bits & pieces is a new large capacity pipeline to tidewater

in the meantime alberta says it's laying on extra railcars to ship dilbit


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## humble_pie (Jun 7, 2009)

as luck would have it, the semi-annual US EIA report on the US national oil reserve at Cushing will be out tomorrow. It will be dated as of 30 september. 

meanwhile historical cushing charts aren't showing any monstrous glut, at least not to me. Cushing storage levels appear to be within a normal band. However a report dated 30 september/18 is already slightly out-of-date

https://www.eia.gov/petroleum/storagecapacity/


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## OnlyMyOpinion (Sep 1, 2013)

If you were to ask - _Murray Mullen, chairman of the Mullen Group, which has about 1,800 staff in its oilfield division, says customers are cancelling projects "left, right and centre." Meanwhile, it seems banks and investors are getting anxious about where the industry is headed, he said. "So all of us that are in executive positions are going, 'Well, we've got no choice but to be defensive, which usually means, you know, I'm going to have to lay off people," Mullen said. "We're trying to not panic, but I can tell you my senses are very, very heightened." _
https://www.cbc.ca/news/business/oilfield-services-layoffs-1.4921435


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## OnlyMyOpinion (Sep 1, 2013)

Not to detract from the oil thread, but here's hoping successful exploration can extend 777 and pull Flin Flon out the fire: Flin Flon's only mine slated to close by 2021, future of 800 jobs uncertain


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## AltaRed (Jun 8, 2009)

humble_pie said:


> i also have a bit of trouble wrapping my head around syncrude's product as an "upgraded" crude of similar quality to WTI. Where is syncrude doing this upgrading? this forum under altaRed's guidance has gone over & over & over the refineries in canada that are capable of handling even a small quantity of dilbit. There are precious few of them.


There is a fair bit of bitumen production in AB that is upgraded to SCO (Synthetic Crude Oil). Such upgraders are mini-refineries which either take out enough carbon (coking) or add enough hydrogen (hydro-treating) to 'upgrade' sticky bitumen to a crude oil that is similar to other light crude oils such as WTI (Intermediate) or WTS (Sour). Suncor and Syncrude have upgraders right on site at their Fort Mac area mining operations. CNRL also has an upgrader for their Horizon production. Yet another upgrader built by Shell is bolted on to the inlet of their Scotford refinery. A dated list is provided here https://www.oilsandsmagazine.com/projects/bitumen-upgraders The Sturgeon upgrader has been in operation for about a year.

Upgrading bitumen to SCO allows it to be sold more or less like conventional crude oil. Bitumen on the other hand must be blended with condensate to make dilbit in order to ship it. Dilbit attracts a much lower price than SCO, but all prices are low (wide differential) now because buyers of crude are bidding down the prices from producers because they can. There is not enough takeaway capacity for all of AB's production so if Company A is more desperate than Company B to sell its production, it will accept a lower price. That causes all prices to collapse, some like dilbit more than SCO. Hence the reason for current talk in AB about prorationing production, in effect, preventing enough excess production from being offered for sale to force prices back up.

Upgraders are hugely expensive and economics highly vulnerable to the difference in spread between the price of bituman and SCO. It doesn't make sense for anyone to take the risk of a freelance upgrader. The Sturgeon upgrader is really the only one and that is because AB gov't funded a good part of it, I believe, for their royalty barrels taken in kind. Could be wrong on that as I have not kept close dibs on the business.

Added: There will never be enough upgrading capacity built to upgrade all dilbit....and that would be counterproductive since so many refineries, especially in the USA Midwest and Gulf Coast are already configured to process dilbit. No number of upgraders will solve the current lack of pipeline takeaway capacity. We need Enbrige's Line 3 (end of 2019 hopefully) plus more unit trains (Notley's choo-choo) to relieve some of the pressure until TMEP and/or Keystone XL to get built. It's going to be a tough 2019.


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## OnlyMyOpinion (Sep 1, 2013)

Bets are that Notley will announce a reduction in Alberta oil production volumes tomorrow in an effort to lift prices.
I think writing an op-ed ahead of time to explain the issue to constituents is quite uncommon.
*Rachel Notley: Alberta faces a momentous decision on oil production *


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## AltaRed (Jun 8, 2009)

Allocation of production cuts will be very messy with winners and losers in the oil patch. One could argue that producers who increased production in the past year or so to create the huge surplus are responsible for the price decline and should be the ones taking all, or the brunt, of the production cuts. Most should consider that the most equitable way of allocating the cutback. 

OTOH, at least some of these producers undertook multi-year expansions on the premise of Line 3 and/or XL being in service already and had made arrangements with buyers in the USA to take this new incremental production. They have borrowed to develop the production and now the bank wants to be paid. Some will say, too bad... you took the risk without having shipping capacity guaranteed, so tough it out. However, there is precedent in the past of prorationing by Enbridge when supply exceeded shipping capacity and these producers will say... we want prorationing back, i.e. if supply exceeds transportation capacity by 20%, then everyone gets cut back 20%.

No matter what Notley does, there will be some anger. Stay tuned.

I have no idea what Notley is talking about with respect to increasing upgrading and refining capacity in AB...unless she is referring to the Sturgeon refinery (Northwest Refining Inc) that has not yet achieved full scale production. Further, the product still has to be shipped out by rail car or pipeline so takeaway capacity has not been increased* significantly. AB of course has a significant stake in this venture. For anything grassroots new, and based on 'spread' risks over a 20 year amortization, I can't see the capital markets funding this on a 'free market' basis. There would have to be AB guarantees, or subsidies, or ownership even more than with the Sturgeon refinery/upgrader.

* Increasing upgrading and refining capacity in AB does have volume benefits because bitumen must be blended with a lot of condensate, some of which is imported, to make dilbit for shipping. Shipping SCO or refined products instead eliminates the 'waste of space' condensate uses in the pipeline and thus more net production can be shipped. This is important during periods of shipping capacity restraints but is totally unnecessary when there is plenty of shipping capacity. Thus a damned if you do, damned if you don't scenario. Billions of dollars of 'Catch 22' if one upgrades/refines more in AB.


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## humble_pie (Jun 7, 2009)

AltaRed said:


> Upgraders are hugely expensive and economics highly vulnerable to the difference in spread between the price of bituman and SCO.



it's a dilemma, isn't it? the less the spread - ie the better for WCS - then the less cost-effective building an upgrader becomes


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## humble_pie (Jun 7, 2009)

thankx to altaRed for all the updates. When it comes to keeping tabs on the energy sector AR is truly the information sentinel & the energy fact gatekeeper for cmf forum.

yesterday's reuters' poll of analysts' oil price forecasts for 2019 averaged $67.45, up 1.05 from the 2018 year-to-date average of $66.40.

https://oilprice.com/Latest-Energy-...ts-Cut-2019-WTI-Oil-Price-Forecast-To-67.html


they say the night is always darkest just before the dawn. I might be pollyannaish but one can see improvement - in baby steps - over the past couple years. Not paying off in dollars yet, but there is visible improvement in terms of coping with global plunge in energy prices coupled with alberta's landlocked situation

the upgraders are all recent, no? think back 5 years, it was either keystone XL or nothing for alberta bitumen. The Sturgeon upgrader debuted only one year ago

in addition we have alberta leasing (buying?) enough tanker railcars to build 2 new oil trains, let's not knock this development by calling them choo-choos.

none of the above can cure the problem which requires a new pipeline to tidewater, but the above steps are lightyears better than brooding at home in a state of near-paralysis, angrily cursing the ROC & the sitting PM, which is where some folks are stuck

another recent positive sign is that transCanada restarted XL construction in the US. Briefly only, before one of the western states - i believe it was montana - halted the startup. But TRP is a wise old hand over the Keystone & i don't believe they would have ever restarted without bush telegraph messaging that XL could be feasible now. 

i believe i've glimpsed one of the ministers - was it marc garneau - commenting that behind-the-scenes meetings with the BC chiefs who are opposing transMountain are going well. Indigenous opposition is the last remaining obstacle; it does not seem likely that the BC gummint would be able to pull off a supreme court ruling against the pipeline, although indigenous nations can do this & evidently some will do this until they are won over.

ok pollyanna but i'm thinking the worst may be over

speaking of worst where is Pluto? do y'll remember how Pluto called a perfect interim bottom in the oil sector after it first collapsed, way back in 2012?

IIRC the dark planet posted his record low forecast some time in mid-december of that year. Eerily enough, he was correct almost to the hour. Pluto if you happen to pass by here & are inclined to share, how is your crystal ball looking these days?

.


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## AltaRed (Jun 8, 2009)

The original upgraders were built by Syncrude and Suncor a very long time ago, e.g. the late '70s I believe, perhaps early '80s. There have been additions and expansions over the years, e.g. '90s, as both Syncrude and Suncor expanded their production. The Husky Lloydminster upgrader was built in the early '90s as well. Shell followed with its original Scotford upgrader in 2004 and others followed thereafter.

The unit trains Notley is investing in won't be in service until late 2019, maybe about the same time as Enbridge's Line 3 expansion. It is a questionable commercial venture (hence the choo-choo comment) that may only provide relief for 1-2 years thereafter until TMEP and/or Keystone XL go into service. These trains could become a white elephant (can't pay out in just a year or two of service). That would be the same risk of committing to additional upgrading capacity which could be 'stranded' once pipeline capacity is achieved. She is damned if she does, damned if she does not, especially with a 2019 staring her in the face. She has to be seen to be doing something to keep hope up.

