Balancing Act---Sanctions, Venezuela, Trade War and Demand

[Jan van Eck + 7,558]

3 minutes ago, William Edwards said:

And what happens to the industry during the months or years that are required for your solution?

The Canadians suffer, the Loonie continues to devalue relative to other currencies, the Canadian housing market in urban areas will likely devalue by 50% or more, real incomes will drop, and the Liberal Government will lose, either in general election or by no-confidence vote. 

And a certain number of very talented Canadians will continue to emigrate, to the traditional countries:  the USA, Australia, and New Zealand. 

[William Edwards + 708]

10 minutes ago, William Edwards said:

I accept the principle of forced consumption. I question the arithmetic of the demand within Canada to implement your solution. But I have not done that arithmetic. Maybe you have. And what happens to the industry during the months or years that are required for your solution?

You reached to the depths of my soul with your GM example, since I might add one additional victim of your MBA group, assisted by Obama. His violation of the law regarding bondholders of corporations, in favor of the union, cost me about half of my expected retirement benefits.

[William Edwards + 708]

15 minutes ago, Jan van Eck said:

The Canadians suffer, the Loonie continues to devalue relative to other currencies, the Canadian housing market in urban areas will likely devalue by 50% or more, real incomes will drop, and the Liberal Government will lose, either in general election or by no-confidence vote. 

And a certain number of very talented Canadians will continue to emigrate, to the traditional countries:  the USA, Australia, and New Zealand. 

Sounds pretty awful.

[D Coyne + 305]

2 hours ago, William Edwards said:

As a helpful suggestion for your consideration, you might re-think whether Aracmo's production is low because they refuse to sell, or because there are not enough customers to buy. That distinction is key to the price impact. When keeping in mind that Aramco cannot effectively produce more oil than they can sell (no, they cannot put ten gallons of oil in a five gallon bucket), you can easily understand how their production level can be capped by demand, and not by their wishes for output. Of course, they will spin the fact of low production to appear that they have the control when, actually, they do not. But if the world is dumb enough to believe their spin, Aramco benefits financially -- until reality forces the world to reconsider the facts. On the futures market this translates into unwise longs, running the price up, followed by the collapse as longs must be liquidated -- at low panic-sell prices. We label that "market volatility".

William,

I imagine there are not enough customers that want to buy at a higher oil price.  Alternatively, given the current pricing mechanism that the World currently uses, the price is based on the futures market and reducing output will tend to affect the futures market.

That is how you have explained the way the oil market currently works, they do control their output, the consumers control how much of that output is sold, based on their preferences and the prevailing market price of oil.

[Jan van Eck + 7,558]

14 minutes ago, William Edwards said:

Sounds pretty awful.

It will likely be a lot worse.  And here is why.  At this point in time the various Canadian Provinces are hard hit by various import duties levied by their largest trading partner, the USA.  For example, BC is whacked by lumber imports and quotas, so it has to find other markets or have its forest products industry shut in, in major extent.  BC has lost tens of thousands of jobs.  Under the Canada unemployment insurance system, that is a huge hit to the Treasury.  Saskatchewan and Manitoba are getting hit by being shut out of the China market due to the big fight over the arrest of the executive of that China telecom producer.   That is not getting better:  China has upped the ante by now condemning two Canadians to death penalties, where before there were none (only prison sentences).  Ontario has had its manufacturing base collapsed by the insanities of the  Kathleen EWynne government, that had no idea what it was doing, and made large increases in electricity costs.  Quebec does reasonably well in export of raw materials, specifically electricity from hydro, but has taken the hit from the collapse of Canadian auto assembly and big hits against the huge investments made in the Bombardier C-series aircraft, which it had to sell to Airbus for one dollar after the USA imposed a 270% tariff wall on the big opening Delta order for 75 planes.  Meanwhile the core business of Bombardier, railcars, continues to suffer due to quality and delivery problems, leading to order shut-outs with the NYC subway system.  New Brunswick is a big lumber shipper into the USA and again the new tariffs are hurting there.  Nova Scotia is facing barriers to sales of its traditional fish, lobster, and paper products and has not developed new markets.  Tourism is way down due to the hassles of the US Border and the need for US persons to have either a border crossing card or a passport.  

