There are regions in the world that have low population densities in conjunction with voluminous amounts of raw materials. Others, the opposite. One of the wonders of the global trade system is that these imbalances are efficiently sorted out. Not always however, without a few hiccups. The logistical hiccups are understandable and that's what engineers are made for. The ideological or baseless ones are far more irritating, the result of misguided initiatives that have cleverly captured the [Read more]
Obama’s irrational oil tax: Unintended consequences and why Energy East is critical for Canada
On February 5, US President Barack Obama floated the idea of adding a $10 per barrel tax on oil. What is meant by a tax on oil is anyone’s guess; the concept itself is so formless and ill conceived you can pencil in any interpretation that turns your crank and you’ll be as far ahead as the rest of us. At the very least, the proposal should be a poster child for the law of unintended consequences. It’s hard to know where to even start trying to analyze the chaos this would cause. Little is [Read more]
The US presidential campaign – a public starved for political courage contemplates the unthinkable
Twenty years ago a diminutive but out-sized Texan with a mildly plucked-chicken demeanor about him ran for the US presidency, and the race became interesting for the first time in ages. A singular individual with good ideas, great judgment, and the courage of independent thought shook up the political scene in a big way. The individual was Ross Perot, who had built a reputation as a no nonsense problem solver that fearlessly took on bureaucracies and challenged entrenched sacred cows wherever [Read more]
Scorched earth energy extraction – are shale resources being developed wisely?
Low oil and natural gas prices are now expected for the foreseeable future, as is evidenced by a glance at future strip prices that are unusually flat - crude oil futures prices, for example don’t rise above $50 until 2022. Low price expectations are primarily based on the notion that infinite shale resources will leap forth from the ground upon command, at the first sign of commodity price increases. That may be so in the short term, but an important misconception is that these newly [Read more]
Saudi oil filling a New Brunswick refinery – what kind of a domestic energy policy is that?
A Calgary based oil trader wishing to remain anonymous recently went on record to say that Irving Oil has "fixed the 299,235t Kamakshi Prem to ship crude on January 21 from Ras Tanura, Saudi Arabia to its 300,000 b/d refinery in St. John, NB in Canada." Yes you read that right, Canada’s largest refinery, the Irving Oil New Brunswick facility, imports oil from Saudi Arabia. If you study crude trading markets, that news won't come as much of as surprise since waterborne crude can originate [Read more]
The Ladyfern legend: huge reserves, frenzied drilling, and no one made money. Sound familiar?
North America is presently in a comfortable natural gas supply position. This is due to the rapid development of shale gas reserves. While shale deposits have been known about for decades, recent rapid changes in technology unlocked huge amounts of gas at moderate prices. New fracking techniques and more efficient capital usage enabled rapid development of these huge reservoirs. Production has indeed increased dramatically, and well productivity has also boomed. It’s almost like a [Read more]
United States now exporting oil and natural gas: deserving of the hype or overdue minor market balancing?
For the first time in 40 years, the US is exporting oil (other than to Canada, where shipments back and forth are common). At the same time, natural gas exports are now beginning to ship from the US Gulf Coast. Is this the start of a new era in global energy movements? Or just a peculiar set of circumstances as unremarkable as movements of wheat, corn, or copper? As is the case with those commodities, the world’s supply moves to areas of demand in various ever-changing patterns, and is business [Read more]
2016 energy predictions are anyone’s guess
No one has any idea what 2016 will bring, but that has not stopped 192 million people from taking a crack at predicting it, according to a quick Google search. It should be safe to say that in the energy business, we are going to see a fascinating collision between new found religions and cold hard truths. Rather than pay attention to predictions, which will sound smart or dumb depending on how close they are to your beliefs, it’s more useful to consider which viewpoints are currently the [Read more]
You call that a hedging opportunity Santa?
Hedging is the biggest double edge sword in the energy business. A hedge program can save your company, or destroy it. 'Destroy' may be a bit dramatic, but it nearly happened to a small Canadian producer a few years ago that locked in too much production at a low price, only to have to pay government royalties at an astronomical rate when natural gas prices skyrocketed. From one perspective, hedging means you will always be wrong; if prices go down, not enough was hedged, and if they go up, [Read more]
$400+ billion in global capital spending cuts will hurt (someday)
Energy in the media tends to have several broad themes. One in particular, is how the 'shale revolution' has redefined the global oil and gas marketplace. It’s an accepted truth that we are in a new era of cheap oil (the futures price for oil doesn’t hit $60 until 2022 or thereabouts, depending on the day) as well as with natural gas. Maybe it’s just the size and ferocity of the North American media business, but in some ways the shale revolution needs to be kept in context. The whole shale [Read more]