World oil prices are not going to take off any time soon. There is simply too much ability to increase production despite increases in global demand each and every year. The USA alone can increase production capacity to meet ALL global demand growth for the foreseeable future. The latest EIA number is production of 11.7 million barrels per day for the past 3 weeks. When pipeline capacity increases to the Gulf Coast out of the Permian basin in a year or so, I wouldn't be surprised production to increase to 13 million barrels per day in fairly short order thereafter.


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## peterk (May 16, 2010)

humble_pie said:


> the upgraders are all recent, no? think back 5 years, it was either keystone XL or nothing for alberta bitumen.


All the big oil sands sites operate upgraders except a few, cenovus, nexen I think, and have for years and years. It seem about 45% of bitumen is upgraded in Alberta 

Bitumen Upgrading in Alberta

A quick check is to take a look at the google maps satellite of a facility. If there is a large black waste pile somewhere in the picture, you know they got a coker.

Recently I've heard the next big issue is going to be much more stringent desulphurization requirements for burning bunker fuel in ships. This is a major problem as Oil Sands bitumen has loads of sulphur, far above what the new emissions limits supposedly will be. As far as I know Syncrude and some small amount of Suncor oil are the only companies that removes sulphur on site, all the other operators have high sulphur SCO that they sell to a refiner who then has to do whatever they do with it, remove the sulphur or use as shipping fuel. This will be another differential and hit to the oil sands in a year's time...
Sulphur Emissions


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## AltaRed (Jun 8, 2009)

Increased desulphurization is indeed another wrinkle coming soon. IMO, it is more economical to have desulphurization at tidewater refineries where sulphur can then be more cost effectively removed, and loaded on ships to global customers, than to require yet more unit trains out of AB just to move sulphur to Burnaby. AB used to have huge sulphur storage blocks from the processing of sour natural gas dotting the landscape until sulphur (fertilizer) markets improved enough to sell* and ship by unit train to primarily the west coast. I don't know how much this will increase differentials primarily because quite a lot of global oil production contains sulphur and the same issues apply to that global supply too. Time will tell.

* In the 80s and beyond, we had 3 business units in our marketing department: natural gas that I was part of, liquids (crude and NGL), and sulphur.

Added for interest: Information about these facilities https://www.cosbc.ca/index.php/advo...procedures/50-sulphur-loading-parametres/file Sultran http://www.sultran.com/about.aspx owns Pacific Coast Terminals Litd while Kinder Morgan owns Vancouver Wharves https://www.kindermorgan.com/content/docs/terminalbrochures/W-C-VancouverWharves.pdf.


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## humble_pie (Jun 7, 2009)

no trains for another year? there aren't enough idle tankercars in north america that they can just go rent em & hook a train together with a few engines inside a couple months?

if indeed they are building new railcars it does look hasty, perhaps ill-advised. AltaRed is calling it when he says rachel notley has to be seem doing _something_ but she'll be damned no matter what action or inaction she chooses


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## AltaRed (Jun 8, 2009)

As I understand it, the primary shortage is locomotives. I think CN has accelerated the delivery of 2 yrs worth of locomotives (200) into one year, i.e. 2019, with a recent new order of 60 more in 2020. I would think there is a shortage of tank cars too as they just don't sit around empty doing nothing. There is a lot of rail car crude loading capacity in AB... about 1 million barrels per day worth, but only about 300,000 bpd of transport capacity will be in place by end of this month. They only recently passed 200,000 bpd transport capacity.

Added a few pertinent links: https://www.cbc.ca/news/politics/tasker-crude-by-rail-eight-fold-increase-1.4842410 and also https://thenarwhal.ca/how-likely-canadian-oil-rail-boom/ and https://www.neb-one.gc.ca/nrg/ntgrtd/mrkt/ftrrtcl/2016-02-01cndncrdrl-eng.html The lack of rolling stock (tank cars and locomotives) has partly been a reluctance of the railways to invest in rolling stock if the crude-by-rail market dries up in a few years, and oil producers unwilling to sign long enough contracts for the same reason. Catch 22, eh? I think part of what AB gov't can do, besides owning unit trains, and likely will do, is to provide some financial guarantees so that CN and CP are not left high and dry if the market dries up when pipeline expansions are completed. Gov'ts have done this before for cereal grains, e.g. bought hopper cars in particular.


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## londoncalling (Sep 17, 2011)

Although a bit dated (2017) some may find this link on global production interesting.

https://www.msn.com/en-ca/money/top...ho-you-might-think/ss-AAxVRXT?ocid=spartandhp


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## sags (May 15, 2010)

Rail companies earn more profits pulling oil cars, and a few years ago they left farmers stranded at harvest with full bins. 

As I recall, the Harper government had to become involved with cartage rules and fines.


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## AltaRed (Jun 8, 2009)

londoncalling said:


> Although a bit dated (2017) some may find this link on global production interesting.
> 
> https://www.msn.com/en-ca/money/top...ho-you-might-think/ss-AAxVRXT?ocid=spartandhp


Bad data in that MSN article. The USA produced under 10 million barrels per day of oil in 2017 (just look at the weekly EIA* charts for real data). The MSN article must be including gas and gas liquids, and/or product imported for refining and re-exported (double counted).

* https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRFPUS2&f=W


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## londoncalling (Sep 17, 2011)

Thanks Alta. I would expect MSN to be less credible than EIA.


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## james4beach (Nov 15, 2012)

Alberta Premier imposes mandatory oil production cuts... crude futures seem to be soaring as a result, up over 4% going into Monday am

Oil Jumps Most Since June as Canada Cuts After Saudi-Russia Pact


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## newfoundlander61 (Feb 6, 2011)

Some oil stock trades today.


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## kcowan (Jul 1, 2010)

Ottawa finds a new way to prevent oil shipments:
by discouraging shipment by rail


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## AltaRed (Jun 8, 2009)

kcowan said:


> Ottawa finds a new way to prevent oil shipments:
> by discouraging shipment by rail


I don't think this is a new 'obstacle' as your post spins it. Transport Canada has had legitimate concerns for many years on train crew fatigue. This is easily solvable with more train crews. One can't keep adding locomotives and unit trains without more operators, including minimum 2 crew trains, sleeper bunks and the like. We shouldn't expect anything less to mitigate catastrophic accidents involving 'dangerous goods'.

Added: Clearly Notley needed restrict production to boost revenues but it will hurt the integrateds somewhat more than anyone else. It has also impacted stocks such as PKI and ATD.B which will feel margin squeeze too, or at least a perception of margin squeeze. Not sure why CNR is down since the oil companies still want to ship as much crude as possible.


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## humble_pie (Jun 7, 2009)

kcowan said:


> Ottawa finds a new way to prevent oil shipments:
> by discouraging shipment by rail




link deals with a 7-month-old gummint study

it's a may 2018 memorandum treating causes of major rail accidents, special emphasis on the 2013 lac Megantic tanker fire tragedy

so far i'm not aware that any feds have recently raised this issue. All you have posted is a cbc story cobbling the lac Megantic inquiry together with alberta's present oil price crisis.

it's to be expected that anti-liberal activists will twist the cbc piece into another see-how-evil-ottawa-keeps-slamming-western-canada story - which it is not.

looks like you are fake-newsing w the above


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## sags (May 15, 2010)

Former Sask. Premier Brad Wall said the rail shipment system is at full capacity with current oil, grain and increasing potash loads. He doesn't view increased rail as a viable solution.

Oil analyst Jeff Rubin says US fracking has increased US production by 6 million barrels a day and production is steadily increasing by 10-15% a year. Nobody forecast it years ago.

The US refiners will be back on stream in a few months, but the big problem is still overproduction and increased shipping doesn't solve overproduction problems.

Rubin says the solution is to build refineries near the resource and finish value added products. He said governments should forget about pipelines and use the money to build refineries.

It is all too complicated for Canadians to understand. The oil "experts" themselves have differing opinions. 

Maybe the Federal government is right to hold back on rushing into new pipelines as the only solution.


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## kcowan (Jul 1, 2010)

AltaRed said:


> Not sure why CNR is down since the oil companies still want to ship as much crude as possible.


I think because the public perceives that this will be an impediment to expansion?


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## AltaRed (Jun 8, 2009)

The ability for the US to increase oil production HAS been known for years. US EIA oil production numbers that I linked above speak for themselves. That is not the issue. A lot of US refineries are configured for our dilbit and it is counter-productive to 'reduce' existing dilbit supply through increased upgrading and refining capacity. The constraint is not dilbit refining capacity - it is transportation takeaway capacity. That said, a case can be made to upgrade/refine increased supplies of dilbit that might come on in the next 10 years. Imperial/ExxonMobil's proposed expansion of Kearl is an example of expansion creep https://majorprojects.alberta.ca/Details/Kearl-Oilsands-Mine-Expansion/3556

No publicly traded company is going to risk spending the capital for more upgrading and/or refining capacity for the reasons I already talked about up thread. It's a Catch 22 of spending capex on capacity increases and reducing differentials at the same time, and requiring 10-15 years to make it pay out (never mind a 25-30 year amortization). Gov't entities will have to provide guarantees. Not only that issue, but more upgrading and refining capacity in Canada will also increase our GHG emissions. By shipping dilbit to the USA or Asia, we shift that problem elsewhere. 

Jeff Rubin has been around long enough that he should know the economics (lack thereof). He must be playing for air time/media attention.


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## AltaRed (Jun 8, 2009)

kcowan said:


> I think because the public perceives that this will be an impediment to expansion?


Or negative connotations to operating ratios.... Who knows why the market does what it does.


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## kcowan (Jul 1, 2010)

Dumping the stock because of a potential margin squeeze is mostly a traders approach. But the inability to hire and train additional staff could be a valid reason (constraint to growth)?


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## peterk (May 16, 2010)

AltaRed said:


> Not only that issue, but more upgrading and refining capacity in Canada will also increase our GHG emissions. By shipping dilbit to the USA or Asia, we shift that problem elsewhere.


