A Buffett-type Solution and Canada's Problem

[William Edwards + 708]

6 minutes ago, Jan van Eck said:

Whether or not Heavy Sour makes it to the port is not the point; the stuff is pumped and sold in competition with other producers.  The point that Mr. Edwards makes is that if the IMO regulations effectively take 2 million barrels per day out of the consumption cycle, then whose 2 million will that be?  His logic, which is difficult to argue with, is that it will be shaved off the highest-cost producer - which turns out to be Canada.  As that market collapses, somebody else's Heavy Sour will be bought, and Canada's stuff will have no home. 

If you have two refineries, both capable of refining Heavy Sour, and the Suncor one sitting in Alberta can process that product into diesel and asphalt but has to pay (pick a number)  $30/bbl more for the feedstock than the Valero one sitting in the USA, then what happens to the price that the Suncor one can fetch for that end product?  Somewere, that $30  has to be eaten.  You will end up with the Canadian stuff getting crowded out of the marketplace.  My suggestion is that Ottawa might well craft a disguised tariff (or quota) to discriminate against imported oils, either crude or refined. But either way, the surplus Heavy Sour being pumped has to be accounted for, and it will likely end up as shut-in stock. 

I must say I am at a loss to grasp why you feel that this discussion is "poor quality."

Thanks For your helpfull explanation, Jan. You have more patience than I have.

Regarding the quality of the discussion, each reader will judge that based upon his own level of competence.

Edited June 5, 2018 by William Edwards

[Jan van Eck + 7,558]

1 minute ago, Tom Kirkman said:

Ouch.  Point taken.  Not really a viable, cost effective option.

The reason scrubbers will not be installed to any degree is not founded on the factors you reference.  Keep in mind that the controlling factor will be the age of the ship.  At a certain point, ships have to undergo a "heavy inspection," to stay in class.  That inspection requires placing the ship in drydock, measuring the plate thicknesses  (against corrosion), all manner of engine and equipment tests, and so forth. Then after that first heavy inspection, further inspections are required at short intervals. If the shipowner refuses, the certificate of seaworthiness from the Class Society is voided.  

So:  who is going to pull his ship out and fit some $2.75 million scrubber system, on a ship that has reduced earnings ability and is headed for scrapping soon enough?  Answer:  nobody.  Instead, you will see a drop-in fuel used, probably methanol. 

Cruise ships will likely never install scrubbers as an after-build mod, simply because they do not have the real estate on board.  Those are crammed up with cabins. 

Newbuild will come with scrubbers if they are going to run on diesel.  But you will also see ships built with natural gas as fuel source. 

[Tom Kirkman + 8,860]

Thanks for the clarification about scrubbers, Jan.  Seems I'm grasping at straws here, trying to see a solution to this.

And it seems more and more inescapable that William's logic is sound - the high cost producer (Canadian oil sands) will be squeezed out of the game.

[Jan van Eck + 7,558]

10 minutes ago, Tom Kirkman said:

Thanks for the clarification about scrubbers, Jan.  Seems I'm grasping at straws here, trying to see a solution to this.

And it seems more and more inescapable that William's logic is sound - the high cost producer (Canadian oil sands) will be squeezed out of the game.

Not really, Tom.  In all candor, my guess is that Canada will create barriers to world fuel as imports, and substitute the higher-cost stuff from the Western provinces.  Politically, it is just not viable for the Canadian oil industry to shut down. 

If Ottawa crafts some clever disguised tariff barrier, by manipulating the internal excise taxes  (and the Feds are really good at that), and that pipeline to the Valero refinery in Montreal running from Portland, Maine gets shut down, and the Irving refinery in St. John, New Brunswick goes back to sourcing by rail (it sourced from the Bakken at one point)  from Canada, and Western crude is brought in  by unit rail, then you have created an artificial market - paid for by  the Canadian consumers, to be sure, but a large market nonetheless.  The Governments now make cash grants to the refiners to modify to handle Western Heavy Sour, and you have a closed system, excluding world oil.  Is it more expensive than purchasing and processing world oil?  Sure, but that never stopped Ottawa from anything. 