So: that leaves ALberta, and Alberta oil, to support the rest of the country.  Without that oil, and its sales, Canada is in serious trouble.  None of that has percolated into the consciousness of the Canadian politicians in Ottawa, unfortunately.  I foresee a dismal result. 

Edited May 1, 2019 by Jan van Eck

[D Coyne + 305]

1 hour ago, Jan van Eck said:

But that assumes (as does William Edwards) that the end refined product is going to be used as a regulated transport fuel.  I would posit yet another outcome:  that the sour crude will be "refined" to the point where it can meet No. 4 fuel oil specifications, and then it will be consumed in heating plants and stationary diesel and steam generators.  

For example, there are still plenty of coal plants out there, and those operators continue to face all kinds of political and shareholder pressures to go off-coal.  The classic direct substitute would be a retrofit to #4 fuel oil.  I don't think there is a sulfur standard for stationary plants.  Burning #4 that has more than 0.5% sulfur would be entirely possible, even plausible, and the retrofit requires only the oil tanks installation, the plumbing, and the burner nozzles.  That is not that difficult to do.  If you can burn #4 (or even #6, which is a bit harder to do but not impossible by any means) in stationary plants, then you have product substitution - heavy oil for coal. Do you have to go remove crud stuff first - such as the asphaltenes?  Sure you do.  But the Canadians have to do that anyway.  Is there a market for that asphalt product?  Sure there is - but if there is too much placed into the market, unless there is some new market developed, you cannot make any money with it.  Can you develop new markets?  Sure you can - but then you have to get off your ass to go do that.  

The failure to develop new markets for your products means that you are always elbowing your peers in the established markets.  And that is the recipe for price wars.  You want to stay away from that. 

Jan,

Perhaps such plants could be competitive with natural gas power plants, it is not clear if the economics would work, it would depend upon the price for the #4 fuel and the cost to convert from coal to residual fuel.  It is also not clear what the emissions standards for those plants are as there are smokestack emissions requirements for coal fired power.

[Jan van Eck + 7,558]

Just now, D Coyne said:

Jan,

Perhaps such plants could be competitive with natural gas power plants, it is not clear if the economics would work, it would depend upon the price for the #4 fuel and the cost to convert from coal to residual fuel.  It is also not clear what the emissions standards for those plants are as there are smokestack emissions requirements for coal fired power.

I doubt if anything will be competitive with natural gas, which price is very depressed and likely to stay that way for some time to come. But if the plant does not have the pipeline, that project goes nowhere.  If it had the pipeline, then it wold already have gone off-coal. 

A steam plant can convert either to $4 liquid, or #6 liquid, or to "hockey pucks," a new development wherein the oilsand oil is converted into a solid for easy shipment via gondola cars.  If converted to a solid, it would be a direct substitute for coal.  

The emissions requirements out of the smokestack are mostly for particulates, although the Midwest plants do have restrictions on sulfur.  To what extent, I dunno. Coal remains a difficult fuel due to emissions.  They tend to have downstream filters for that, including "bag-houses" filled with sacks of cotton-type material that trap the particulates, and possibly nozzle washers to remove the sulfur parts by adhesion to water droplets.  It tends to get technical.  To the extent it is already there, it could be used for oil outputs.  Or, if not used, then you have this cost reduction. 

[D Coyne + 305]

1 hour ago, ceo_energemsier said:

Their crap selling @ deep discounts will be incentive enough. With 3 different proven techs ( tested and proven in Venezuela, KSA, Q-8, and in the US and EU over a period of 14 years) to upgrade various grades of ultra heavy, heavy, sour , high sulfur crudes , plus refined products with low API, high sulphur along with other impurities and contaminants, it could be a very profitable venture to test out and explore various options for Crappy Canadian materials.

 

Hey,

CCM, I thought they made hockey equipment.  I never realized it stood for Crappy Canadian Materials. 