Great example of the perverse nature of having international climate accords being implemented by national governments. What a sham.


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## nobleea (Oct 11, 2013)

For sure refining it here is a good idea. But once it's refined, we still need to ship it out. Regardless if it's bitumen, crude, or diesel, we produce more in Alberta than we use. The decision to refine is an economic one, while the need for shipping is a logistics issue.
Pipelines can ship whatever product you want. The current TM pipe has been batching multiple products for decades now.


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## Mechanic (Oct 29, 2013)

It amazes me that people will protest a pipeline, citing safety and environment, while not worrying about it travelling across the country in tanks, by rail and truck.


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## humble_pie (Jun 7, 2009)

Mechanic said:


> It amazes me that people will protest a pipeline, citing safety and environment, while not worrying about it travelling across the country in tanks, by rail and truck.




i don't believe ms Notley's call for oil trains has anything to do with judgments on relative safety of rail tanker vs pipeline. It seems she perceives rail shipment as helpful in the current overproduction emergency, that's all.

one doesn't have to be an economist to ask how, if world oil pricing is indeed discounting WCS by $40/barrel, does anyone imagine that WCS delivered by railcar will fetch any price higher than the going rate of $10, though

altaRed has done his usual insightful job of pointing out that there won't be any oil trains ready for at least another year, not until late 2019. That future date is likely to coincide with a successful conclusion to one of the pipeline proposals, in which case a massive new railcar alternative will be useless. What kind of railway company would commit to investing in new locomotives, building new oil tanker trains, just in case maybe these might be put into use sometime in 2020? even worse, such trains would be obsolete the minute a new pipeline starts to flow

there are rumbles these days that XL is on again, that transMountain is inching forward, there are even rumbles that newly elected gummints in new brunswick & quebec will look approvingly on energy east. Meanwhile enbridge has been able to pipe alberta oil at least as far as quebec city. Progress in baby steps.

perhaps this is too simplistic, but the way i see it, the big chill for canadian oil these days is not the capacity or lack of pipelines or oil trains. The big chill is the competitive price undercutting caused by the vast production of US shale oil & gas. This problem is not going to go away soon.


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## AltaRed (Jun 8, 2009)

humble_pie said:


> perhaps this is too simplistic, but the way i see it, the big chill for canadian oil these days is not the capacity or lack of pipelines or oil trains. The big chill is the competitive price undercutting caused by the vast production of US shale oil & gas. This problem is not going to go away soon.


The big discount is due to the ability of the refiners to prey on desperate Canadian producers underbidding each other to sell their production into constrained transportation capacity. With enough pipeline and/or train capacity, the discount would disappear (to normal levels for quality). That is why the futures for January have jumped some and will jump a lot more as the surplus is dissipated. US shale oil doesn't compete with dilbit for refinery space since the two oils are very different. Gulf Coast refineries would love more Canadian dilbit because competing supplies from Venezuela and even Mexico Mayan is declining in volume. That is where the oil trains will go.

Notley is doing the right thing to curtail production. This will cause underbidding to vanish over time and oil in storage to be cleared. It hurts certain companies like Imperial, Suncor and other refiners who take a disproportionate hit on production curtailments due to reduction of spread and production constraints.


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## james4beach (Nov 15, 2012)

There appears to be a sharp turnaround in Alberta crude prices, with a significant narrowing of the spread vs WTIC.

https://www.bloomberg.com/news/arti...l-shipments-keep-climbing?srnd=premium-canada



> Heavy Canadian crude surged to the strongest level in more than a year as rail shipments keep rising even as production was curtailed.
> 
> The discount of Western Canadian Select at Hardisty, Alberta, to West Texas Intermediate futures shrank $2.10 to $10.5 a barrel Monday, the narrowest since August 2017, data compiled by Bloomberg show. That’s from about $29 a barrel at the end of November


Smallest discount since August 2017 sounds like a big improvement.


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## on2qc (Jan 4, 2019)

james4beach said:


> Crude oil is down over 8% so far today. Gasoline futures are down 7% so we should get cheaper prices at the pump any day now. The gasbuddy national chart is already showing the cheapest gas since Dec 2017.
> 
> I'm not sure I can believe we're in any kind of energy bull market with crude falling that much in a single day.
> 
> ...


I have not had time to read all the comments in this topic; however, the Canadian dollar is still going to see a boost when oil prices increase. Its still a petro-dollar of sorts, even though there's much more to the economy than oil, oil still has a huge influence on CAD.

Here is what I think is going to happen in the next few years: pro-oil forces are greatly under-estimating the leaps and bounds happening with electric car battery technology. Oil as a source for energy is going to have less demand as the shift to electric cars for commuters occurs. Now, the costs aren't low enough yet for trucks and higher powered vehicles (yet), but its beginning to get there for commuter cars.

Think of it like this: the Nissan Leaf, first gen, cost around $40k and had a 24KW/h battery pack, and it didn't have a level 3 charge capability to receive 80% charge in 20 mins or less. The range of that first generation was around 100-120 clicks.

In 2018/2019 we are getting several 60KW/h vehicles, the Chevy Bolt, Tesla has its model 3 coming out, and Nissan Leaf is getting a 2019 "E-Plus" update with a 60KW/h battery pack that is capable of fast charging AND through the better battery these 60 KW/h battery vehicles are going to get you range around 350-400km. When you get to 400 clicks of range and can recharge most of the battery pack in 20 mins or less at level 3 stations, that's a game changer. The cost of all these vehicles (without government incentives) are in the $35-40k range.

Just do the math here: less than 10 years time vehicles at $40,000 are going from slow charging and 100km ranges to fast charge capable machines that get you 400km. That's a near 400% improvement in range for the same cost in a short time frame.

Come 5, 10 years from now, electrics will be able to replace the family car or van. These aren't toys, I've test drove a Chevrolet Bolt and the car has better acceleration than most gas vehicles and is a serious vehicle.

Oil is not going to rebound when demand drops for the commuter car fleet, electricity is way cheaper and cleaner as a source. Here in Ontario coal has been completely phased out, our neighbors in Quebec and Manitoba use almost 100% hydro-electric pure green grids.

The future is not going to be kind to oil markets, and we have to adjust. I'm not convinced building new pipelines all over the place will solve anything, if demand for oil in the world keeps oil prices suppressed for the long term, you can build 50 pipelines and it won't help bring back jobs if it costs more to produce it then to sell it.

All this east vs west nonsense doesn't mean anything, the reality is that the vehicle fleet will change radically in the next ten years and oil won't be powering many of the new cars sold come 10 years. Just wait until the prices for battery technology get trucks and SUV's into the electric game. You can't run semi-trucks and jets on electric right now (or the forseeable future) so oil will continue to be valuable as a commodity, but it really will meet its match for the vast majority of commuter cars. The day is actually coming sooner than anyone thinks.

And I know its not necessarily true on this forum, but for all the hyperbole you see on Twitter and other platforms, the fact is eastern Canada is sourcing oil from North America more and more, not less. Check this article out for some fact checking:

https://www.nationalobserver.com/2018/11/13/news/guess-where-quebec-gets-its-oil

...objectively, Quebec isn't buying oil from Saudi Arabia to amount to anything, yet I see political talking heads bring up "Saudi oil and eastern canada" time and time again. Its a false narrative that doesn't exist!

What we need in Canada right now, more than anything, is to tame down this silly east vs west nonsense. Albertans are hurting, its not the fault of eastern Canadians, its the global oil glut and the potential lack of future demand that is forcing change. Alberta needs to structurally shift to expect the demand for commuter cars to fundamentally switch to electric in the next decade. By 2030 you'll see it happen. A majority of cars sold won't have internal combustion engines, and that won't be Quebec's fault to parade around as a political talking point/punching bag to increase vote share in western ridings. Eastern Canadians are already sourcing more domestic oil as each year passes, we're doing all we can to help the west.

Do we really need a new pipeline when rail cars can get the job done in the next 5-10 years until the switch to electric commuter cars takes place? Investing billions into a pipeline whose very existence won't have the demand come 10 years makes little sense.

Does this make me anti-Alberta? Its just objective fact in my view. I want Albertans to have a growing economy, I want good jobs in Alberta. I have nothing but the best of hopes for Albertans. I hate it when the east vs west nonsense comes up... I love Alberta, actually. Beautiful place, beautiful province. Oh, and Jasper is many times better than Banff.


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## Pluto (Sep 12, 2013)

on2qc said:


> Come 5, 10 years from now, electrics will be able to replace the family car or van. These aren't toys, I've test drove a Chevrolet Bolt and the car has better acceleration than most gas vehicles and is a serious vehicle.


This possible (probable?) scenario is interesting. Reportedly, in any residential block, maybe containing a dozen or more homes, there is only enough hydro capacity to charge 3 electric cars at any one time. Hence, if your scenario unfolds, investing in boring electric utilities, and electric infrastructure compaines seems to be promising. Might be a huge increase in hydro prices as well, as demand increases and infrastructure upgrades need to be paid for.

Even so, I'm not convinced demand for oil will drop off as much as one might think. Cars are only one use for oil among many uses.


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## Eder (Feb 16, 2011)

Alberta has many legitimate beefs that people out east don't care about.