What you end up with is government interference in the marketplace to upend the otherwise inescapable conclusion: the shut-in of Canadian Heavy High-sulfur.  Now, who does that is entirely a function of the Party in office.  Canada has three parties of consequence in their parliamentary system:  a right-wing (but more of a mainstream than you see on the world stage); a pseudo-centrist, which is actually left, and a "progressive," which is way-out left.  Each one will come up with a formula, all will cost a bundle, all will be stumbling around, but eventually, I predict that some conclusion that excludes world oil and shifts to Alberta-Saskatchewan crudes will come out of it. 

[Tonya 0]

Thanks for keeping me informed and updated on the Energy status going on

[William Edwards + 708]

10 minutes ago, Jan van Eck said:

Not really, Tom.  In all candor, my guess is that Canada will create barriers to world fuel as imports, and substitute the higher-cost stuff from the Western provinces.  Politically, it is just not viable for the Canadian oil industry to shut down. 

If Ottawa crafts some clever disguised tariff barrier, by manipulating the internal excise taxes  (and the Feds are really good at that), and that pipeline to the Valero refinery in Montreal running from Portland, Maine gets shut down, and the Irving refinery in St. John, New Brunswick goes back to sourcing by rail (it sourced from the Bakken at one point)  from Canada, and Western crude is brought in  by unit rail, then you have created an artificial market - paid for by  the Canadian consumers, to be sure, but a large market nonetheless.  The Governments now make cash grants to the refiners to modify to handle Western Heavy Sour, and you have a closed system, excluding world oil.  Is it more expensive than purchasing and processing world oil?  Sure, but that never stopped Ottawa from anything. 

What you end up with is government interference in the marketplace to upend the otherwise inescapable conclusion: the shut-in of Canadian Heavy High-sulfur.  Now, who does that is entirely a function of the Party in office.  Canada has three parties of consequence in their parliamentary system:  a right-wing (but more of a mainstream than you see on the world stage); a pseudo-centrist, which is actually left, and a "progressive," which is way-out left.  Each one will come up with a formula, all will cost a bundle, all will be stumbling around, but eventually, I predict that some conclusion that excludes world oil and shifts to Alberta-Saskatchewan crudes will come out of it. 

Intriguing prospect, Jan.

[Tom Kirkman + 8,860]

William and Jan, I'm waiting to see which one of you will be at the top of the leaderboard by end of this month.  Well crafted comments from both of you, on a regular basis.

[Jan van Eck + 7,558]

2 minutes ago, Tom Kirkman said:

William and Jan, I'm waiting to see which one of you will be at the top of the leaderboard by end of this month.  Well crafted comments from both of you, on a regular basis.

It will go to William.  Two reasons:  first, he is far more knowledgeable than me;  second, I get carried away with the politics!

Oh, well.

[Jan van Eck + 7,558]

16 minutes ago, Tonya said:

Thanks for keeping me informed and updated on the Energy status going on

Welcome aboard, Tonya.  It's a Byzantine world out there, so hold onto your hat!

[William Edwards + 708]

1 hour ago, Tom Kirkman said:

William and Jan, I'm waiting to see which one of you will be at the top of the leaderboard by end of this month.  Well crafted comments from both of you, on a regular basis.

Thanks for your kindness, Tom. And I certainly agree that Jan deserves your comments

Edited June 5, 2018 by William Edwards

[Ian Austin + 131]

On 2018-06-04 at 2:49 PM, Jan van Eck said:

Yup, and that is going to be a big problem. 

Whether or not it can be used to manufacture monomers, such as ethylene to manufacture polyethylene plastics, will be interesting to watch. If it can, then the production of ethylenes and styrenes just might absorb enough to keep the whole thing afloat.  And I grant that I do not know of the technical aspects, it may well be insurmountable.  Sure is a huge mess in the making  (again, very Canadian).  Canadians are big on messes.  Just look at the current election in Ontario, being uniquely fought on a single issue - the outrageous prices and supply of electricity.  When was the last time there was a big election fought over just one issue?  Amazing what goes on up there. 