[D Coyne + 305]

7 minutes ago, Jan van Eck said:

I doubt if anything will be competitive with natural gas, which price is very depressed and likely to stay that way for some time to come. But if the plant does not have the pipeline, that project goes nowhere.  If it had the pipeline, then it wold already have gone off-coal. 

A steam plant can convert either to $4 liquid, or #6 liquid, or to "hockey pucks," a new development wherein the oilsand oil is converted into a solid for easy shipment via gondola cars.  If converted to a solid, it would be a direct substitute for coal.  

The emissions requirements out of the smokestack are mostly for particulates, although the Midwest plants do have restrictions on sulfur.  To what extent, I dunno. Coal remains a difficult fuel due to emissions.  They tend to have downstream filters for that, including "bag-houses" filled with sacks of cotton-type material that trap the particulates, and possibly nozzle washers to remove the sulfur parts by adhesion to water droplets.  It tends to get technical.  To the extent it is already there, it could be used for oil outputs.  Or, if not used, then you have this cost reduction. 

Would it be cheaper than coal?  If not, it doesn't happen.  Also does this make more sense than just doing the refinery upgrades needed?  The stationary plants for electricity can move power by wire and there are many locations with access to natural gas.  For heating applications, heat pumps make more sense than stationary steam plants.  Also the coal power plants are being replaced by wind, solar, and natural gas (depending upon location areas with good wind or solar resources usually don't see a lot of new natural gas power plants).

Edited May 1, 2019 by D Coyne

[William Edwards + 708]

14 minutes ago, Jan van Eck said:

It will likely be a lot worse.  And here is why.  At this point in time the various Canadian Provinces are hard hit by various import duties levied by their largest trading partner, the USA.  For example, BC is whacked by lumber imports and quotas, so it has to find other markets or have its forest products industry shut in, in major extent.  BC has lost tens of thousands of jobs.  Under the Canada unemployment insurance system, that is a huge hit to the Treasury.  Saskatchewan and Manitoba are getting hit by being shut out of the China market due to the big fight over the arrest of the executive of that China telecom producer.   That is not getting better:  China has upped the ante by now condemning two Canadians to death penalties, where before there were none (only prison sentences).  Ontario has had its manufacturing base collapsed by the insanities of the  Kathleen EWynne government, that had no idea what it was doing, and made large increases in electricity costs.  Quebec does reasonably well in export of raw materials, specifically electricity from hydro, but has taken the hit from the collapse of Canadian auto assembly and big hits against the huge investments made in the Bombardier C-series aircraft, which it had to sell to Airbus for one dollar after the USA imposed a 270% tariff wall on the big opening Delta order for 75 planes.  Meanwhile the core business of Bombardier, railcars, continues to suffer due to quality and delivery problems, leading to order shut-outs with the NYC subway system.  New Brunswick is a big lumber shipper into the USA and again the new tariffs are hurting there.  Nova Scotia is facing barriers to sales of its traditional fish, lobster, and paper products and has not developed new markets.  Tourism is way down due to the hassles of the US Border and the need for US persons to have either a border crossing card or a passport.  

So: that leaves ALberta, and Alberta oil, to support the rest of the country.  Without that oil, and its sales, Canada is in serious trouble.  None of that has percolated into the consciousness of the Canadian politicians in Ottawa, unfortunately.  I foresee a dismal result. 

Wow! So sad. And from my perspective, Alberta's oil resource is the poorest quality, furthest from the water and highest cost of the major competitors. I do not think that I have a workable solution. But I might have a few ideas as to how to make it less worse. But who will listen?

[William Edwards + 708]

1 hour ago, ceo_energemsier said:

Their crap selling @ deep discounts will be incentive enough. With 3 different proven techs ( tested and proven in Venezuela, KSA, Q-8, and in the US and EU over a period of 14 years) to upgrade various grades of ultra heavy, heavy, sour , high sulfur crudes , plus refined products with low API, high sulphur along with other impurities and contaminants, it could be a very profitable venture to test out and explore various options for Crappy Canadian materials.

