Monday, March 09, 2020

I'll Bet Teck Isn't Crying Now

If anything, Teck Resources should be breathing a sigh of relief that it chose not to proceed with its $20 billion Frontier mine project.

While the usual suspects - Kenney, Scheer, the Calgary Petroleum Club and Canada's petro-cheerleader, Post Media - will be blaming it all on Justin Trudeau, the jig is up and JT doesn't wear this one.

There's just way too much lower-carbon oil on the market, a glut. That's always bad news for high-cost/high-carbon/low-value bitumen, the oil market's red-headed step child.  Good oil, cheap; crap oil, cheaper. Can't be helped.

Now, Trudeau isn't off the hook entirely. He did get a lot of hopes up when he made his pilgrimage to Houston to assure the oil posse that no country would find 173-billion barrels of oil in the ground "and just leave it there." No, no, no - he told those hombres that Athabasca was in Mardi Gras mode and they could count on us.

I wonder if Justin would repeat that same boast today? I'm thinking not so much.

As for Teck, I guess they didn't want to commit seppuku - ritual suicide, Japanese style. Only a few months earlier Teck had to take a $900 million write down on its one-fifth share of the flailing Fort Hill mine.  They knew that financial markets were turning their backs on bitumen and coal. Even Captain Austerity, Jason Kenney himself, was musing about his all-but-broke government becoming a last resort/life support lender to the Tar Sands operators. That's almost as dumb as Trudeau buying that pipeline.

And just how bad is it? It's bad enough that the Post Media gang stubbornly insist that the West Texas Intermediate price is somehow valid for Athabasca bitumen. No mention whatsoever of Western Canadian Select which is the price for prairie bitumen. So how's that going? Brace yourselves. Dave Climenhaga of offers this:
Last night when I last looked on my handy-dandy cell phone app, West Texas Intermediate was down to $27.69 US, and Western Canadian Select, our tarsands special, was trading at $14.43.
Hardly makes a man eager to dig that 173-billion barrels of tarry sludge out of the ground, does it?

It's enough to make a grown man weep or, in the case of the Calgary Herald's Chris Nelson, wonder if Jason Kenney's policies were lifted from The Wizard of Oz.
Heck, we’ve seen more five-year plans than Joseph Stalin. It’s more of the same, rosy, budget-balancing revenue projections: another $8 billion in revenue, 55,000 more jobs, 2.8 per cent GDP growth and a $700-million surplus in the 2022-23 financial year? 
What an absolute crock. Look, if politicians are going to do the heavy lifting that balancing this budgetary mess entails, they’ll do so in the first 18 months of their mandate. They aren’t going to do the nasty stuff close to another election. 
Yet in the year ahead, we’ll be borrowing almost $7 billion. Of course, after that, the money will pour in and save us all. Really? Are we Munchkins here?
Kenney placed his own head on the platter when bragging the budget would be balanced without affecting front-line services in key areas. 
That promise is like one of those tattoos you get in Vegas. Never forgotten but always regretted. 
Sure, well-paid consultants can browse the provincial books before pointing out the bleedin’ obvious: that we pay more per head for public services, yet this doesn’t translate into better outcomes. That’s simple number-crunching.

...Humans don’t like change. We’re lazy critters. The way we currently do things is the way we like ‘em. Therefore, if funding cuts are imposed to reduce the billions we now borrow, don’t expect any re-evaluation of how services are delivered. 
Not a chance. Instead, those cuts will be borne by front-line services. It’s the simple way, because it leaves the system itself intact. Plus it annoys the public, which helps pressure the politicians to back off. 
A final word on Teck Resources. There was a time, not that long ago, when the Teck controversy might be a thing for a couple or three weeks at least with accusations and recriminations and finger-pointing aplenty. It seems that time is over, prematurely consigned to our "past."

There are other things to grab our attention, bigger things, and they're coming on hot and heavy. Teck, who cares?


John's aghast said...

I took a quick midweek trip (by ICE vehicle) to Edmonton, via Valemount last week. (Why not, gas was only 85.9 cents/litre!) What an eye opener! We were the ONLY occupant in the motel twice, the restaurants were mostly empty and I've never seen so much Caterpillar equipment parked, and for sale. A number of yards with in excess of 100 pieces of dozers and excavators!
They need not worry about their tar sand though. They can use it all to patch their disastrous highways! I have NEVER encountered such a stretch of potholes!
I say if they want to separate, by all means wish them a speedy trip, before they suck the ROC down the hole!
And they haven't even begun to address their Orphan Wells problem!