The world really thinks us Canadians are a gaggle of idiots, doesn’t it?

[William Edwards + 708]

Just now, Ian Austin said:

The world really thinks us Canadians are a gaggle of idiots, doesn’t it?

Not all of you, Ian.

[Ian Austin + 131]

45 minutes ago, William Edwards said:

Not all of you, Ian.

Well at least I’m comfortable in knowing that I’m not part of the gaggle.

Edited June 6, 2018 by Ian Austin

[Jan van Eck + 7,558]

38 minutes ago, Ian Austin said:

 

I think some explanation is in order. As we all know, the world tends to be run by networks. Canadians take this to the extreme, and it is really the source of all the poor decision making that infects our fine country. 

So you end up with a group, both corporately and politically, in their positions of power due to things like: family name, childhood neighbors, shared interests (hunting/farming), just to name a few things. The tight knit group tends to hate/expel anybody with brains - you know, never let a threat linger, and basically socially engineers itself into an echo chamber. This is DT Calgary in a nutshell, where most of the O&G decisions are made. 

  God forbid we solve a problem, rather than causing them. 

.

Yup, that nails it.  One other aspect is that those tight-knit groups systematically exclude "furriners," those immigrants that can be very talented and productive with imaginative ideas.  Just for illustration, the Canadian internal elites even excluded Adi Dassler, the migrant who developed an original design of sneaker.  He was shunned.  So he went out on his own and created Adidas Sportswear, a huge success.  Then you have Bob Schad, The Austrian who stood the thin-wall container industry on its end by developing the Husky brand of injection and injection-blow molding machines, now an international operation.  And all manner of expats running foreign-owned enterprises are systematically socially excluded. 

What made Montreal interesting as a city to live in were not the stuffed shirts and swelled heads parked in their estates on Westmount Mountain; rather, it was the immigrants, some just passing through for a few years as they worked their way around the British Empire, the folks from Ireland and New Zealand and South Africa, all very creative and personable men and women. Being English-speaking, they got pushed out during the seventies and the French Awakening; some went to Toronto, some to other Commonwealth countries, and Quebec lost a big reservoir of talent.  When I think back to those days, I just cannot remember anyone who was a dummy.

How Canadians have managed to screw things up as badly as they have, to the extent that the entire society is impoverished in a land with so much natural wealth, is just staggering. And the mentality that you describe is a big chunk of it. Oh, well. 

[Guillaume Albasini + 851]

A link to an article from CleanTechnica stating that "Canada’s Acquisition of Kinder Morgan Pipeline is Based on False Assumptions of Chinese Demand" :

https://cleantechnica.com/2018/06/05/canadas-acquisition-of-kinder-morgan-pipeline-is-based-on-false-assumptions-of-chinese-demand/

 

 

[Jan van Eck + 7,558]

2 hours ago, Guillaume Albasini said:

A link to an article from CleanTechnica stating that "Canada’s Acquisition of Kinder Morgan Pipeline is Based on False Assumptions of Chinese Demand" :

https://cleantechnica.com/2018/06/05/canadas-acquisition-of-kinder-morgan-pipeline-is-based-on-false-assumptions-of-chinese-demand/

 

 

The purchase is not based on any demand assumptions.  It is based on the politics of Canada and the internal dynamic of having that Alberta oil reach the sea.  It cannot go through the USA, it cannot make it to Montreal, so it goes through the Rockies to the Pacific.  The Chinese market is not the determinant for this buy decision. If the oil cannot be moved, it is worthless. 

[AliBaba + 1]

I'm glad to be part of this community of experts ! As everybody knows,

the oil price is of outmost importance to the economy, and all governments are closely scrutinising its evolution. Those involved in the oil industry, particularly in exploration can even feel its impact on the evolution of their own career...! 