 

If your crap cost you $20, cash cost, to create it, and the crap only sells for $10, how do you sustain your business? Crap selling price is a key element of the arithmetic. And usually it must be higher than teh total cost. Did they forget to mention that element when you got your MBA?

[William Edwards + 708]

31 minutes ago, D Coyne said:

William,

I imagine there are not enough customers that want to buy at a higher oil price.  Alternatively, given the current pricing mechanism that the World currently uses, the price is based on the futures market and reducing output will tend to affect the futures market.

That is how you have explained the way the oil market currently works, they do control their output, the consumers control how much of that output is sold, based on their preferences and the prevailing market price of oil.

It appears that you are suggesting that it is the price that is adjusted or controlled, and not the production. I agree. But the common description is that the producers control production directly. I disagree. And I think it is a significant distinction, blurred by sloppy thinking.

[Jan van Eck + 7,558]

21 minutes ago, William Edwards said:

But who will listen?

Nobody. 

[D Coyne + 305]

3 minutes ago, William Edwards said:

It appears that you are suggesting that it is the price that is adjusted or controlled, and not the production. I agree. But the common description is that the producers control production directly. I disagree. And I think it is a significant distinction, blurred by sloppy thinking.

William,

Didn't you say in earlier comments that the price is just a differential to the futures price?  If I understood that correctly, then the futures market controls the price and producers can only affect that price by increasing production (if they would prefer a lower price) or decreasing production (if they would prefer a higher price).  They of course would run the risk of losing market share if they reduce output because competitors might choose to fill the gap by increasing output, this is where quotas for OPEC play a role, but they have no control over US tight oil producers who try their best to fill any gaps made by OPEC cuts.

In short they attempt to influence price by changing output, just as the RRC did with their allowances before 1972.

[Jan van Eck + 7,558]

22 minutes ago, D Coyne said:

Would it be cheaper than coal?  If not, it doesn't happen

Not quite.  Coal use is controlled by various levels of government in Canada, typically the Provincial government.  Ontario closed the big Nanticoke generating plant and substituted wind machines and nuclear, for a dramatic price increase in generated electricity.  If the coal is forbidden, its cost price becomes irrelevant.

24 minutes ago, D Coyne said:

Also does this make more sense than just doing the refinery upgrades needed?

Sure.  Using hockey pucks means no capital expense for refinery upgrades. 

26 minutes ago, D Coyne said:

For heating applications, heat pumps make more sense than stationary steam plants

Not for large commercial and industrial installations.  Canada is a cold country.  Heat pumps don't even work out for small residential applications.  They also have this habit of "tripping," and then you have NO heat until someone climbs out to the installation and does a manual breaker re-set.  Not a workable solution. 

[William Edwards + 708]

7 minutes ago, D Coyne said:

William,

Didn't you say in earlier comments that the price is just a differential to the futures price?  If I understood that correctly, then the futures market controls the price and producers can only affect that price by increasing production (if they would prefer a lower price) or decreasing production (if they would prefer a higher price).  They of course would run the risk of losing market share if they reduce output because competitors might choose to fill the gap by increasing output, this is where quotas for OPEC play a role, but they have no control over US tight oil producers who try their best to fill any gaps made by OPEC cuts.

In short they attempt to influence price by changing output, just as the RRC did with their allowances before 1972.

Let us just consider one of the problems with your thinking. I ask again, and you refuse to answer, how can a producer load a cargo of crude, that is, pump oil out of his tank, if there is no vessel to receive that oil. Until you enlighten me as to where that oil floats in the sky while the consumer considers the new price , sends in a vessel and loads the oil from the tank in the sky, I think you have not posed a sound question.  That leads me to conclude that you have not done a thorough job of thinking through the reality of your assessment or the answer to my question. You can think critically as well as I can, I am sure. So please do not depend upon me to do that thinking for you. My brain is tired enough while yours is fresh.

We shall defer the correction of your misconceptions regarding the RRC for another time. I suspect that that will require more brain work and time.

