Saturday, April 30, 2016

Only In Your Dreams

Old myths die hard. One of them is the wild delusion of Canada as an "energy superpower."

First problem. A superpower, by definition, calls the shots. When it comes to oil production we don't call the shots. When it comes to the highest cost/highest carbon of the ersatz petroleum products, bitumen, we absolutely don't call the shots.

Sure we've got vast reserves of bitumen. Doesn't make a damned bit of difference.

In the world of oil there are two types of nations. Camp A would be the Middle Eastern producers with their fields of conventional "sweet crude" oil that can be produced, in some cases, for $3 a barrel. Those are what you can fairly call energy superpowers. They call the shots. We're feeling that right now.

Then there's Camp B which includes us. We don't have massive reserves of oil of the Middle East quality. We go after the grotty stuff that has to be mined and boiled out of the ground. That's the costly stuff.

Our oil bounty depends, as we're seeing today to our distress, on the willingness of the real energy superpower to manipulate world oil prices high enough to cover our costs and leave us a small profit - around $50 a barrel, depending on how you cook the books. We can't compete unless Camp A makes the market price we need. Economics 101.

The Saudis game the markets, they always have. That was the whole reason that OPEC was founded. It was for a collective of oil producers to exercise monopoly control. The Americans learned that in the 70s with the Arab oil embargo.

We shun monopolies as uncompetitive affronts to free market capitalism but not in this case because we, particularly Alberta, saw a magic carpet ride to vast riches and general prosperity. We became the home of the "blue eyed sheikhs."

The problem with belonging to Camp B is the constant worry about margins. The Camp A types can tolerate much lower oil prices than we can bear. To them, a 30 dollar a barrel price still yields profits. Not so for the Camp B types.

As margins narrow for the Camp B crowd, we succumb to the temptation to cut corners in order to prop up an industry that turns unviable. Otherwise the energy producers might just close up shop and pursue opportunities elsewhere. What does this corner cutting look like? Ask yourself why those massive tailing ponds in Athabasca have been left to threaten one of the world's great freshwater resources, the Mackenzie River watershed. Why aren't they getting cleaned up?

Why are Alberta and Saskatchewan unwilling to refine bitumen on site? Why do they insist instead on marketing hazmat dilbit through hazmat pipelines incapable of safely conveying their toxic sludge?

A lot of this corner cutting really comes down to externalizing costs by shifting risks elsewhere. That risk is offloaded onto other provinces by putting their wilderness, their rivers and their coastal ecology at risk, essentially free of charge. These miscreants don't even pretend to have the technology much less the infrastructure to clean up a spill or the wherewithal to properly compensate those they might injure.

The arrogance of these pricks in Edmonton and Saskatoon and Ottawa is appalling and, yes, I'm referring to Rachel and Brad and Justin too. Whenever I see someone like Brad Wall utter the word "tidewater" all I can think of is backpfeifengesicht (a face badly in need of a fist).

What these leaders are doing is an act of reckless endangerment. They have no right to inflict that on us, none. We don't exist to help them maintain the pretence that bitumen is economically viable. We, however, have every right to defend ourselves and what is ours, against them and their predation.

Post script: I was motivated to write this after enduring the cringeworthy spectacle of Saskatchewan's Brad Wall whinge about "tidewater" followed by Rex Murphy's slobfest over the petro-calamity also known as Newfoundland and Labrador.


Anonymous said...

A lot of real smart people mistook Saudi price fixing as a sign of peak oil production. As oil became scarce, we were told, the demand for our guck would inevitably rise and we'd all be rich - well at least those of us in Alberta.

Instead, it looks like we're approaching peak oil demand, with even the IEA predicting that it may occur in only 4 years from now. As renewables becoming cheaper and battery technology improving by leaps and bounds, the writing is on the wall for oil in general and our tar sands in particular.

The Mound of Sound said...

I expect all of that's true, Anon. Which makes it all the more infuriating that the feds and the petro-provinces would try to ram through a hazardous, corner cutting pipeline to our coast.

Toby said...

If the pipeline gets built it is inevitable that taxpayers will contribute. This looks more and more like a government make-work project.

Lorne said...

An excellent analysis that pierces the fog of propagandistic deception that our politicians and domestic oil producers love to to perpetrate and perpetuate, Mound. It guts the efforts of those CAPP commercials that love to B.S. us with commercials showing pristine wilderness that they are helping to 'protect' or 'restore':

Steve said...

better living with pipelines, the problem is they dont have a better pipe dream to sell.

the salamander said...

.. shift the risk .. a damning & apt description.. But should add useful & accurate terms like 'captured government' - 'too big to jail' - into any discussion or essay on the various mythologies or unicorn tales re Energy Resource Extraction in Canada eh?

The clarion call and trumpets 'to tidewater' is vomit inducing euphamism for pump it through Vancouver - jam it through temperate rain forest - slam it east via incredible reversible aged pipelines - wham it via the melting arctic 'wastelands' - but fer gawds sake and our shareholders & stock options n bonus bribes get it off to India China Gulf Coast upgraders or any willing trade partner - before the end times - hellelujah ! ! And by the by.. we aint got no stinkin petcoke here in Firewalled Conswervative Alberta - home n native land o Stephen Harper n Jason Kenney eh !

The good folks pimpin the drinkable tar beds gots some token buffalo dontcha know, grazin on the righteous grasslands that spring from the very tailings ponds aliens from space are studying. Now don't get too excited and think the fish upwind, downstream or belly up are nutritious and good to eat.. or anything in the nearby or connected foodchain. And don't be talking to the First Nations out thataway. those is known provacateurs, tree huggin redskins known to take immaculate bribes from Yanqui enviromentalists..

Why Mound, I was checking my email - just like Harper's spy services was checking my mail.. and lo I came upon an ad from TransCanada pipe pimps pitching Energy Security for all Canadians - and letting me know that every barrel of dilbit that heads east is a barrel that don't have to come from our military allies in Saudi Arabia .. the US of A .. Venezooayla .. or be inshored from offshore Newfoundland..

Anonymous said...

Haven't you heard? It is all about moving toward alternative energy in Saudi A. Yup...I'll go to bed tonight dreaming about that one.

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