# Looks like the price of oil may go up...



## Eder (Feb 16, 2011)

https://www.wsj.com/articles/drone-strikes-spark-fires-at-saudi-oil-facilities-11568443375

Of course Canada is not able to take advantage as our oil exports are sold to the USA for 1/2 price who will in turn sell it back to us.


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## AltaRed (Jun 8, 2009)

True for our dilbit which is takeaway capacity constrained, but less so I think for our light oil which mainly feeds existing refineries in Canada and WA state. I haven't done any real work understanding the size of the oil discount across all oil grades so cannot comment. However, that really has been the tragedy of the current landlock, i.e. lack of timely incremental pipeline capacity that needed to start to roll in circa 2015-2016. Canada as a whole would have benefited tremendously from a tax and GDP perspective had Western Canada been able to sell ALL of their crude at world prices, minus a technical quality and transportation discount, like occurs elsewhere on this planet. Canada has been unique in its willingness to shoot itself in its foot.

That said, whether there is anything but a short spike in oil prices due to the Saudi sabotage remains to be seen. What is pretty clear is that Saudi facilities are concentrated and vulnerable. The Houthis have been savvy in using small drones to disable or disrupt Patriot missile batteries, allowing bigger aircraft to get through to destroy key infrastructure. This may become a new normal if the Saudi coalition cannot actually accomplish an overwhelming defeat of the Houthis, and it is increasingly apparent they don't have what it takes to do so. I have been watching this unfold weekly for years and it is frustratingly inept. https://yemen.liveuamap.com/ Similar issue in Libya https://libya.liveuamap.com/


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## Topo (Aug 31, 2019)

Looks like some major damage. 

Question is will it be a short-term pop or last longer.


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## Eder (Feb 16, 2011)

The threat of escalation & outright war may affect oil prices longer term,however even if just a short pop in price we, in Canada, are caught with our pants down while *ALL* other oil producing nations are laughing at our posturing.

On another note and not on topic....I had a few brews last night with a friend that runs his own Canadian investment funds (which will remain nameless), He had returned from a presentation in Palm Springs...the gist of it was an auditorium full of high net worth people paying to hear advice on how best to most efficiently locate their assets to the USA...pretty telling.


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## m3s (Apr 3, 2010)

AltaRed said:


> What is pretty clear is that Saudi facilities are concentrated and vulnerable. The Houthis have been savvy in using small drones to disable or disrupt Patriot missile batteries, allowing bigger aircraft to get through to destroy key infrastructure. This may become a new normal if the Saudi coalition cannot actually accomplish an overwhelming defeat of the Houthis, and it is increasingly apparent they don't have what it takes to do so. I have been watching this unfold weekly for years and it is *frustratingly inept*. https://yemen.liveuamap.com/ Similar issue in Libya https://libya.liveuamap.com/


The threat of drones has been well known in the air defense realm for a long time. Defense industry has already developed counter drone technology and we've been testing it for a long time now. Late reaction always costs so much more than early prevention and adaptation. Frustratingly inept indeed. Ah well.. the stupidity is good for my oil and defense stocks I guess. Canadian and US generals have also agreed on major gaps in NORAD btw. Just like they identified the airline threat before 9/11 that only got the attention after the fact.


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## agent99 (Sep 11, 2013)

m3s said:


> The threat of drones has been well known in the air defense realm for a long time. Defense industry has already developed counter drone technology and we've been testing it for a long time now.


I wondered about that. Suppose a company like, say Exxon operates a large refinery is a smallish town in Texas. How would they protect themselves against a drone attack? With all the flammables around, it would take much to start a fire. Even a small hobby type drone could do it.


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## AltaRed (Jun 8, 2009)

agent99 said:


> Even a small hobby type drone could do it.


Most likely only if the drone targeted low pressure storage tanks which make a lot of fire due to the major presence of fuel. Pressure vessels and piping would (should) deflect most blasts that could be delivered by small drones. Obviously a military Predator type drone would be different. 

My initial guess is the size of the fire in the Saudi instance IS related more to the tank farm than it is to processing equipment and piping. Don't know which process this plant uses to convert sour crude to sweet crude but one of the products is obviously sulphur itself. 