[D Coyne + 305]

37 minutes ago, Jan van Eck said:

Not quite.  Coal use is controlled by various levels of government in Canada, typically the Provincial government.  Ontario closed the big Nanticoke generating plant and substituted wind machines and nuclear, for a dramatic price increase in generated electricity.  If the coal is forbidden, its cost price becomes irrelevant.

Sure.  Using hockey pucks means no capital expense for refinery upgrades. 

Not for large commercial and industrial installations.  Canada is a cold country.  Heat pumps don't even work out for small residential applications.  They also have this habit of "tripping," and then you have NO heat until someone climbs out to the installation and does a manual breaker re-set.  Not a workable solution. 

Ground source heat pumps would work fine in Canada.

Places that wouldn't allow coal, would likely not favor the hockey puck solution, if the government has to subsidize a rather polluting alternative, it seems market solutions would make more sense and be more efficient.

[Jan van Eck + 7,558]

20 minutes ago, D Coyne said:

Places that wouldn't allow coal, would likely not favor the hockey puck solution, if the government has to subsidize a rather polluting alternative, it seems market solutions would make more sense and be more efficient.

Maybe so, but remember that the objective here is to develop a sustained market for Alberta oil.  So, the "market" goes out the window and the matter is dealt with by a Directed Economy.  There really is no "market" anyway, it is all being manipulated by interested parties, all around the globe.  Either the producers are attempting to manipulate "the market"  (and fail at it), or the consumer importers are attempting to manipulate it (and fail), or the traders are manipulating it  (the one group that actually does do manipulation, albeit erratically).   Don't think any of these guys are ideologically pure.  They are not. 

[D Coyne + 305]

1 hour ago, William Edwards said:

Let us just consider one of the problems with your thinking. I ask again, and you refuse to answer, how can a producer load a cargo of crude, that is, pump oil out of his tank, if there is no vessel to receive that oil. Until you enlighten me as to where that oil floats in the sky while the consumer considers the new price , sends in a vessel and loads the oil from the tank in the sky, I think you have not posed a sound question.  That leads me to conclude that you have not done a thorough job of thinking through the reality of your assessment or the answer to my question. You can think critically as well as I can, I am sure. So please do not depend upon me to do that thinking for you. My brain is tired enough while yours is fresh.

We shall defer the correction of your misconceptions regarding the RRC for another time. I suspect that that will require more brain work and time.

William,

I answered earlier, the oil is pumped into a storage tank.  Generally the aim is to reduce output and thereby increase the price of oil.  In the case where price goes down and there are willing customers, output is increased and there are tankers willing to accept the increased output.  This is not very hard to understand, or not for me.  I think the cause for the misunderstanding is my suggestion that they would increase production to reduce price, that is not a likely scenario, I agree.  However the reverse case is indeed plausible, output could be reduced in hopes of an increase in price, or because there are no customers at the current price (which you favor),  If oil is not produced, there won't be any customers for it that is plain.  As to the reason for lower output there are many potential reasons, maintenance issues are a possibility, lack of customer interest, or a desire for higher oil prices in the futures market.

You seem to want to describe a case that is unlikely to exist.  That is at prevailing prices when a producer has no customers they will want to increase output.  To what end?  So they can make the oil price lower?  This behavior would be counter intuitive and likely imaginary.

You can speculate on why we would see behavior that is never seen in practice.  I think it better to consider real world situations such as a drop in price because the futures market perceives an oversupply of oil.  So how might a large producer who is part of a cartel react?  To change the perception of the futures market they will announce boldly that they will be reducing output and privately will tell cartel members they better not increase output, then they would act on that by in fact reducing their output.

This requires no pumping of oil into the sea, simply choking some wells to reduce output.  If they are successful, the futures market will quote higher prices for oil, if the price is satisfactory they will leave output as is, if it is too high, they will increase output a bit to have the opposite affect.  