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## AltaRed (Jun 8, 2009)

I believe On2qc is over optimistic on the rate of change to EVs, and most people in dense urban areas are over optimistic because they don't see the perspective of the country (or the planet) as a whole. Sure, it makes 100% sense for everyone to have an EV in big urban areas but it makes no sense in most rural areas nor most of the developing world. Global oil demand is still increasing by 1-1.5 million barrels of oil per day and the only thing that has ever dropped that rate of growth materially has been recessions....so far. I do believe current global oil demand of about 100 million barrels of oil per day will not likely climb much further and will roll over at some point. Still passenger transportation is only one part of oil demand and I would be very surprised if oil demand for transportation drops by more than 50% by the middle of this century. Most large commercial, industrial and construction equipment will still operate on diesel, jet fuel and heavy fuel oil for decades/centuries to come. Intra-city delivery transport can certainly convert but I don't see trans-continental B trains traversing the loneliness of our highways converting any time soon despite enthusiastic cheer leading by some. Diesel is simply too portable and cost effective for that to occur.

Virtually all of the globe's current oil production is economic at these crude price levels and new discoveries are being developed at these prices every year. Technology has also made a huge difference in reducing development and production costs. Oil may well be priced at between $50/B and $100/B for decades to come. It will harder than most expect for electricity to compete with oil on an energy unit basis due to the huge additional generation and distribution costs have to be passed on to consumers. Only stiff application of fuel taxes will ultimately make a significant shift and that almost demands a coordinated policy decision among developed countries. Despite all the lip service, most countries will not be stupid enough to get so far ahead of the curve as to curtail their own economic growth by becoming non-competitive with their trading partners. This is not the same as the global cooperation on getting rid of DDT or CFCs in the past. None of those global efforts cost much, if anything, in economic growth. I believe there will be a transition, but it will be much longer and slower than CC advocates will ever imagine.

As far as pipelines go, I agree with On2qc that much of the rhetoric about Eastern Canada oil imports from overseas is overstated and overblown. It is mostly Irving in NB that imports most of its production, with some of that coming from the US. Valero and Suncor are slowing picking up more Western Canadian crude to the extent they can get lighter crudes as cheaply as imports, and dilbit only to the extent their process units can handle it. It is simply economics for most of Western Canadian oil to go to the Midwest or Gulf Coast, or offshore to Asia via the West Coast. Energy East simply didn't and still doesn't make sense and it is a good thing it died. 

That all said, TMEP is indeed critical to expand our markets to Asia and it will get built one way or the other. So will Keystone XL albeit more volume to the USA certainly does not add market diversity. I don't see the need for any further pipeline expansions beyond the 3 already being discussed, i.e. Enbridge Line 3 replacement, Keystone XL and TMEP. Even Keystone XL is questionable in my opinion but I disagree with On2qc that our pipelines will not remain full of oil shipping for decades to come. Oil demand is simply not going to come down near as quickly as some believe.


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## Eder (Feb 16, 2011)

Do we really need a new pipeline when rail cars can get the job done in the next 5-10 years until the switch to electric commuter cars takes place? 


Yes....most likely
https://www.theglobeandmail.com/bus...re-soaring-in-canada-but-still-fall-short-of/


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## OnlyMyOpinion (Sep 1, 2013)

I assume thisis the relevant part?:
_Quebec now has a quota system to require auto dealers to sell a minimum percentage of electric cars or pay a penalty. British Columbia in November expanded its zero-emission-vehicle policy to say that no gas cars can be sold in B.C. after 2040._

Nanny government dictating what we must buy for our own good?


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## AltaRed (Jun 8, 2009)

OnlyMyOpinion said:


> I assume thisis the relevant part?:
> _Quebec now has a quota system to require auto dealers to sell a minimum percentage of electric cars or pay a penalty. British Columbia in November expanded its zero-emission-vehicle policy to say that no gas cars can be sold in B.C. after 2040._
> 
> Nanny government dictating what we must buy for our own good?


Except the BC program won't unfold as issued despite greenies in their high rises in the Lower Mainland thinking otherwise (the world stops at Abbotsford or Nanaimo for most of them). Once a sensible gov't gets back in, the Horgan/Weaver debacle will be fixed. The initiative is simply too aggressive to be workable (much of the remainder of BC is ROFL over this). Vast stretches of BC can't function without ICEs even if there is a multi-billion dollar program to electrify the province's highway system. Even if that were the case, non-competitiveness will drive business investment south of the border where WA state will be that much more competitive. 

Even if all new registrations were EV by 2040, the existing ICE fleet will continue to operate for decades thereafter. That forester 100km back in the wilderness isn't going to have solar panel generator/battery pack packages sitting around waiting to charge up his crew cab. He will keep repairing that gasoline fueled crew cab for decades to come. So will half a million or more RV owners who are not likely going to tow a 30 footer with an EV.

I have no doubt gov't programs will accelerate the demise of ICEs in favour of EVs but it won't be remotely the idyllic scenario being painted by idealists in ivory towers.


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## on2qc (Jan 4, 2019)

Pluto said:


> This possible (probable?) scenario is interesting. Reportedly, in any residential block, maybe containing a dozen or more homes, there is only enough hydro capacity to charge 3 electric cars at any one time. Hence, if your scenario unfolds, investing in boring electric utilities, and electric infrastructure compaines seems to be promising. Might be a huge increase in hydro prices as well, as demand increases and infrastructure upgrades need to be paid for.
> 
> Even so, I'm not convinced demand for oil will drop off as much as one might think. Cars are only one use for oil among many uses.


Oil isn't going to drop like a rock, no, because there will still be lots of demand in the heavy truck sector (batteries aren't yet at capacity with affordable price for semi trucks, and won't be for some extra time). Of course Elon Musk and other innovators are out there to change this, but the next ten years will finally reach the status where commuter cars finally have the prices down to where the masses can afford them.

I'm not going to sit here and pretend I know it all, I don't know how the commuter car gas fits in to an exact percentage of oil consumption. I know its a huge percent, but I don't know specifics. What I do know is that commuter cars will absolutely flatten out the demand curve for gasoline products.


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## on2qc (Jan 4, 2019)

AltaRed said:


> I believe On2qc is over optimistic on the rate of change to EVs.


I'm a climate moderate. I don't come from the perspective of wanting to switch to electrics to "stick it to oil companies". I happen to be very pro-nuclear for areas that don't have hydro generation options, because I don't believe we have enough solar and wind capacity to make the grid stable, I've upset many environmentalists with my positions, but nuclear is the only carbon neutral method to generate stable, reliable electricity that is still relatively cheap to purchase.

Regarding cars, I've seen electrics and test drove them and have some acquaintances driving them. They have improved at a rate where come another 5-10 years, there will be no need for internal combustion engines for the commuter car fleet.

Now I am not going to sit here and tell you absolutely, without a doubt, this change will absolutely take place in 10 years flat. But the math says batteries are getting cheap enough and energy dense enough that its very likely.

For what its worth, electric vehicles are a better quality product. Fewer moving parts, fewer things that can go wrong. You should seek out a Chevy dealer in your area that has a Bolt to test drive, you'll go away with a new vision of what electric cars are. Incredibly fast acceleration for a commuter car, quiet and smooth, and it really is the future.

This is the problem the oil industry faces: Canadian oil particularly is competing in a world market where the oil we sell is undersold. Bitumen is a lower grade quality of oil, and when commuter cars do switch to electric the demand curve is going downward. I don't see oil rebounding to levels that make Alberta have the same revenues that occurred in the 2000's. You could build 5 new pipelines to every coast and the Gulf and I don't see where this solves the problem with the oil glut. You have to sell 4-6x the oil to get the same revenues we had 15 years ago because of the price difference today. I recognize what happened in Lac Megantic, but the honest truth is that Alberta should get used to beefing up rail transport of oil. Its the best option to get oil to port, whether its out to the Pacific, over to the Atlantic, or down to the Gulf. Rail is going to be the best option, not fighting over pipelines endlessly. Demand for oil is going down fast when the commuter car fleet switches to electric.

I don't buy this crap that rail is too dangerous to transport oil, just get upgraded oil tankers and ensure proper safety procedures are followed and its a fine way to transport oil and get it to market today, not in 10 or 20 years from now. And a pipeline isn't going to be worth it when cars are headed toward electric very soon. I just don't see the cost/benefit in the long term.

There is no conspiracy here, electric cars are genuinely better. Go try one out if you don't believe me.


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## on2qc (Jan 4, 2019)

Eder said:


> Alberta has many legitimate beefs that people out east don't care about.


Honestly, there aren't many legitimate beefs I've heard. Its mostly just angry people typing anger into keyboards online.

The reality is far more complicated. You might have an easterner say something stupid about Alberta, then someone from Alberta makes an equally stupid comment about the east, but at the end of the day we're in it together.

If Albertans who actually believe in separation think that's a way out, what would an Alberta that is a different country do when faced with an even more anti-pipeline BC in where Alberta is no longer in confederation to debate them. Alberta would be debating from the outside without a voice at the Canadian table anymore. Silly separatists really haven't thought things though very clearly. LOL

Alberta is never going to separate, and the Americans aren't helping you guys out either since the Keystone XL issue is constantly hung up in courts because no one wants it in their back yard going through Nebraska and other areas.

Face it, the only beef you have in Alberta is the fact that oil is difficult to get to market no matter what direction you go. Just throw it on rail and you'll be fine. The real problem is the globally set price of oil, that's what is hurting you guys. You could have 5 new pipelines and you still couldn't get a price that is decent right now. It isn't all pipelines! That isn't my fault, or eastern Canada's fault. OPEC opened up production a few years back, and the American discovered shale oil production in the past 20 years. That's what has changed the fate of Western Canadian Select. We all know it, so let's stop fighting like a bunch of children and accept that Canada is one kick ***, great country to be in. All of it. Alberta is beautiful, but so is Quebec and BC.

I know Albertans hate listening to this, but the key to success is to diversify. Alberta needs another core industry to rely on, just like Ontario has had to adjust away from manufacturing in the last 20-30 years. Its tough to transition, but it will have to be done.