The Disaffected Lib said...

They're getting squeezed from all sides, John.

The Saudis and the Russians aren't being capricious. Each is struggling to protect its energy position. Putin knows all too well the role oil prices played in the demise of the Soviet Union. The Saudis want to muscle their way back to the top even if that means beggering Trump's energy economy.

Troy said...

Ah, I should be working on my final projects for this semester, but there's a thought in my head that won't budge loose.

Optimistically speaking, we may be seeing the end of oil as a fuel.

I don't have a whole lot of evidence, but oil as fuel is dying much faster than anticipated. EVs are set to take over a majority if not the entire market share in the vehicle market in the next five to ten years. Their growth has already become exponential within the last five years. Back in 2008, it took a year for Tesla to build a 1000 cars. Recently, they were building a thousand cars in a week. Moving forward, it'll become a thousand cars in a day.

For the middle class, the next new car purchase will probably be an EV. As EV's move downward into the used car market, they'll probably displace used car sales too for the working class. This'll happen fast. Internet growth fast. I mean, the internet was around in the mid-nineties, and then boom! it was central to economic growth. ICE cars will still be around, but gas stations are going to continue shuttering.

I said sometime back that EV sales will approach 40% about mid-decade, and that'd have a major impact on the automobile market. But, I was being conservative. By the mid-twenties, according to my estimates now, EVs may well have 80% of the market at its current growth. Boom! ICE sales are dead mid-decade. Oil as a fuel is dead or merely critically dying by mid-decade.

Liberal dithering on the tar sands may have saved Ottawa's bacon from committing too much to the tar sands. The pipeline was their last major commitment, and it's probably worthless now. The tar sands are dead now too. There's no reviving them from this. Oil will never "recover" to high prices. They'll continue declining so long as EVs continue to grow in power and range, and from what I've been reading, their growth in the next five to ten years will more than double from they are now: 200 miles. At 300 miles range, they'll take over short and mid-range airplane and shipping engines. At 500 miles, they'll take over long-range airplane and shipping engines. Battery range is set to hit 300 miles in the next one to four years. 500 miles will happen in the next three to eight years.

And batteries will disrupt industries further up and down the line too. Power plant peakers are first in line. IE, BC Hydro can and should drive energy prices down by switching its peaking units fully to battery. This would also render the Site-C dam worthless, as it was basically supposed to be a peaker unit for the tar sands and its pipelines. How quickly the world changes...

I've always maintained change happens fast. It happen underfoot. It's a seachange. Well, change has already happened. We'll see the laggards swept from power in a short time despite however hard they'll cling to the levers of power. Here in Canada, Leapers will probably begin moving in roles of power. In the USA, power will be taken by Green New Dealers once they take control of the Democratic Party. It's a matter of election cycles now. Corbyn may have failed in the UK, but the Thatcherites fought him so hard, they were themselves swept from power in their efforts to remove Corbyn: a Pyrrhic victory for so-called moderates.

Reagonism is dying, and their favoured economic form of growth is dying: fossil fuels. Change is happening right now. They may cling to power for one or two more election cycles, but they're quickly becoming irrelevant. Good riddance to them.

Then again, I may be over-optimistic, but I don't think so now.

Toby said...

Of course, our various elected leaders will happily hand out more subsidies to keep the carbon bubble growing. I don't know what we can do to stop that.

Trailblazer said...

@ Toby.

People will remember the bubble and the jobs it creates long after they have forgotten , or even knew of, the taxpayer subsidies and the loss of environmental standards that made it possible.

The same people/electorate are the ones that will cry out for free enterprise and low taxes!!

At the end of the day it is likely that a socially ,environmentally conscience government will have to make the difficult decisions to clean up the friggin mess we have created.

You have three guesses to the outcome of such actions; the first two don't count.


e.a.f. said...

Saw the price of oil late Sunday night and went omg, Kenny is going to have a melt down. Heard one economist say the Saudi's were using the Rockerfeller monopoly play. Gather, back in the day the Rockerfellers would lower prices to force others out of business if they couldn't buy them up. Saudi wants the Russians to fall into line with OPEC prices. Putin hasn't been willing to. Saudi is now playing hard ball and Putin is going to loose. A bi product of this is a negative impact on Texas shale, which can not make a profit if it goes below $38 to $40 a barrel. This works for Saudi also because Texas shale has been cutting into their profit margin. Saudi knows what they need to maintain their economy and power and for that Russia needs to play ball and the U.S.A to bow out.