[William Edwards + 708]

8 hours ago, Jan van Eck said:

Yup, that nails it.  One other aspect is that those tight-knit groups systematically exclude "furriners," those immigrants that can be very talented and productive with imaginative ideas.  Just for illustration, the Canadian internal elites even excluded Adi Dassler, the migrant who developed an original design of sneaker.  He was shunned.  So he went out on his own and created Adidas Sportswear, a huge success.  Then you have Bob Schad, The Austrian who stood the thin-wall container industry on its end by developing the Husky brand of injection and injection-blow molding machines, now an international operation.  And all manner of expats running foreign-owned enterprises are systematically socially excluded. 

What made Montreal interesting as a city to live in were not the stuffed shirts and swelled heads parked in their estates on Westmount Mountain; rather, it was the immigrants, some just passing through for a few years as they worked their way around the British Empire, the folks from Ireland and New Zealand and South Africa, all very creative and personable men and women. Being English-speaking, they got pushed out during the seventies and the French Awakening; some went to Toronto, some to other Commonwealth countries, and Quebec lost a big reservoir of talent.  When I think back to those days, I just cannot remember anyone who was a dummy.

How Canadians have managed to screw things up as badly as they have, to the extent that the entire society is impoverished in a land with so much natural wealth, is just staggering. And the mentality that you describe is a big chunk of it. Oh, well. 

Terribly distressing, Jan. But it helps to explain why my attempts to forewarn and assist have been rudely rejected.

[William Edwards + 708]

6 hours ago, Guillaume Albasini said:

A link to an article from CleanTechnica stating that "Canada’s Acquisition of Kinder Morgan Pipeline is Based on False Assumptions of Chinese Demand" :

https://cleantechnica.com/2018/06/05/canadas-acquisition-of-kinder-morgan-pipeline-is-based-on-false-assumptions-of-chinese-demand/

 

 

Thanks for providing this excellent reference, Guillaume. The author, Michael Barnard, did an outstanding job of explaining why "Oil Sands to China" is a non-starter. He accurately states "The projected increase in oil demand in China is overstated and there’s no reason to believe that they will be buying expensive-to-refine Canadian product. With each passing year, this will be a more obvious dynamic."

It is past time for Albertans to wake up to reality.

[Jan van Eck + 7,558]

On 6/6/2018 at 9:55 AM, William Edwards said:

Terribly distressing, Jan. But it helps to explain why my attempts to forewarn and assist have been rudely rejected.

There was an area of Montreal known a century ago as "the Golden Mile."  It is the land that now is just West of MCGill University, along Sherbrooke Street, running towards Westmount.  Within that square mile were the mansions of the Montreal Elites, the Movers and Shakers of the 1800's and into the 1900's.  Those were the "English"- Canadians, the French-speaking equivalents were in Outremont on the polar other side of Mont-Royal, the "mountain" that was the core of the ancient volcano upon which Montreal is built. Today, the remaining mansions are consulates, the rest having been torn down for high-rise apartment buildings. the area was served by the three dominant Protestant churches of the religions of the dominant groups, the Episcopal and Anglican being the most expensive(and fanciest), to no  surprise. 

Living inside the Golden Mile were the railroad barons, the timber barons, the shipping barons, and the banking barons. They only spoke with each other, and their children only socialized and married each other.  It made it convenient if say a timber baron needed to raise some millions; his neighbors were the banker barons. But it also meant that Groupthink and sterility of imagination ended up as the dominant  trait on display.  And that, eventually, becomes the seed of its own downfall (although the Baron Group has not collapsed, it has to some extent simply migrated to run Toronto, and replaced by their equivalent in French-speaking Barons, and the Jews that are successful in the liquor trade). 