I see more similarities between Ontario and Alberta than differences. Both provinces have been shellacked with global economics. Ontarians have had to retrain, and while manufacturing will still be important, there had to be diversification. Alberta is much the same. Oil will continue to be a revenue generator, but the 2000's aren't coming back. Retraining and diversification is the key to success.

There's more similarity between the west and the east than you'll even realize. Pain happens everywhere.


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## doctrine (Sep 30, 2011)

The primary reason oil is up because of speculation on a US-China trade deal. The secondary reasons are more typical - cuts from OPEC, Russia, Canada, and other natural depletion due to lack of capital investment, combined with increased consumption due to lower prices, and increasing use during winter months leading into the summer driving season. But in the short term, the swings are mostly US-China trade.


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## on2qc (Jan 4, 2019)

doctrine said:


> Alberta already upgrades and refines its own oil; more than enough for all its own needs and that of many of its neighbors. Are you suggesting Alberta puts gasoline and jet fuel in pipelines to California and the US East Coast?
> 
> Energy East could have been under construction had Trudeau not forced it to be cancelled. Same with Transmountain.
> 
> Heard some murmurs that the Trudeau government might sink the Transmountain pipeline. They are not at all interested in progressing construction and are looking for a way out, which might just be to bury it, since no one will buy it.


I tend to observe what people do, not just what they say. The government clearly wants to build TransMountain, but its facing the same legal challenges it always has and is slow going because of it. I see no reason to believe they bought it to kill it, it would have died on its own accord therefore there wouldn't have been a need for purchase if they don't want to build it.

Trudeau is doing the middle of the road dance: pro-environment, but also pragmatist when it comes to the fact that we want to get oil to market as much as possible. Energy East was killed long before Trudeau came to town, because provinces in the east don't want it running through their land. Particularly Quebec. Quebec is not much different than BC in this regard, BC has forces fighting TransMountain tooth and nail in the courts.

I defer to what I said earlier, just use rail and beef up rail transport. Its here now, it can ramp up quickly, and we can adjust when oil becomes less in demand going forward as the vehicle fleets convert to electric in due time. Pipelines won't solve Alberta's problems longer term. Rail transport isn't particularly dangerous when proper tanker cars are bought and safety procedures are followed. We need to get over this rail-phobia and just accept its the only way to transport oil across vast distances at low cost and without any legal opposition to amount to anything. If we get beyond rail-phobia, we can forget about the pipeline debates.

Trudeau probably made a blunder buying the TransMountain pipeline: he got no political points for it, although Albertans should be happy he bought it they aren't. He isn't able to overcome the legal opposition any easier than the company that previously owned it. We're not a Chinese dictatorship where an autocrat dictates and the legal system adjusts to what the autocrat says, we are a nation with the rule of law in a democratic government with people's rights under a constitutional system. Courts will decide whether TransMountain can go forward as much as Trudeau.

He would have been better off just letting TransMountain die and beefing up rail transport.

But again, we're back to square one: Alberta would have to sell 4x-6x the volume of oil it currently sells just to begin approaching revenues from the mid 2000's into the early 2010's before the oil crash because we're getting nothing for our oil. Because of OPEC and the shale boom. There isn't enough demand to sell that volume of lower grade, thick, gooey bitumen when sweeter shale oil is available from North Dakota. Alberta has a long term problem, it isn't going to change even if 3-5 new pipelines come online.

If people would take the political lenses off, Alberta's problems would become more focused and we could address them as a country better. I for one thing Trudeau genuinely wanted to help Alberta with the TransMountain purchase, and he didn't realize the legal challenges would be as difficult as they are. Albertans are piping hot mad at Trudeau, yet Harper didn't get anything accomplished on this file because of legal opposition and courts. The truth is that Albertans should have equal amounts of anger at Harper, the only difference is that he has (C) beside his name instead of (L) and (L) isn't as accepted as a household brand in Alberta. That's all that is really going on right now with these caravans/truck brigades dancing around in the streets. Its almost all politics with little substance. All that is happening right now is ridings in Alberta and Sask. will go from 60-70% Tory to voting 90% Tory come the next election. The entire rest of the country will be roughly the same, the Conservatives aren't netting much with this oil and carbon tax outrage. Latest polls I've seen show Trudeau hanging onto the west coast and the east just fine.

Whether its a Lib or a Con it honestly doesn't matter, the problems are far bigger than a government.

Personally, I didn't even vote in 2015. I was too lazy to show up. I have at one point or another voted for either Con, Lib, or NDP, so I'm versatile when it comes to my politics. I don't think the brands really differ as much when they actually are faced with governance. I didn't vote for the Trudeau government, but I don't see all this seething hate online toward him as justified. He bought TransMountain because he genuinely wanted to help Alberta, problem is he rushed into it and didn't think it over, so its probably a wasted billion dollar investment that won't see the light of day. I don't think its something to hate him and vilify him, however.

Bottom line is that BC and Quebec don't want pipelines, there's serious opposition in those two provinces. People have rights here, and the courts will uphold those rights when there is opposition. Harper couldn't change that, Trudeau can't change that.


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## Eder (Feb 16, 2011)

on2qc said:


> Its mostly just angry people typing anger into keyboards online.


Yes...this is the problem, thanks for pointing that out.


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## AltaRed (Jun 8, 2009)

What is missing here in the discussion is that most AB producers today are likely resigned to a circa $50 oil price (WTI) long term, for decades to come, in their capital spending decisions...with short term geo-political or logistical aberrations both ways. So it matters a lot whether the price they get at the wellhead is $30 or $38 assuming a $40 WCS price and a $2 (pipeline) transportation charge or a $10 (rail transport) charge. Rail simply is not a long term solution due to the much higher transportation costs. THAT is the part On2qc is not getting. The difference between pipeline and rail transport is all margin (or lack thereof) for the producer, and essentially all the profit. ANYTHING that reduces shipping costs to a reliable quantity is a win for AB producers. A few companies are making 5+ year rail commitments for some of their oil production but that is a 'hedge' against severe pipeline issues just like they would hedge forward some/all of their production.

Most prudent AB oil producers can now make money at $35-40 WCS oil price levels. The ones that cannot and have blown their brains out will simply wither away. Remember that almost all foreign oil companies have now left the AB/SK oil scene so the better Canadian companies that remain have the ability to sustain themselves. Don't sell them short. Our production levels will continue to grow, albeit modestly. Certainly not along the lines currently being projected by CAPP, NEB, etc. though. As I have already said, there is enough opportunity for Enbridge Line 3 replacement, TMEP, and maybe Keystone XL though I suspect Keystone XL will be underutilized longer term.

Further, I agree that aggregate oil revenues returning to levels seen in the first decade of this century are gone. There is no oil producer around that remotely believes that. If AB cheer leaders, i.e. politicians, believe that, they are extremely naive or are simply playing optics for their electorate. There is a rude awakening in both AB and SK politics if their governments are remotely projecting that and I don't think that most savvy AB or SK residents believe that golden age is coming back either. The current rhetoric is emotional. Time will tell I suppose.


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## OnlyMyOpinion (Sep 1, 2013)

on2qc said:


> ... The reality is far more complicated. You might have an easterner say something stupid about Alberta...


On this we agree. The rest, not so much. 

You suggest the problem is global oil prices and the solution is more oil by rail. Really? 
Oil-by-rail has increased, from 137 to 327 thousand barrels per day from Oct 2017-2018. Aside from safety concerns, AR has pointed out that it is a very expensive mode of transport. The proposed expansion of TM was an economic project (and could still be). It was derailed by a vocal minority (with US group funding), who were supported by a minority government in Victoria most interested in staying in power - not by "BC", and aided by an incompetent 'Federal' government that has no genuine interest in acting federally - only in being re-elected.

In short, its the political leadership 'we've' chosen and the priorities (or lack thereof) that they have.


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## peterk (May 16, 2010)

AltaRed said:


> I have no doubt gov't programs will accelerate the demise of ICEs in favour of EVs but it won't be remotely the idyllic scenario being painted by idealists in ivory towers.


The question I have is does the delusional of a quick and orderly transition to EVs make it outside of San Francisco, all the way to Wall Street? Or do the oil futures markets and Big Oil's long-term investment plans (and the bank's willingness to give them loans) have a realistic view of the situation which won't lead to a large production undersupply and price spike in the medium term?


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## AltaRed (Jun 8, 2009)

The court derailment might have been mitigated had Ottawa done a better job initially on indigenous consultation, i.e. 2 way dialogue rather than mostly just accumulating concerns, and then working with KM to make more adjustments in the project to mitigate/alleviate these concerns. Plus many times, the consultation process does not clearly articulate that consultation does not mean approval or veto. I've had some, but limited, first hand experience some 15-20 years ago on exactly these issues and it is human nature not to be as realistic as one should sometimes especially when the other side is confrontational/aggressive/hostile.


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## AltaRed (Jun 8, 2009)

peterk said:


> The question I have is does the delusional of a quick and orderly transition to EVs make it outside of San Francisco, all the way to Wall Street? Or do the oil futures markets and Big Oil's long-term investment plans (and the bank's willingness to give them loans) have a realistic view of the situation which won't lead to a large production undersupply and price spike in the medium term?


There will no doubt be more hesitancy in financing development projects, but that will most likely be on the margin... meaning not funding projects with weak economics to begin with. I suspect financiers have for the past 1-2 years already been insisting on base planning scenarios with minimal growth in oil prices as the test for a 10% return on earnings. They might even insist on a 'lower' price test of, for example, $30 to test for positive EBITDA. Could that possibly lead to under-investment and a medium term short spike in oil prices? Certainly it could as that is the nature of commodity prices anyway...cyclic. 