One loses inventory from a tank farm but it is questionable enough damage would be done to wipe out the bulk of the tank farm negating the ability of the processing plant to have a place to pump liquids.

A paper on processing of sour crude for the chemically inclined https://core.ac.uk/download/pdf/30858314.pdf


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## james4beach (Nov 15, 2012)

NYMEX oil futures don't trade until Sunday? I don't know what hours they trade.

Why are you Albertans in such a hurry to sell Alberta oil so damned quickly? The oil isn't going anywhere, and it isn't losing value. Reality is, it will continue to be valuable, and it is being extracted and sold.

One might even argue it's in the best long term interest of the province to gradually extract and sell the oil, both for better management of the resource, and extended future benefit to all future Albertans. *The resource isn't going anywhere. There is no hurry.*

Listening to you guys rant and rave, one might get the idea the oil is "trapped" in Canada or something. Hardly the case! Canadian oil exports rise each year, and accounted for fully 48% of US crude oil imports last year.

Reality is, you guys (and I suppose Alberta in general) are just greedy. The extraction and export just isn't fast enough for your taste... take a long view for once. Pipelines already exist, and more are coming.

Such immense greed in Alberta, and you guys showcase it for us daily with your rantings about "poor little Alberta, suffering in poverty, because of these evil forces holding us back" -- get a grip!!


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## MrMatt (Dec 21, 2011)

james4beach said:


> NYMEX oil futures don't trade until Sunday? I don't know what hours they trade.
> 
> Why are you Albertans in such a hurry to sell Alberta oil so damned quickly? The oil isn't going anywhere, and it isn't losing value. Reality is, it will continue to be valuable, and it is being extracted and sold.
> 
> ...


Actually, the value of oil is going to decline in real dollars as alternative energy becomes cost competitive.
A few more breakthroughs in battery technology and we're there.

A great example is lithium batteries, in the past model planes were all gas because there just wasn't a light enough battery, now there are, and you don't fly many gas model planes.
The same thing will happen to most uses.


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## AltaRed (Jun 8, 2009)

James, what Albertans really want (and deserve the opportunity to obtain) is world prices, adjusted for quality and transportation, for their existing crude. They (and Canada) have been leaving about $20/bbl on the table with existing production. It is less of a volume increase that is important as it is price. You fail to understand the concept that if supply exceeds shipping capacity, buyers (refiners) can pick off the producers through bidding prices down. Increase shipping capacity and prices dramatically recover...which is what Notley's curtailment program, continued by Kenney, is trying to do. And of course, the industry wants to grow with production growth just like any company wants to increase sales, revenue and profit. Why not? That is what all shareholders expect from their companies, be they banks, consumables, or pick what you like.

With some 300 Billion barrels of economically recoverable crude (about 170 billion which is proven reserves), we are not going to run out of oil for well over 100 years (production currently in the order of 1.6 billion barrels per year. The math is simple if you care to do it. There is NO supply problem as far as the eye can see on the open prairie.

Added: Here is another stat... Canada (at 170 Billion barrels) has about 10% of of the world's proven reserves (an economically defined term), and just under 5% of world supply/demand of 100 million barrels per day. The US, Russia and Saudi currently supply about 30% of the world's oil demand. If anything, Canada is way behind the likes of Saudi, US, etc. when it comes to Reserves-to-production ratios, an important criteria estimating longevity. I don't think there is any fear of Alberta producing too much oil at all. Further, all the climate advocates on here presume oil is going the way of the dinosaur. World demand may well start to go into decline by 2030


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## Eder (Feb 16, 2011)

Our thread lasted 5 posts before a thread killer dropped in to do some name calling.

At any rate these drone attacks seem pretty efficient and hard to defend against. I'd hate to see tanks ablaze like Saddam did to Kuwait not too long ago.
Heres a couple vids of the damage...
https://mobile.reuters.com/video/20...y-fires?videoId=600161768&videoChannel=117760
https://www.theguardian.com/world/v...largest-oil-refinery-after-drone-attack-video


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## sags (May 15, 2010)

They say they used 10 drones. Where do they get 10 military style drones from ?


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## agent99 (Sep 11, 2013)

Eder said:


> At any rate these drone attacks seem pretty efficient and hard to defend against. I'd hate to see tanks ablaze like Saddam did to Kuwait not too long ago.


