Are we now subsidising the oil patch?

[Dave_1963]

Yesterday, there was a story on Castanet about how gas price will be frozen at $119.9/litre because the Canadian dollar is trading a bit under the USD, so we will not be enjoying the cheap gas we are seeing in the US at the moment (cheapest gas I could find in the US on GasBuddy was about $2.34/US gallon). This got me thinking about a story I read on Castanet about a month ago, when oil was in the $80/barrel range. Canada's energy minister said if the price of oil dips below $70/barrel, it would severely impact production at the oil patch. Oil closed Friday at $66.75/barrel. Are the artificially high gasoline prices in place to continue to pay the rig workers salaries instead of layoffs (which would not look good for Harper and his energy plan)? They are now talking about $30/barrel oil in the near future....will we still be paying $5.44/gallon while our southern neighbors are paying $1-$1.50/gallon? The oil industry is starting to run out of excuses about high prices.

[Relentless]

They ran out of excuses long time ago!

[Captain Awesome]

If you see oil at $30/b, stock up on ammo cause it will be the sign of the end.

[maryjane48]

If you see oil at $30/b, stock up on ammo cause it will be the sign of the end.

it means a glut

[maryjane48]

yes it is kinda a joke we here still paying higher prices


The National Bank of Canada describes the high cost of gas as one of the “restraining” factors in the economy -- leaving less cash for Canadian households to spend on other items and contributing to a “soft” first quarter when it comes to overall retail sales

Read more: http://www.ctvnews.ca/canada/gap-betwee ... z3KWbYQ7MH


according to bank of canada the high gas prices are hurting canadians , but now you have harpers cronies saying the low price hurts canada , lol who to trust ? a bank of canada , or mein harper?

[Dizzy1]

according to bank of canada the high gas prices are hurting canadians , but now you have harpers cronies saying the low price hurts canada , lol who to trust ? a bank of canada , or mein harper?

There's a lot of good paying jobs that rely on the oil industry in this country, those jobs go and there's not much to fall back on, so it could be very crippling to the economy.

[maryjane48]

well that maybe true , i was just pointing out you have bank of canada saying high prices bad , and now other people saying low prices bad , and if we refined more oil and its derivatives for use here in canada would our dependance on selling it be as great ?

[hobbyguy]

The situation with lower oil prices is a two edged sword.

Good for consumers, especially in places where Costco has a gas bar. Kamloops and Prince George both have significantly lower gasoline prices, and the only common denominator is a Costco gas bar. Follow around on Gas Buddy, and you see that everywhere Costco has a gas bar, prices are lower than Kelowna. I guess they are the only ones who don't "play ball".

The flip side is that you may see a lot of disruption in the Canadian economy in the next couple of years if oil prices stay low. CERI forecast a significant drop in tar sands capital expenditures around 2016 some time ago. The lower oil prices make a lot of projects in the tar sands iffy at best. So you could see a big drop in new construction, and projects cancelled. This recent Bloomberg article lays out problems coming to oil sands around $75 bbl. Now they are lower. http://www.bloomberg.com/news/2014-11-25/oil-sands-keep-churning-with-crude-at-75-not-growing.html

There are an awful lot of Canadians that rely on the construction industry in the oil sands for a living.

And with new projects requiring $95 bbl. to be viable, a lot of jobs could be lost. It also makes me wonder if the pipeline proposals will die an economic death, because without the new projects to spur demand, who needs them?

The issue goes a lot further than what we pay at the pumps.

[John500]

Does no matter what the price of a barrel will be. The oil spin doctors always will have an excuse to keep the price at the pump high. And the politician will not do anything about that for the consumers. They are just too chicken sh-t

[Captain Awesome]

It also makes me wonder if the pipeline proposals will die an economic death, because without the new projects to spur demand, who needs them?

Wishful thinking on your part, hobbs.

First of all, oil prices didn't go down because there's no demand. Oil consumption is going nowhere but up.

Second, pipelines are planned decades in advance. Within that period prices can go up and down seventeen times and it has no bearing on pipelines feasibility.

[maryjane48]

well from what i read there is a over abundance of oil for sale now , im not sure how that equals demand going up

[Atomoa]

OPEC is pricing their oil super low to try and make North American wells unprofitable.

All capital investments by private companies into the oilsands were a 100% tax write off.

"The risk takers" - were the Canadian taxpayer and now that the the sands are producing, private companies are profiting insanely while Alberta posts their second deficit and will have to borrow money to keep their schools and hospitals open.

Seems fair. We take all the risk, they get all the rewards, and we give them the lowest tax rates, royalties and tax credits and subsidies. Oh, and they get foreign workers and all sorts of perks to help them along during the "squeeze" phase.

When it's all over - guess who pays to clean it all up?

[Captain Awesome]

well from what i read there is a over abundance of oil for sale now , im not sure how that equals demand going up

Demand can double but if the supply triples it's still creates over abundance.

[hobbyguy]

I agree CA. The difficulty for the pipeline companies will be shareholders who want dividends right now, and don't care about where the company is in 10 years, they will have moved on.

Of all the pipeline proposals, probably the XL and K-M proposals have the best chance of proceeding. Too bad Energy East has hit such headwinds, I still think that would be the best one for Canada as a whole.

But there won't be customers for the pipelines if Cenovus et al start cancelling projects in droves. That hasn't happened yet, but it is now in the realm of a serious possibility. Especially as it now starts to look like natural gas prices are starting to decouple from oil prices, which adds another huge risk factor for new SAGD projects. If natural gas prices were falling in step, then their cost base would too. But NG prices are holding up so far...yes, "so far", with emphasis.

I also wonder if you can sell many folks on pipeline benefits if in the end, gasoline prices are stubbornly high. The old "what's in it for me?".

[Static]

I also agree with CA. Pipelines also lock in their prices years in advance. In some cases, they are guaranteed their revenue no matter the amount of oil moved. Pipelines are excellent investments.