I foresee more oil price volatility in the future as the industry tries to find a way for equilibrium as global demand rolls over into slow secular decline. A wild card is always OPEC since they have to keep hunting for a sweet spot of oil revenue (price vs volume) to fund their domestic budgets. It is every bit as critical for Russia as it is for Saudi. Without sufficient oil revenue, Russia's economy would collapse and Putin would be overthrown eventually.


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## Eder (Feb 16, 2011)

EV's will hardly put a dent in energy usage...in the USA only 29% of total energy is used for transportation...and only 50% of that 29% is used my cars/light trucks. So only 15% of all fossil fuels burned in the USA is by us peons. Add in that most power is produced by fossil fuels in the USA make EV usage much less green and impact to CO2 emissions inconsequential.

I used the eia.gov source. Maybe recent graduates with Bachelor of Political Science degrees can supply alternative facts.


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## AltaRed (Jun 8, 2009)

A good reference point for power generation in the USA are these 2017 stats https://www.eia.gov/tools/faqs/faq.php?id=427&t=3 Oil use (diesel mostly) is virtually non-existent and likely for remote settlements only such as in Alaska and maybe Hawaii. Coal use continues to decline with power plant retirements in 2018 and mostly picked up by Nat Gas generation. Still, about 62% from fossil fuels with a trend from coal to nat gas. The fossil fuel/renewable ratio is not going to change much over time since electrical usage will continue to grow.

I agree EV impacts on overall oil usage will be less than what advocates suggest. 15% of current US oil demand of 19 million barrels per day is only about 3 million barrels per day. Expand that to global demand of 100 million barrels per day and 15-20% is only 15-20 million barrels per day by circa 2040-2050. News of oil's death is greatly exaggerated.


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## doctrine (Sep 30, 2011)

Even if the billion or so people living in the world's most advanced economies - North America, Europe, Japan, etc, transition to 100% EVs within 10 years, oil use will still go up. There are another 6.5 billion people in the world and they won't be able to afford the electric cars, nor will their governments be able to subsidize them. They will, however, be able to afford the much cheaper gasoline powered vehicles.


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## AltaRed (Jun 8, 2009)

I actually think mass production EVs will become less expensive than ICEs over time, even without subsidy, due to simplicity in design. But electrifying developing countries will come at huge cost and rates won't be inexpensive. Even if ALL personal use vehicles become EV, oil demand will still be well up into the 70+ million barrel per day range. The offset will be more electrical generation with nat gas, LNG, and even oil since most countries likely won't have enough hydro-electric sites to keep up with demand, and I truly believe solar and wind just can't become as big a source as advocates thin.


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## on2qc (Jan 4, 2019)

AltaRed said:


> What is missing here in the discussion is that most AB producers today are likely resigned to a circa $50 oil price (WTI) long term, for decades to come, in their capital spending decisions...with short term geo-political or logistical aberrations both ways. So it matters a lot whether the price they get at the wellhead is $30 or $38 assuming a $40 WCS price and a $2 (pipeline) transportation charge or a $10 (rail transport) charge. Rail simply is not a long term solution due to the much higher transportation costs. THAT is the part On2qc is not getting. The difference between pipeline and rail transport is all margin (or lack thereof) for the producer, and essentially all the profit. ANYTHING that reduces shipping costs to a reliable quantity is a win for AB producers. A few companies are making 5+ year rail commitments for some of their oil production but that is a 'hedge' against severe pipeline issues just like they would hedge forward some/all of their production.
> 
> Most prudent AB oil producers can now make money at $35-40 WCS oil price levels. The ones that cannot and have blown their brains out will simply wither away. Remember that almost all foreign oil companies have now left the AB/SK oil scene so the better Canadian companies that remain have the ability to sustain themselves. Don't sell them short. Our production levels will continue to grow, albeit modestly. Certainly not along the lines currently being projected by CAPP, NEB, etc. though. As I have already said, there is enough opportunity for Enbridge Line 3 replacement, TMEP, and maybe Keystone XL though I suspect Keystone XL will be underutilized longer term.
> 
> Further, I agree that aggregate oil revenues returning to levels seen in the first decade of this century are gone. There is no oil producer around that remotely believes that. If AB cheer leaders, i.e. politicians, believe that, they are extremely naive or are simply playing optics for their electorate. There is a rude awakening in both AB and SK politics if their governments are remotely projecting that and I don't think that most savvy AB or SK residents believe that golden age is coming back either. The current rhetoric is emotional. Time will tell I suppose.


Fair enough, but why does rail transport have to remain stagnant? We've socialized a pipeline to try and bring down costs, why not socialize the rail system (to the extent that it can be) and bring that cost down? Government is buying rail cars, check. Government can force CP and CN and the smaller players to reduce prices due to sheer influence if nothing else.

Just an idea... Why does it have to remain $10 per barrel to transport by rail? It can be reduced. Trudeau didn't think the TransMountain purchase through, he could have spent that money building a government owned railroad to the Pacific from Alberta. That would have made the price for rail much more effective.

South of the border I don't look for Keystone XL to be built. Trump, the eccentric dictator lite, can't overcome the rule of law to get it built. I doubt a future leader can, either.

Let's face it, when it comes to pipelines they are mostly dead on arrival. The mood always changes when its coming through your own back yard.

In so far as the residents of Sasketchewan and Alberta, they are as varied as anywhere else. I jokingly say most ridings will get 90% Tory, but the truth is Alberta has a socialist government when Ontario has a Tory so hot he's burning blue. Go figure. There are trends, sure, but there are lots of different types of people everywhere, even if they don't always make a majority.


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## on2qc (Jan 4, 2019)

OnlyMyOpinion said:


> On this we agree. The rest, not so much.
> 
> You suggest the problem is global oil prices and the solution is more oil by rail. Really?
> Oil-by-rail has increased, from 137 to 327 thousand barrels per day from Oct 2017-2018. Aside from safety concerns, AR has pointed out that it is a very expensive mode of transport. The proposed expansion of TM was an economic project (and could still be). It was derailed by a vocal minority (with US group funding), who were supported by a minority government in Victoria most interested in staying in power - not by "BC", and aided by an incompetent 'Federal' government that has no genuine interest in acting federally - only in being re-elected.
> ...


LOL well you are certainly entitled to an opinion different than mine, doesn't hurt my feelings. Alberta and Ontario are more alike than they are different, IMO. You step off a flight in Calgary and you think, gee, am I in a suburb of Toronto with licence plates from the 1970's that need to be updated? 

I'll stand by what I've said: Trudeau is a moderate, he's genuinely interested in helping Alberta with the TransMountain purchase. He probably didn't think the move through that much, didn't realize the power of the federal government can't overcome the legal challenges to it, but he tried.

The real challenge going forward is going to be demand. Unless OPEC shuts down lots of production, or shale starts to dry up in the US, Alberta's fortunes aren't going to change regarding oil royalties and oil related jobs, no matter who is in politics in this country. I repeat, when the electric car fleet ramps up and becomes real competition instead of demonstration cars, that's what will set the longer term course. That's when demand will flatten out and fall even if OPEC drops production.


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## on2qc (Jan 4, 2019)

Eder said:


> EV's will hardly put a dent in energy usage...in the USA only 29% of total energy is used for transportation...and only 50% of that 29% is used my cars/light trucks. So only 15% of all fossil fuels burned in the USA is by us peons. Add in that most power is produced by fossil fuels in the USA make EV usage much less green and impact to CO2 emissions inconsequential.
> 
> I used the eia.gov source. Maybe recent graduates with Bachelor of Political Science degrees can supply alternative facts.


When you say energy usage, you have to define it. Provide me some links to what you're talking about if you want to talk about it. What link on eia.gov are you referencing and what energy use are you referring to? If you're including energy production for electricity, specifically in the USA, then okay.


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## on2qc (Jan 4, 2019)

AltaRed said:


> I actually think mass production EVs will become less expensive than ICEs over time, even without subsidy, due to simplicity in design. But electrifying developing countries will come at huge cost and rates won't be inexpensive. Even if ALL personal use vehicles become EV, oil demand will still be well up into the 70+ million barrel per day range. The offset will be more electrical generation with nat gas, LNG, and even oil since most countries likely won't have enough hydro-electric sites to keep up with demand, and I truly believe solar and wind just can't become as big a source as advocates thin.


Actually, we've been talking about rail. Locomotives use DMU or Diesel Multiple Units. A DMU is essentially an electric motor with a diesel engine running an electric generator. The actual torque and power is produced by an electric motor, which is more reliable, and can deliver the torque with fewer moving parts, thus more reliability.

Electric motors aren't toys, they are used in very high power applications. The problem has and always was energy storage and the battery technology.

I agree: wind and solar will never be backbone stable grid production. They will be able to supplement and help and assist, but my bet is on nuclear as the future unfolds. We have to do something about carbon, and nuclear is the clear way to have a stable grid and be carbon neutral in areas without massive hydro-electric generation options such as Manitoba or Quebec.


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## kcowan (Jul 1, 2010)

on2qc said:


> I'll stand by what I've said: Trudeau is a moderate, he's genuinely interested in helping Alberta with the TransMountain purchase. He probably didn't think the move through that much, didn't realize the power of the federal government can't overcome the legal challenges to it, but he tried.


OK you are granting a lot to a political light weight. I can agree with the objective but I can't agree with the outcome. They were all congratulating themselves on the gas pipeline and now look what's happening?


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## AltaRed (Jun 8, 2009)

on2qc said:


> Fair enough, but why does rail transport have to remain stagnant? We've socialized a pipeline to try and bring down costs, why not socialize the rail system (to the extent that it can be) and bring that cost down? Government is buying rail cars, check. Government can force CP and CN and the smaller players to reduce prices due to sheer influence if nothing else.
> 
> Just an idea... Why does it have to remain $10 per barrel to transport by rail? It can be reduced. Trudeau didn't think the TransMountain purchase through, he could have spent that money building a government owned railroad to the Pacific from Alberta. That would have made the price for rail much more effective.