My very first job many years ago, was in an oil refinery. I had only been there one day when us young newly hireds were informed we were to receive fire fighting training. The refinery had of course a well trained and equipped fire and safety staff, but because there is such a high risk of fire, just about everyone was trained to use the fire fighting equipment. Not much different in Petrochemical industry where I spent most of my career athough there, we were more likely trained on how to evacuate fast!

Anyone with knowledge of how a refinery operates, would know where the vulnerable areas are. Drones are a newer added threat. My earlier question to MP3, was what is this counter-drone technology he mentioned? Is something that all refineries now install?


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## m3s (Apr 3, 2010)

The cold war era systems like patriot missiles in saudi arabia and kuwait were designed to counter manned aircraft and missiles. Drones are smaller and fly lower so you just need different defenses designed for them.

Raytheon anticipates international boom in counter drone sales


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## doctrine (Sep 30, 2011)

Well, my loading up on energy stocks in the last 6-8 weeks is going to pay off. At a minimum, there is going to be a risk premium coming back in, the one that evaporated last week when Bolton was fired; the current price absolutely reflects the possibility of Iran sanctions easing within the next 6-9 months. So min case is $3-5 a barrel. It could be more, but most of this infrastructure can be restored pretty quickly, even if they lost millions of barrels to ruptured tanks or other aspects. If the rumors are true that this attack did not come from Yemen (i.e. Iranian forces in Iraq), then there will be a larger risk premium coming.

All the more reason Canadians and Americans should be working together to expand energy infrastructure. No thanks to both domestic and foreign funded environmentalists who in many cases want Alberta oil straight-up shut down, shale fracking and the Alberta oil sands has made North America energy independent. Even if oil spikes, we have ample domestic supplies. 

Yes, thanks to Alberta, and thanks to fracking. How insulting that someone would throw this back at Alberta already. Maybe the situation will change a few decades from now, but wow, what a difference 10 years of development has done. Thank Alberta and the United States that we are not wholly reliant on the Middle East for oil. Because of those business investments and strategic decisions, we are not being held hostage. Because if we were, it would be bad. Very bad. Our entire civilization is built on oil. The whole industry should be held in high regard and celebrated, not lobbied for shut down.


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## james4beach (Nov 15, 2012)

doctrine said:


> How insulting that someone would throw this back at Alberta already.


What I'm challenging is the ridiculous narratives, being posted persistently, about a supposed disadvantage to Alberta due to evil forces working against them. What nonsense.

Alberta is doing just fine, and so is the energy industry. Canadians and Americans are working together for mutual benefit in energy security and infrastructure. Alberta's crude exports keep steadily rising. Money is being made. From all these overly dramatic stories of doom in the oil patch, you'd think energy companies aren't making any money.

So with Alberta consistently increasing exports and total sales, why all the complaining? Oh, they want "world prices", says AltaRed. Well, North America is a different market.

Middle east issues just don't matter that much, when there's a self sufficient North American oil market. And yet the greed shows up again, in threads like this, hoping that those "middle east troubles" will make Alberta richer.

*No, Alberta does not "deserve" world prices in oil.* I know you want it, but that doesn't mean you "deserve" it.

Alberta made its own bad policy decisions for years. Encouraged all this rapid oil sands development (which was not necessary). Kept royalties low, depriving the public of the extraction benefit.

I'm getting irritated by this greed. AB provides 43% of America's oil, more than all OPEC nations. Just blasting it out over the pipelines, in increasing amounts... always pushing for more oil sands extraction... watching the price stay depressed, and yearning for "world prices".


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## doctrine (Sep 30, 2011)

james4beach said:


> What I'm challenging is the ridiculous narratives, being posted persistently, about a supposed disadvantage to Alberta due to evil forces working against them. What nonsense.
> 
> Alberta is doing just fine, and so is the energy industry. Canadians and Americans are already working together for mutual benefit in energy security and infrastructure. Alberta's crude exports keep steadily rising.
> 
> ...


This isn't about deserve. The fact that we, Canada, actively prevent Alberta from achieving world prices, is patently stupid and directly equivalent to shooting yourself in the foot again and again. Yes, it has been growing, but it could have grown faster. It has succeeded in despite of, not because of, Canadian government policy which is 100% against Alberta.