Short answer, your scenario suggests the producer is trying to reduce the price of oil, this is unlikely to happen.  Prices fall due to futures market as you have explained, then there are customers waiting for oil to be pumped into their tanker.  If the producer wants price to increase, they just produce less, the oil is already stored in the ground.  If for some reason the producer wants less money and a lower price of oil as in your scenario, they would need to boldly announce a drastic increase in output, wait for the futures market to react with lower oil prices and they would have plenty of customers willing to purchase more oil at a lower price. Or they could store the oil on tankers, on land based storage tanks, they would most likely not choose dirigibles.

On RRC my understanding is that the RRC restricted allowable output to some percentage of capacity and thereby controlled the level of output in Texas.  Texas was once the swing producer for the World, up to about 1970.  If oil prices were too low, allowables were reduced (along with output) and if they were too high, the allowables were increased.  No doubt the changes were small as it is difficult to predict the oil price based on changes in production.

Edited May 1, 2019 by D Coyne

[D Coyne + 305]

1 minute ago, Jan van Eck said:

Maybe so, but remember that the objective here is to develop a sustained market for Alberta oil.  So, the "market" goes out the window and the matter is dealt with by a Directed Economy.  There really is no "market" anyway, it is all being manipulated by interested parties, all around the globe.  Either the producers are attempting to manipulate "the market"  (and fail at it), or the consumer importers are attempting to manipulate it (and fail), or the traders are manipulating it  (the one group that actually does do manipulation, albeit erratically).   Don't think any of these guys are ideologically pure.  They are not. 

Nobody is pure.  Yes people try to manipulate the market, it is not perfect, just better than most alternatives, especially with a bit of government regulation to take care of externalities.

[William Edwards + 708]

14 minutes ago, D Coyne said:

William,

I answered earlier, the oil is pumped into a storage tank.  Generally the aim is to reduce output and thereby increase the price of oil.  In the case where price goes down and there are willing customers, output is increased and there are tankers willing to accept the increased output.  This is not very hard to understand, or not for me.  I think the cause for the misunderstanding is my suggestion that they would increase production to reduce price, that is not a likely scenario, I agree.  However the reverse case is indeed plausible, output could be reduced in hopes of an increase in price, or because there are no customers at the current price (which you favor),  If oil is not produced, there won't be any customers for it that is plain.  As to the reason for lower output there are many potential reasons, maintenance issues are a possibility, lack of customer interest, or a desire for higher oil prices in the futures market.

 You seem to want to describe a case that is unlikely to exist.  That is at prevailing prices when a producer has no customers they will want to increase output.  To what end?  So they can make the oil price lower?  This behavior would be counter intuitive and likely imaginary.

You can speculate on why we would see behavior that is never seen in practice.  I think it better to consider real world situations such as a drop in price because the futures market perceives an oversupply of oil.  So how might a large producer who is part of a cartel react?  To change the perception of the futures market they will announce boldly that they will be reducing output and privately will tell cartel members they better not increase output, then they would act on that by in fact reducing their output.

This requires no pumping of oil into the sea, simply choking some wells to reduce output.  If they are successful, the futures market will quote higher prices for oil, if the price is satisfactory they will leave output as is, if it is too high, they will increase output a bit to have the opposite affect.  

Short answer, your scenario suggests the producer is trying to reduce the price of oil, this is unlikely to happen.  Prices fall due to futures market as you have explained, then there are customers waiting for oil to be pumped into their tanker.  If the producer wants price to increase, they just produce less, the oil is already stored in the ground.  If for some reason the producer wants less money and a lower price of oil as in your scenario, they would need to boldly announce a drastic increase in output, wait for the futures market to react with lower oil prices and they would have plenty of customers willing to purchase more oil at a lower price. Or they could store the oil on tankers, on land based storage tanks, they would most likely not choose dirigibles.

On RRC my understanding is that the RRC restricted allowable output to some percentage of capacity and thereby controlled the level of output in Texas.  Texas was once the swing producer for the World, up to about 1970.  If oil prices were too low, allowables were reduced (along with output) and if they were too high, the allowables were increased.  No doubt the changes were small as it is difficult to predict the oil price based on changes in production.