Railroads are complex private enterprises hauling a wide variety of goods for thousands of customers over large interconnected systems over multiple ownerships of track and equipment. Other than taxpayer owned locomotives and cars such as Notley's choo-choos which should be in service by the end of 2019, there is no socialization to be had, plus the taxpayer has to get a return on that investment. There is not a remote chance in hell that rail transport can be reduced by more than $1-2/Bbl even if taxpayers own the equipment. Pipelines are orders of magnitude less expensive, and orders of magnitude safer from accidents and spills, and faster than trains being switched and idling on sidings from time to time enroute to the Gulf Coast.

If you limit it to Canada, who is going to pay the tens (more likely hundreds of billions) for all the double tracking to handle another X unit trains per day to the coast, and do you want them traversing every hour of every day up/down through our Rocky Mountain National Parks, the Kicking Horse Canyon, and along the Columbia River, and down the Fraser Canyon to Burnaby, BC? Do you have any idea of the geography between Edmonton and Vancouver? Full cycle rail transport costs don't come close to the lower costs of building and operating pipelines.


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## AltaRed (Jun 8, 2009)

on2qc said:


> Actually, we've been talking about rail. Locomotives use DMU or Diesel Multiple Units. A DMU is essentially an electric motor with a diesel engine running an electric generator. The actual torque and power is produced by an electric motor, which is more reliable, and can deliver the torque with fewer moving parts, thus more reliability.
> 
> Electric motors aren't toys, they are used in very high power applications. The problem has and always was energy storage and the battery technology.


I am familiar with how locomotives work and I am quite aware of, and have had hands on familiarity with, for example, ~10,000HP electric motors driving heat transport pumps in nuclear power stations, etc. 

Who is going to pay to electrify the railroad system and eliminate all grade crossings to permit overhead wires? Who is going to maintain and repair all the km of line that would get wiped out every year due to icing and/or sometimes daily avalanches in our mountainous areas? Converting the North American railroad system, even just the Class 1 railroads, would cost hundreds of billions of dollars, maybe trillions, and until it was complete, it would be chaos switching between diesel electric and electric locomotives on the huge interconnected railroads on the continent. Places like Europe and Japan are easy to electrify given the amount of traffic and the relatively small distances.


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## Eder (Feb 16, 2011)

Meanwhile in the real world our Canadian companies are making money & paying taxes elsewhere...

A joint venture led by Enbridge (ENB +0.3%) and including Kinder Morgan (KMI -0.1%) and German storage tank company Oiltanking propose building an offshore export terminal that will be capable of receiving supertankers on the Texas Gulf coast.The companies say the Texas Colt Offshore Loading Terminal would be able to receive and fully load Very Large Crude Carriers, which can carry as much as 2M barrels of oil.

Incredibly we only allow American super tankers off our left coast...


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## james4beach (Nov 15, 2012)

Natural gas is up 17% today (in one day), and appears to be up 20% over the last couple days:
http://quotes.ino.com/charting/?s=NYMEX_NG.G19

What the heck is going on in the energy markets?


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## AltaRed (Jun 8, 2009)

It is winter across much of the USA. When big storms hit the mid-continent and there is snow on the ground in the heavily populated eastern seaboard, NYMEX goes bonkers! Always been that way.


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## doctrine (Sep 30, 2011)

Natural gas storage levels are well below average. There has been a drop in production due to incredibly low prices over the last few years. The current cold snap looks like it will be around for a week or more. Supply and demand.


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## AltaRed (Jun 8, 2009)

doctrine said:


> Natural gas storage levels are well below average. There has been a drop in production due to incredibly low prices over the last few years. The current cold snap looks like it will be around for a week or more. Supply and demand.


I agree storage levels are down from the 5 year average but both US supply and demand has been surging over the last several years, supply due to shale production and demand due to NG replacing coal electrical generation plus economic growth. https://www.eia.gov/outlooks/steo/report/natgas.php It is really this week's winter weather over much of the USA that has cause spot prices to spike.

Anecdote: I had responsibility for the supply of AB and BC nat gas from our operations to customers for a number of years in the late '80s and early '90s. Whenever brutal weather hit the USA, the phones rang off the hook from US customers looking for ANY supply at ANY price. The sales guys would pressure my dept to bring on additional supply, which of course was an oxymoron. The reason gas prices would spike is because no one had enough supply to sell more.... Duh! 

Sadly, with the advent of shale gas AND offgas from shale oil production in the USA, the USA is generally well supplied, and not needing much from Canada. That said, they didn't put enough in storage this year (costs the gas utilities a lot of money to pay for storage of gas many months in advance of winter need, e.g. April-October, and that money is a 'sunk cost' until they can recover the costs selling it out of storage in the heating season of Nov-Mar. Fascinating business though.


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## fatcat (Nov 11, 2009)

Canadian oil reserves at risk from policies to combat global warming, think tank warns
https://www.theglobeandmail.com/bus...-risk-from-policies-to-combat-global-warming/

i own suncor primarily as a hedge against us dollar inflows and though i read their report, i wonder to what extent they are understating political risk ?

aside from the fact of the current anti-energy climate, i suspect we are just beginning to see the effect of the greenies on and against oil and gas development and suncor may well be optimistic in their convictions (which are based on 2%)

am i exhibiting self-deluding-bias when i conclude that the future for energy and resource extraction in canada is politically doomed ? i really think it is, am i wrong ?

time to sell suncor and buy some gold perhaps


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## agent99 (Sep 11, 2013)

Interesting to read concerns above about oil dropping to below $50/bbl compared with what is happening now.

From BMO March 30th 2020:


> May Brent crude was last seen down $2.17 to US$22.76 while Western Canada Select was down $1.12 to *US$3.94 per barrel*, well below production costs.


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## james4beach (Nov 15, 2012)

Yes, I would imagine that Western Canada Select at $3.82 a barrel is bad for business.

It's still shocking to me that the Saudis decided to crash the price of oil at the same time a global pandemic was brewing. Two financial shocks at the same time.


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## andrewf (Mar 1, 2010)

For most of the world, a big decline in oil prices is stimulative, so maybe not so shocking?


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## doctrine (Sep 30, 2011)

james4beach said:


> Yes, I would imagine that Western Canada Select at $3.82 a barrel is bad for business.
> 
> It's still shocking to me that the Saudis decided to crash the price of oil at the same time a global pandemic was brewing. Two financial shocks at the same time.


From their point of view, it just accelerates the decline in US Shale which was coming, but not for another year or two. Better to inflict massive pain quickly, than to drag it out over years. They are in the ultimate position of power and at best will see the US and Russia come crawling back to them. At worst, other countries will have to reduce production and cede market share. It's really a fantastic win for them. This is going much better for them than 2014, when shale oil balance sheets were strong, capital was available, and prices were still higher.


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## nobleea (Oct 11, 2013)

doctrine said:


> From their point of view, it just accelerates the decline in US Shale which was coming, but not for another year or two. Better to inflict massive pain quickly, than to drag it out over years. They are in the ultimate position of power and at best will see the US and Russia come crawling back to them. At worst, other countries will have to reduce production and cede market share. It's really a fantastic win for them. This is going much better for them than 2014, when shale oil balance sheets were strong, capital was available, and prices were still higher.


I'm not sure why Trump doesn't just call the saudis up and say stop this or your own your own for defence you backstabbing mofos. We're not going to guarantee your safety anymore. Given his penchant for isolationism etc, and the fact that US is/was energy independent, he can let the whole middle east descend in to chaos. THAT would be the ultimate power play.


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## doctrine (Sep 30, 2011)

nobleea said:


> I'm not sure why Trump doesn't just call the saudis up and say stop this or your own your own for defence you backstabbing mofos. We're not going to guarantee your safety anymore. Given his penchant for isolationism etc, and the fact that US is/was energy independent, he can let the whole middle east descend in to chaos. THAT would be the ultimate power play.


Well, the counter argument is easy. Oil demand has dropped 20,000,000 million boe/d. Saudi exports 7-10 million boe/d. How can they do anything to stop it, even if they stopped oil production and 90% of their economy? That's not a reasonable ask, they may as well give up US protection if that was even a credible threat. Either everyone cuts, or no one cuts. Saudi has no reason to do anything.


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## nobleea (Oct 11, 2013)

It's a conscious decision on SA's part. It is well known that their govt requires something like 60-80$/barrel to break even, so they are clearly taking the hit as an 'investment'.
I'm not sure I understand the reasons though. In CAD and US, if the production is shut in and the producing company goes bankrupt, the assets don't disappear. They just get scooped up by someone else for holding. SA needs the oil to evenutally climb back up, those N Amercian assets become economic again, and someone else takes a flier on them.


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## peterk (May 16, 2010)

doctrine said:


> From their point of view, it just accelerates the decline in US Shale which was coming, but not for another year or two. Better to inflict massive pain quickly, than to drag it out over years. They are in the ultimate position of power and at best will see the US and Russia come crawling back to them. At worst, other countries will have to reduce production and cede market share. It's really a fantastic win for them. This is going much better for them than 2014, when shale oil balance sheets were strong, capital was available, and prices were still higher.


I believe the latest narrative is that Saudi was being rash, and it won't go like they think it will. Russia can support its own oil industry indefinitely and stimulate its own economy with real money for a long time; they have their own means of production. Similarly, the USA, Canada and European countries could prop up their oil industry indefinitely if it felt like it, while continuing to subsidize green energy sources too.