Interestingly, you  see traces of that in other sub-cultures of North America - for example, in Boston it was famously said that the Henrys only spoke to the Cabots, the Cabots only to the Lodges, and the Lodges spoke only to God. But the waves of talented and ingenious immigrants changed all that, with Carnegie the peasant boy from Scotland taking over the Steel industry, again taken over by J.P. Morgan the financier in New York who then molded the monopoly that became U.S. Steel. And you have Rockefeller cleverly figuring out how to dominate the oil industry by controlling the railroads, thus ending up monopolizing the sale of kerosene for lamp oil and cooking and becoming the head of Standard Oil and the richest man in America.  Not so shabby for the son of a con man and swindler from Upstate NY, himself the descendant of a peasant boy from Germany (Rockefeller died worth $400 billion, the richest man on the planet.  His Standard Oil was broken up into 37 independent corporations, including ExxonMobil, Chevron, and other industry mega-corporations.   Figure out if you owned all that today!).  

So you have this pattern of the migrants coming in and making their mark. They were an interesting crowd.  The fellow that built the Brooklyn Bridge never went to engineering school; he was a penniless hanger-on in a university in Austria, simply sitting in on classes without being a registered student, then went to America and talked his way (OK, lied his way) into being a bridge designer for the new railroad industry, building bridges in Ohio out of wood timbers.  He then convinced the City of New York to hire him to design and build the Brooklyn.  Worked fine, the thing still stands.  Indeed, all the bridges and tunnels in NYC were designed and built by migrants - who also provided the labor source. 

The Canadians did not do this; they pushed the migrants out into the hinterlands to go be peasant farmers, so their intellectual gene pool remained stagnant. The results are there inside that society today.  The children of the rich only marry and procreate with others of their group, and Groupthink permeates all aspects of Canadian society. It leads to the problems that are so costly, and also led to big chunks of their manufacturing being done by transplanted industries from the USA, and controlled by parachuted American executives.  Countries that operate that way end up making a pile of coin, then sinking into oblivion.  Look at Portugal. 

Will the Canadians ever pull out of this myopia?   I don't think so. And that is why I left. Remember, at some point somebody has to pay for the mess, and that somebody is going to be the person(s) who worked hard and made some dough.  The people who made the mess will then tax that away from you, it always ends up that way. In the USA, the States headed for that type of oblivion are places such as Illinois and Connecticut, States with incompetent managers and huge unfunded liabilities, typically in unpayable pension obligations. Stay away.  Cheers.

Edited June 10, 2018 by Jan van Eck
scrivener error

[Jan van Eck + 7,558]

1 hour ago, William Edwards said:

It is past time for Albertans to wake up to reality.

 But they won't. As a Province, I suggest that Albertans would make more money in cattle than they will in Tar Sands. Will Albertans shift their thinking?  No chance. 

[Refman + 207]

12 hours ago, Guillaume Albasini said:

A link to an article from CleanTechnica stating that "Canada’s Acquisition of Kinder Morgan Pipeline is Based on False Assumptions of Chinese Demand" :

https://cleantechnica.com/2018/06/05/canadas-acquisition-of-kinder-morgan-pipeline-is-based-on-false-assumptions-of-chinese-demand/

Interesting because I just read an a news release saying that the Chinese were looking for replacements for the Venezuela crude, and Canadian would be a good replacement.

Now I like the guys over at Cleantechnica, but they are not always right on fossil fuel subjects.

[Danny Hangartner + 31]

Social media is something that I'm straying away from. Changing my mind and stuff is impossible when not allowed to delete previous posts.

So I edit.

Edited September 15, 2022 by Danny Hangartner
Social media is something that I'm straying away from. Changing my mind and stuff is impossible when not allowed to delete previous posts. So I edit.

[Danny Hangartner + 31]

Social media is something that I'm straying away from. Changing my mind and stuff is impossible when not allowed to delete previous posts.

So I edit.

Edited September 15, 2022 by Danny Hangartner
Social media is something that I'm straying away from. Changing my mind and stuff is impossible when not allowed to delete previous posts. So I edit.

[Danny Hangartner + 31]

Social media is something that I'm straying away from. Changing my mind and stuff is impossible when not allowed to delete previous posts.

So I edit.

Edited September 15, 2022 by Danny Hangartner
Social media is something that I'm straying away from. Changing my mind and stuff is impossible when not allowed to delete previous posts. So I edit.