You have a correct picture of unilaterally withholding desired supplies to blackmail a price increase. That can physically occur and has occurred in the past. But you seem to have blinders on for the other, more common situation where a producer has more oil to sell than the market wants. Incidentally, that is the normal situation. In fact, I know of only one instance in recent history, around 1970, when supplies were physically snug versus demand, in spite of inaccurate commentary to the contrary. Check the BP data for validation.

Turning to today's situation where Aramco would like to produce 10 MMB/D and the market only wants 8 MMB/D, you will see up close and first hand the reason for my question. How, physically, can they pump more oil? Their tanks are already full. Into what do they pump? It is a physical containment situation. Price is immaterial at this point. Until you can understand this question and provide a sensible, realistic, practical (versus imaginary) answer any further discussion is pointless.

[Jan van Eck + 7,558]

36 minutes ago, D Coyne said:

Nobody is pure.  Yes people try to manipulate the market, it is not perfect, just better than most alternatives, especially with a bit of government regulation to take care of externalities.

Yet you do have to get away from genuflecting before free-market orthodoxy.  In oil, there is no real free market.  It is all being manipulated, and the market makers are motivated by lots of inputs, ranging from hatred of Israel to fury at being part of the left-behind world, backward and insular, as far as the Middle East goes, to  the huzzah mentality of the Texan oilfields.  And not to be ignored are the futures traders in there, motivated by greed and fear.  None of this is a pure market of willing buyers and willing sellers, that is a Friedmanesque fantasy. 

Once you get past Milton Friedman and his academic ideas, you are left with the realpolitik of Henry Kissinger and the brute force legacies of John Foster Dulles, Margaret Thatcher and Ronald Reagan.  If Canada is going to survive in that crowd, then it had better develop a domestic market for Alberta oil, and do so fast.  And that implies closing the borders to oil imports without special permits  (and then not handing out the permits).   Such is life in the (very rough) oil patch. If the Canadians want to avoid getting totally hammered, they have few options. 

[Rasmus Jorgensen + 1,169]

4 hours ago, William Edwards said:

In essence, the IMO merely said that the industry must quit burning 13,000 tons of sulfur, each day, after Dec 31,2020, than what was burned on the last day of this year. They did not say how. Nor did they say "you can wait as long as you like to quit burning it". They said "On Jan 1, 2020, 13,000 tons less sulfur will be pushed into the air.

William, 

I have read your post with great interest and mostly agree. But I think you are overlooking scrubber technology. Yes, they are expensive and nobody really knows the running costs. But the shipowners that can afford the CAPEX would get much lower OPEX.

[William Edwards + 708]

2 minutes ago, Rasmus Jorgensen said:

William, 

I have read your post with great interest and mostly agree. But I think you are overlooking scrubber technology. Yes, they are expensive and nobody really knows the running costs. But the shipowners that can afford the CAPEX would get much lower OPEX.

Scrubbing is a partial answer, but not for complete addition to the fleet by Jan 1, 2020.

[William Edwards + 708]

9 minutes ago, Jan van Eck said:

Yet you do have to get away from genuflecting before free-market orthodoxy.  In oil, there is no real free market.  It is all being manipulated, and the market makers are motivated by lots of inputs, ranging from hatred of Israel to fury at being part of the left-behind world, backward and insular, as far as the Middle East goes, to  the huzzah mentality of the Texan oilfields.  And not to be ignored are the futures traders in there, motivated by greed and fear.  None of this is a pure market of willing buyers and willing sellers, that is a Friedmanesque fantasy. 

Once you get past Milton Friedman and his academic ideas, you are left with the realpolitik of Henry Kissinger and the brute force legacies of John Foster Dulles, Margaret Thatcher and Ronald Reagan.  If Canada is going to survive in that crowd, then it had better develop a domestic market for Alberta oil, and do so fast.  And that implies closing the borders to oil imports without special permits  (and then not handing out the permits).   Such is life in the (very rough) oil patch. If the Canadians want to avoid getting totally hammered, they have few options. 

Like Howard Cosell, you do have a tendency for "telling it like it is", Jan.