Saudi will go broke, can't make anything on their own, nor be able to buy it soon. The rest of OPEC nations will also be in shambles. Russia and the USA will be laughing as they keep their own oil industry on life support, and grow the whole western economy at the same time with cheap oil.


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## andrewf (Mar 1, 2010)

Is Russia really in good economic shape? They are confiscating savings at the moment to maintain solvency. I think Russia can bear this downturn in oil prices much less well than Saudi can. Saudi has trlilions of dollars in reserves.

Putin can't afford for the Russian economy to implode. His personal safety is dependent on his maintaining power.





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## agent99 (Sep 11, 2013)

News Apr 20:


> WTI is seeing its steepest drop since 1982, just as the front month contract is about to rollover. Prices are down by 38%, with a barrel of crude in Cushing Oklahoma fetching just $11/bbl. Brent is doing a little better at $26/bbl and WCS prices have yet to be priced as we write, but were already trading at $11/bbl last Friday.


WCS was at $4.23 at close on Friday. I think it is priced at Gulf Coast. Not a good time for Alberta or Canada.



> Alberta Premier Jason Kenney tweeted on Monday that the price of WCS actually dipped into negative territory overnight — meaning Canadian oil companies are functionally having to pay to get rid of their product.


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## nobleea (Oct 11, 2013)

Wow, WTI as low as 0.90/bbl now. WCS is higher.


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## doctrine (Sep 30, 2011)

I saw $0.12 a barrel and there is a registered trade at $0.01. The May contract closes today. There is panic selling because no one wants to take crude for delivery in May.

Most oil followers will know most trading is now on the June contract. That's also down, but still at $22.

If there isn't a better time to buy oil stocks than when the index is $0 and most actual pricing, after blending and transportation, is severely negative, I don't know when you would.


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## james4beach (Nov 15, 2012)

Oil futures have gone *negative for the first time in history*

Update: ** May oil is negative $36 a barrel ... I repeat ... -$36 **

But this is just the current, expiring futures. The following month's futures are more like positive $20 to $30. So the -36 price is purely a crashing price due to desperation to dump the immediately expiring futures.


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## doctrine (Sep 30, 2011)

I see negative $7.50 a barrel now, a drop of $8-9 in under 20 minutes. 

There is a little financial engineering / consequences going on here, a lot of funds bought the May contract and have to unload it before it expires at the end of the day. So much easier to just trade the oil companies than to trade contracts.

However, the supply response is real. Real amounts of production are being physically shut down. This hasn't happened in decades at this scale. Some of the production will never return.


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## james4beach (Nov 15, 2012)

Boy I sure hope that some aggressive futures speculators didn't stupidly buy the crashing futures at $0.01 thinking "oil can't possibly go any lower". They would now be ruined.


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## doctrine (Sep 30, 2011)

There are a lot of losses. The May WTI contract is now trading at negative $26 $35 $40. Whoever thought it was a good idea to own crude for delivery in May is eating it. Whoever has free storage might make themselves millions.


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## agent99 (Sep 11, 2013)

CNN - This is NOT Fake news 


> US oil prices plunged, falling below $0 Monday. At one point, oil fell to $-40.32 a barrel. That's the lowest level since NYMEX opened oil futures trading in 1983.


Crazy world we live in right now.


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## john.cray (Dec 7, 2016)

@james4beach - I would appreciate if you could please explain the mechanics of the futures contracts' trading that leads to a negative price?


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## james4beach (Nov 15, 2012)

john.cray said:


> @james4beach - I would appreciate if you could please explain the mechanics of the futures contracts' trading that leads to a negative price?


I honestly don't know! And I am about to make a related post in a new thread...


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## agent99 (Sep 11, 2013)

john.cray said:


> @james4beach - I would appreciate if you could please explain the mechanics of the futures contracts' trading that leads to a negative price?


I don't know either.......

Perhaps it is a bit like when our hydro, nuclear and wind power (plus gas fired on stand-by) facilities produce more electricity than we can use. Excess gets offered on grid at negative price for short periods until demand picks backup. Less opportunity to store electricity than oil though.

Imagine that you are paying $X,000 a day or hour to transport your crude in a supertanker. You either keep paying until it gets sold, or offer it at a give away price? Probably other scenarios where it costs you more to not sell your oil at a negative price.

Crazy.

Here is a better explanation! 








This oil price crash isn't as bad as it seems — here's why


The contract for May delivery of U.S. crude dropped more than 100% on Monday to a record low, but longer term, things might not be as bad.




www.cnbc.com


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## :) lonewolf (Feb 9, 2020)

It cost a lot of money to shut the oil well off & start it back up again so sometimes they operate @ a loss

Looking @ the price pattern in bonds, silver, gold, stocks all look like they are ready to collapse over the next several months. Often silver collapses before stocks crater oil I think could be the canary in the coal mine for stocks.

The 90 year crash cycle has just started anyone that has lost a lot of money this year if you keep doing what your doing you will lose everything by the end of 2022. Which might be good when the masses lose everything they lose it so the authoritarian government will be gone.

Maybe the covid fake pandemic which is no worse then the flue was used to bring in martial law as the whole financial system collapses.


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## doctrine (Sep 30, 2011)

The June contract has now collapsed, down 5% as we speak to $10 but spiked down to as low as $6.50 - it was $26-27 just a week ago.

The vast majority of this can be attributed to a rush of money, billions, mistakenly being invested into oil ETFs like USO and HOU on the assumption they were a bet on an oil price rebound. 

In fact, that is the worst way to bet on an oil rebound and it is causing contagion in the futures markets as these funds are trying to unwind. Horizons has already cancelled new subsriptions for its HOU and HOD ETFs, which are being crushed. Look at the volume on USO. What a disaster. *1.5 billion shares* of USO traded in the last 2 days.

These traders should have been betting on equities rather than the commodity, as the price action is virtually identical outside of distortions, and you wouldn't get screwed by contango as the contracts roll over month to month.


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## james4beach (Nov 15, 2012)

Don't worry, something tells me those Horizons ETFs won't be around much longer.

Update: Horizons says HOU's NAV is now $0.37. Yesterday the price closed at $3.13 ... this Horizons fund has been wiped out.


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## Just a Guy (Mar 27, 2012)

Had a buddy of mine ask me yesterday what to do now that oils is negative. I told him buy oil, as they are paying you to take it. So he got some UCO at $1.34 yesterday and its $15.80 in after hours today. I should listen to my own advice.


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## capricorn (Dec 3, 2013)

Just a Guy said:


> Had a buddy of mine ask me yesterday what to do now that oils is negative. I told him buy oil, as they are paying you to take it. So he got some UCO at $1.34 yesterday and its $15.80 in after hours today. I should listen to my own advice.


I thought it was because of reverse split.


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## potato69 (Mar 21, 2018)

Woke up this morning and caught some dirtbag in my driveway siphoning gas into my car.


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## Foiwater (May 16, 2018)

potato69 said:


> Woke up this morning and caught some dirtbag in my driveway siphoning gas into my car.


That's pretty good lol.


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## james4beach (Nov 15, 2012)

I can't imagine touching any of these derivatives/ETFs right now. The CEO of Horizons himself was on BNN today after the close. If you want to find the clip, it was at 4:20 eastern. He basically said: you should not buy this thing (HOU or related ETFs) because they are trying to wind down the fund, the price is way off fair value, and the derivatives positions are causing problems.

He said you can still sell, because they are leaving the ETF operations in place so that market makers can absorb selling, from people who want to get out of the units.

How often does an ETF company ask the public, please don't trade this? Wow. They probably want to wind down all the oil related ETFs and shut them down, put that in their past and never speak of it again.


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## doctrine (Sep 30, 2011)

Just a Guy said:


> Had a buddy of mine ask me yesterday what to do now that oils is negative. I told him buy oil, as they are paying you to take it. So he got some UCO at $1.34 yesterday and its $15.80 in after hours today. I should listen to my own advice.


That is pretty funny. Too bad he only has 1/25th the shares as the day before.


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## Just a Guy (Mar 27, 2012)

Even if they did, it’s still a 1000% return before hand an, he made good money.


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## james4beach (Nov 15, 2012)

I found this receipt from during the covid crash. Just amazing, gas at 69.9 cents a little over a year ago.


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## MrBlackhill (Jun 10, 2020)

Yup, we went so low and now we are so high.

For Winnipeg (as on your receipt)


























Gas Station Price Charts - Local & National Historical Average Trends - GasBuddy.com


Compare gas and crude oil prices over time for the US Average, Canada Average, and your hometown. View charts for the past month to 10 years.




www.gasbuddy.com


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## doctrine (Sep 30, 2011)

With gasoline stocks below 5 year averages, there's not much relief in sight, even with the end of peak driving season. Gasoline consumption being saved by remote work is being offset by people moving outside the cities and also a total decimation in the use of mass transit; both gasoline and traffic are above or near pre-COVID levels in most major cities around the world. Canada has been a bit of an exception but is starting to pick up.


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## Spudd (Oct 11, 2011)

With a category 5 hurricane threatening New Orleans, I wonder how oil/gasoline prices will be affected. I remember after Katrina the gasoline prices went nuts. I googled it, and apparently oil prices did too.


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## AltaRed (Jun 8, 2009)

Spudd said:


> With a category 5 hurricane threatening New Orleans, I wonder how oil/gasoline prices will be affected. I remember after Katrina the gasoline prices went nuts. I googled it, and apparently oil prices did too.


A temporary aberration. Production will come back relatively quickly as long as onshore processing and pipeline transportation is not destroyed. Production is less at risk than pipelining, processing and distribution. Oil prices could actually fall if LA based refineries are knocked out for a month (as an example).


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