"As for Canada. Doesn't look like we are going to have to worry about a pipeline.

Kenny is going to have to figure out a way to diversify the Alberta economy. It ought not to be too hard. They have an educated population, low housing costs, and very inexpensive office space. Kenny may also have to implement a sales tax. yes, the end of the world have arrived, a sales tax in Alberta. The rest of the country isn't going to be interested in a bail out for Alberta if they don't implement one.

The "carbon bubble" has already burst and there won't be any subsidies. They would have to be too large. Its that simply. Alberta tar isn't commercial when the prices fall below $50 a barrel as I recall. Saudi is selling it much cheaper and their oil doesn't need the refining the tar or Texas shale does.

The americans will most likely be willing to give up Texas shale, if the Saudi oil is cheaper. the economy is taking a huge hit.
Trump's announcement today that he would be lowering pay roll taxes to help corporations is simply going to further defund the American government. His last cut in taxes has increased the deficit by approx. a trillion. His promises of money to everyone is not going to work. First the U.S.A. is going to run out of money and credit and people are going to be more interested in their health than money. Of course the billionaire class won't have to worry. They'll still have their money and their health.

rumleyfips said...


More ev's means more consumption. Hydro dams may help solve this problem even though they create their own unique problems.

The Disaffected Lib said...

Hey, Troy. Good luck with the finals.

Here's the situation in a nutshell. If we want to survive we can burn just a small fraction of proven fossil energy reserves. Most fossil energy will have to be left in the ground.

We know our 'carbon budget,' the amount of greenhouse gas emissions we can still pump into the atmosphere before any hope of averting climate catastrophe is foreclosed. Because we have a fairly precise understanding of that GHG budget we can reliably estimate how much more fossil energy we can burn.

The world is now awash in relatively low-carbon fossil energy options. Burning high-carbon fossil fuels is no longer viable if we want to maximize our budget. That means what no politician in Canada is willing to say - coal and bitumen must be abandoned, left in the ground. If we don't we bugger up our chances of a rational transition to alternative energy options.

Trailblazer said...

I have to wonder whether this was the intention all along?

When confronted by US shale oil , all the Saudis and Russians have to do is start an oil trade war.
After a couple of shots accross the bow , no one is going to invest in shale oil or bitumin.


Troy said...


To be honest, I'm still exploring much of this, but from what I'm learning, the energy consumption problem has already been licked. Now it's just a matter of individuals, neighbourhoods, cities, provinces, and states adapting to the technologies in renewable and storage energy technologies available right now, and which are still exponentially improving, and becoming more and more affordable for the average household.

The problem, such as it is, here in BC has been BC Hydro locking itself into now dead-end projects such as Site-C and Mica Lake, as well as the government hitching its fortunes to natural gas. I suppose ten to fifteen years ago, people were saying solar plus storage couldn't continue improving in efficiency and cost, but it has defied these expectations. Now, it can't be beaten by _anything_ when it comes to cost and efficiency.

Solar plus storage right now has the capacity to power the entire province, and still have surplus, even in winter. In five, ten years time, a province-wide infrastructure of solar and storage could probably be halved, and still provide surplus energy to the whole province. That's how fast this technology is improving!

What BC Hydro should be doing, as of yesterday, is quietly making arrangements to build a solar and storage province-wide energy infrastructure, as well as quietly halting work on these now going-to-be increasingly worthless hydro-electric dams.

Big power plants are now obsolete. Their output can be matched by smaller nodes strategically placed around the province. And households, businesses, and industries can probably meet 25-50% of their own needs.

The Disaffected Lib said...

Troy, apropos of your remarks here are a couple of links you might find useful.

A video from Bloomberg:

Then there's this report of an investors' warning issued by Swiss bank, UBS, in 2014:

And a follow-up UBS report from 2016:

UBS again, 2019


You certainly won't get any arguments from the Swiss banking crowd, Troy.

Then there's this latest report from Forbes predicting that VW will be the first 'profitable' electric car manufacturer for the mass market.

You are definitely not swimming upstream, Troy. And that's a very good thing.