As far as I'm concerned, we should support Alberta in exporting virtually as much oil as they can economically and safely produce. Every barrel they produce is more social services and a higher quality of life. Every barrel that they don't produce is one that someone else will. It's that simple. I want a Canada that is richer, not poorer and dumber. That wealth goes to some other country. And we lose out on the capital and business investments.

If Canada had double the oil production, great. Even more wealth for Canadians and money for social services. If we don't, someone else does. I think we've done just about enough enriching of overseas dictators. The combined current account deficit of the last 5 decades is how much again? How do those massive cities get built in the desert, housing more people than Canada in a country with less water than a small Manitobian lake? Time to throw that process into full speed reverse.

Oh, I'm totally okay with Albertans and subsequently Canadians getting richer at the expensive of bombings in foreign dictatorships. Cha-ching.


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## james4beach (Nov 15, 2012)

doctrine said:


> The fact that we, Canada, actively prevent Alberta from achieving world prices, is patently stupid and directly equivalent to shooting yourself in the foot again and again. Yes, it has been growing, but it could have grown faster.


Like you say, it is growing. That desire for faster growth is the greed... the Alberta energy industry pretends it isn't making money, which is a lie. There is lots of money being made. They just want more, and faster.

People on this board who worked in O&G got filthy rich. Huge incomes, massive net worths, ability to retire to an amazing lifestyle. But it isn't enough... is it?

I find this kind of greed shameful. It gives Alberta a bad image, too. It makes it look like a province of greedy oil extractors who _already got rich through multiple oil booms_, and yet who complain endlessly that it isn't enough, and who don't care about anyone else's interests. Even while exporting record amounts, Alberta keeps complaining.

One thing I've been learning over the years is that the most highly privileged in society tend to complain the loudest and most shamelessly. Alberta is a perfect illustration of this. Such _endless whining_ about 'not making enough money'.

Canada looks out for citizens' interests, for many stakeholders. In an advanced country like ours, you get some constraints. There are environmental concerns. There's indigeneous land. There are other people who live here besides big oil capitalists. Thank goodness we have governments in our country which actually look out for everyone's interests.


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## doctrine (Sep 30, 2011)

You think its a few fat cats getting rich off the backs of everyone. I see the billions of royalities and the billions more of tax revenues at the municipal, provincial, and federal level. A new barrel of oil produced in Alberta scores amongst the best in the world in terms of environmental and social ratings scales. Some call those that work in the industry evil capitalist greedy pig dogs, when they are providing employment for hundreds of thousands and over the years *hundreds of billions* of social services that improve the lives of everyone. With hundreds of billions of more to come in the decades ahead.

I don't work in the industry or live in the province. Thankfully there are also many, many other people just like me across this country that recognize the benefit this has provided and celebrate this industry. Albertans have been extraordinarily patient with other Canadians. Other countries have had civil conflict over far less.


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## james4beach (Nov 15, 2012)

doctrine said:


> Albertans have been extraordinarily patient with other Canadians. Other countries have had civil conflict over far less.


_Patient_ and frustrated about what exactly? Becoming some of the wealthiest people in the country, deriving enormous revenues just through the dumb luck of digging some substance out of the ground they just happened to be situated on top of? Continuing to export record amounts today through massive new pipeline capacities they wanted to (and succeeded) in building?

Alberta should be thankful for the position they are in. I'll say it again: I've never seen such a bunch of rich, privileged people complain so much about perceived unfairness and injustice. But this tends to be what rich people do, so I shouldn't be too surprised.


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## doctrine (Sep 30, 2011)

It's hardly dumb luck. Few other countries in the world have the capital and technological resources to extract and process such a difficult resource. In Saudi Arabia, they can stick a fork in the ground and make oil. Not so much in Alberta. Although I doubt you've taken the time to inform yourself.

I have informed myself. And thanks to people much like you, there has been a historic disconnect between equities and the price of oil. Alberta oil companies are trading at historic all-time lows on cash flow metrics. And they are profitable at $55. It doesn't make sense, and that makes a market opportunity.

Can't wait for Monday morning. I'm going to have a large bowl of popcorn for the market open. 

Let's close with a video of the largest oil processing facility in the world through which 7 million barrels a day of oil flows. Amazing that no one was injured. But you don't fix this in 48 hours. 

https://www.youtube.com/watch?time_continue=19&v=sz58GyPoY3o


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## james4beach (Nov 15, 2012)

Are you not catching on to what's happening here? The energy industry, which still is very profitable of course, is trying to mobilize lesser paid O&G workers (and sympathetic blue collar Canadians elsewhere) as a political force, using this bull**** story about extreme injustices and evil forces working against them.

It's just a ploy to gain more political power. The industry isn't in shambles. They are exporting record amounts to the US and new pipelines are coming online all the time. They are using an old trick, leveraging Joe Sixpack Trucker as a tool to get more power in government.

There are no big injustices against Alberta or the O&G industry. It's an extremely wealthy industry with a huge amount of political power, just trying to get even wealthier, as corporations always try to do. And *you're being used by them*, if you believe their narrative.

Don't be manipulated by the industry. Be a smart citizen and exercise independent thought. Go look up AB export stats, and US crude import stats. Look at the income statements of giant O&G firms.


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## kcowan (Jul 1, 2010)

It is sad that apparently smart people like James take such ignorant stances when Canada wastes billions importing oil from "bad" suppliers when they could be using domestic oil. But then he does not seem to care about budgets.


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## hboy54 (Sep 16, 2016)

This thread has such an Alice in Wonderland feel to it.

James starts and continues threads of how important an issue is global warming, while declining to not own energy shares, specifically ENB and SU as reported by him as recently as July IIRC. At the same time, AltaRed, who to the best of my knowledge no longer owns shares in oil and gas, comes to the defense of the industry.

Then we have someone like me, "greedy" oil investor. Surely, if the industry is greedy, then by extension the shareholders are greedy too. Yet, all I have done this past year, is rebalance, buying move energy shares as the stock prices are forever in freefall, to roughly maintain the same allocation. All my greed has gotten me is hundreds of thousands of dollars in losses. Meanwhile, James has or will sell some gold to also rebalance and maintain his allocation. I am greedy, he is not.

What do we do with our gains, mine greedy, his not greedy? Well, as above, I currently have no greedy oil gains, but I donated 200 MX about a year and a half ago to a specialty school of the arts. We are currently making our wills, and this same charity is to be a recipient of a hopefully large legacy. James has in contrast sufficient extra funds ... to go on vacations via airplanes, CO2 emitting airplanes, while at the same time being a major cheerleader of any and all climate change efforts of the current government. The hypocrisy is truly stunning.

I think I need to go listen to "White Rabbit" now.


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## Topo (Aug 31, 2019)

More likely any price surge would be short-lived, as both S.A. and the US are willing to put their strategic reserves in play.


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## Karlhungus (Oct 4, 2013)

You see greed james, i see envy on your part.


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## Mechanic (Oct 29, 2013)

I see Alberta's oil and gas industry as a resource industry, which all of Canada should be able to benefit from. If people choose to live and work in Alberta with the goal of increasing their personal wealth, nothing wrong with that. That is about doing what is in the best interests of your loved ones, by providing a good standard of living and enjoyment of life as far as I am concerned. No, I don't live in Alberta and I didn't work in the oil and gas industry but I certainly benefited from living and working in Alberta and serving the needs of those resource industry workers. I am in full agreement that Canada should enable the resources from all provinces to get to world markets too.


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## AltaRed (Jun 8, 2009)

Karlhungus said:


> You see greed james, i see envy on your part.


I think that is the real issue and it has totally derailed rational responses on his part. It is rare to see such a continuum of posts from James that have been so far out of whack with the fundamentals before. 

One may wonder why I bother responding to some of his posts. I don't do it nearly as much for him since I recognize he has a complete block on this subject, as a I do it for what I hope is informative information for other members of the forum.... assuming they are still reading dysfunctional threads as this.

To the extent the Saudi problem is anything more than a 1-3 week blip before getting most of its production back, there will be fundamental shifts on where the tankers go with their crude shipments. As an example, it will only take days for oil shipped via TM to Burnaby and Puget Sound to generally* match world oil price spikes because if it does not, some crude being shipped down TM will start leaving Vancouver harbour instead for Korea and China (to the extent tankers can be re-directed to pick up crude and to the extent of wharf loading capacity). Burnaby and Puget Sound will have to bid up their purchase prices to keep that oil coming to them rather than going elsewhere.

Eastern Canada oil prices will spike along with the rest of mainland USA, etc, etc. And yet the price increases for AB crude will be muted for the same reasons I have articulated before. Landlocked oil producers without takeaway capacity will still be bid down by US refiners who can pick of its Canadian sources. There is insufficient rail capacity to re-direct enough crude trains to make a difference. That is the real travesty as I have repeated time and again.

The US is not yet self-sufficient in crude. It produces about 12.5 million barrels per day and consumes about 19 million barrels per day. Some of that comes from Canada, but the rest is a complicated series of net imports. The impact of price increases will be immediate across the nation, even if the USA taps into the strategic reserve. Gasoline prices at our local pumps will start to go up within a week or so due to higher gasoline rack prices throughout Canada. When Canada starts to produce 6-8 million barrels per day of oil instead of 4.5 million barrels per day, and US production increases to about 15-17 million barrels per day, then at least North American demand can be supplied, but it will still be at world prices. As I think Doctrine said, regardless of NA becoming self-sufficient, it will always be at world price....because if not, tankers will go from the Gulf Coast to Europe instead of up the Eastern Seaboard. Oil is priced globally unless there are physical constraints and/or individual governments control the price.

* generally because there are transportation and quality adjustments that have to be made between source of supply and a particular refiner and that will all start to self-adjust as soon as tanker traffic is re-directed by buyers and sellers. One can better believe the oil traders from both producers and refiners have been putting in 18 hour days since the Saudi strike.


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## Eder (Feb 16, 2011)

This might be huge...suspicions that rather than drones from Yemen , cruise missiles from Iran were used to damage the refinery...

https://www.wsj.com/articles/suspic...de-yemen-11568498542?mod=cxrecs_join#cxrecs_s

That changes everything if true...escalation is perhaps unavoidable.


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## AltaRed (Jun 8, 2009)

Eder said:


> This might be huge...suspicions that rather than drones from Yemen , cruise missiles from Iran were used to damage the refinery...
> 
> https://www.wsj.com/articles/suspic...de-yemen-11568498542?mod=cxrecs_join#cxrecs_s
> 
> That changes everything if true...escalation is perhaps unavoidable.


I agree that could have larger consequences and effect. If true, that could mobilize a concerted Western effort to take out entrenched Iranian presence in a number of locations, e.g. Iraq and Syria, perhaps Iran itself, and some risks about Russian involvement. Any significant disruption to oil supplies will cause exactly what Russia wants, significantly better prices for their oil (and any increased volumes) they sell, and they need it desperately given the state of their finances. This could be as much Russian driven disruption as it is Iranian driven.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> One may wonder why I bother responding to some of his posts. I don't do it nearly as much for him since I recognize he has a complete block on this subject, as a I do it for what I hope is informative information for other members of the forum.... assuming they are still reading dysfunctional threads as this.


I certainly appreciate hearing from someone who knows the oil and gas industry from the inside and reading your sensible responses to some posts that seem so out in left field (pardon the pun).

I just wish I didn't have to go back and forth between two threads.

Is there no moderator that can't combine them into one?

ltr


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... It's just a ploy to gain more political power. The industry isn't in shambles. They are exporting record amounts to the US and new pipelines are coming online all the time.


Since new pipelines are coming online "all the time", it should be easy for you to provide references right?

IIRC, something like one new pipeline came online with rejected or withdrawn pipelines including Enbridge’s Northern Gateway, Energy East including the proposed Eastern Mainline and the Mackenzie Gas Project.

TMX has been approved but if there's no problem - why did the Liberals buy it?

Why's it taking over eleven years to expand/reverse the Portland-Montreal pipeline? 
For about the last three years, it has pretty much been decomissioned.


Cheers


*PS*
Given the Liberals felt they had to buy from Kinder Morgan who was trying to expand on what was there, I suspect TMX fits the withdrawn category.


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## AltaRed (Jun 8, 2009)

Some reinforcing data https://www.thecanadianencyclopedia.ca/en/article/pipeline part way down below the chart reinforces what has NOT happened. The last export pipeline to get built was Keystone which started in operation in 2011 from Hardisty to Cushing.


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