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    Default Oil Production Cuts

    I want this to be a seperate thread.

    What do you think of the merits of production cuts being enforced?

    https://www.cbc.ca/news/canada/edmon...nton-1.4928921

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    It will likely be a net positive for the province, but it's an ugly choice. Since companies compete for investment with thier peers, it effectively punishes those who have invested in downstream refining assets. Also, more government intervention isn't likely to increase international investor confidence in the safety of Alberta projects.

    But with all that said, I still think it's a net positive for the provincial government and the people of Alberta.
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    Short term gain, the risk is losing some market share. The government could have take a different route and just legislated a required price. I was discussing this with a friend of mine who is in the industry and much older than I and apparently the government did it before in the 70's, it just has to be kept a bit cheaper than wti so that refiners still buy it.
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    Charge more carbon taxes. More social license will definitely fix the problem.

    Quote Originally Posted by ExtraSlow View Post
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    It will likely be a net positive for the province, but it's an ugly choice. Since companies compete for investment with thier peers, it effectively punishes those who have invested in downstream refining assets. Also, more government intervention isn't likely to increase international investor confidence in the safety of Alberta projects.

    But with all that said, I still think it's a net positive for the provincial government and the people of Alberta.
    I don't see how any form of govn't intervention can be a net positive.
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    Garbage... What happened to free markets?

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    Well, technically in a free market you are allowed to not sell if you think the offer for your good or service is too low. In a free market you are absolutely allowed to throw your hands up, call it a day - and watch Netflix for a week instead of hauling 16 tons if you don't think its making you any money.
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    Quote Originally Posted by NissanFanBoy View Post
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    Garbage... What happened to free markets?
    the free market would build pipelines, but we absolutely do not have a free market here.
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    Quote Originally Posted by ExtraSlow View Post
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    the free market would build pipelines, but we absolutely do not have a free market here.
    Free markets also would not have price fixing and monopolies or comoanies getting together and actingr like monopolies manipulating price and production

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    ...
    Last edited by Sugarphreak; 08-18-2019 at 03:05 PM.

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    I'm really torn on how I feel about this. On one hand I would rather the market correct itself, but I understand that that will be at the detriment to many Albertan's jobs and businesses will fold. On the other hand without government intervention then you have the big players throwing themselves on a sword for everyone and could potentially be charged with price fixing if they felt strongly enough to do anything about it (which we all know they won't do it if they are the only ones). I do not like mein Fraulein Notley anymore than the next guy, but I think she has a very difficult decision ahead of her and I do not envy her position.

    The end goal is for production to drop, supply to diminish, and for us to eventually get a somewhat fair price for our product but I don't think there is any right answer for how we get there. Regardless.. something needs to happen.
    Last edited by schurchill39; 12-01-2018 at 09:57 PM.
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    I don't want to get laid off because there's no work, but we can't just give oil away for free either.

    I don't know what the answer is and I'm glad I don't have to come up with it.
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    It's really interesting (to me at least) to compare this with OPEC production cuts. OPEC countries have virtually unlimited transport capacity, due to all being costal nations. When they cut production they are working to influence world price benchmarks.

    Alberta is in the opposite situation. We have fixed (low) transport capacity, and a very localized price because of it. Production cuts in Alberta are unlikely to influence world price benchmarks.
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    I tried to find some data on this, but it's a bit complicated. There's something like 7000 bulk oil tanker ships in the world, and the majority of the large ones travel repetitive roties from the middle East to Europe and Asia. VLCC and ULCC classes hold well in excess of 1 million barrels each.
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    Quote Originally Posted by ExtraSlow View Post
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    It's really interesting (to me at least) to compare this with OPEC production cuts. OPEC countries have virtually unlimited transport capacity, due to all being costal nations. When they cut production they are working to influence world price benchmarks.

    Alberta is in the opposite situation. We have fixed (low) transport capacity, and a very localized price because of it. Production cuts in Alberta are unlikely to influence world price benchmarks.
    To be fair, Canada is also a coastal nation. Just a broken one

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    Quote Originally Posted by ExtraSlow View Post
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    the free market would build pipelines, but we absolutely do not have a free market here.
    This is where I agree with production cuts.

    Additionally, I am STRONGLY in favor of the concept that that oil is OUR oil, and the oil companies have been given licence to develop it.

    In this most extreme of circumstances (which we couldn't have dreamed of 40 years ago), I think drastic action is for ONCE and only once justified.

    The oil companies that are vertically integrated bet on a regulated industry. They haven't even lost anything, and will not "lose" by production cuts. Its really only upstream companies and us via royalties that are getting boned without cuts.

    If anyone argues about investment, well that is pretty easy, investment is dead in Alberta. Its not coming back. The last oilsands plants have been built, only expansions will happen (like the 3rd and 4th kearl expansions) and then oil will be done in 40-70 years.

    Syncrude is 40 years old and still going.

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    Quote Originally Posted by dirtsniffer View Post
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    To be fair, Canada is also a coastal nation. Just a broken one
    most of Canada would argue we are not an oil producing nation. Merely the unimportant province of Alberta.
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    Quote Originally Posted by HiTempguy1 View Post
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    This is where I agree with production cuts.

    Additionally, I am STRONGLY in favor of the concept that that oil is OUR oil, and the oil companies have been given licence to develop it.

    In this most extreme of circumstances (which we couldn't have dreamed of 40 years ago), I think drastic action is for ONCE and only once justified.

    The oil companies that are vertically integrated bet on a regulated industry. They haven't even lost anything, and will not "lose" by production cuts. Its really only upstream companies and us via royalties that are getting boned without cuts.

    If anyone argues about investment, well that is pretty easy, investment is dead in Alberta. Its not coming back. The last oilsands plants have been built, only expansions will happen (like the 3rd and 4th kearl expansions) and then oil will be done in 40-70 years.

    Syncrude is 40 years old and still going.
    Is it really not coming back though? Says who? We'll get Cons in power in couple years again and the US will have far left leaning Dems in power again and the cycle will continue once again.... Until that 40-70 year estimate is up again of course. But there should be a few more boom and bust cycles until then no?

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    Canada is first and foremost a socialist country. Albertans dont recognize this as we don't operate the same way the rest of the country does.

    Who would invest $billion in infrastructure to mine and drill for oil, when a federal provincial double whammy combo of government could crater the industry for 4-8 years at a time? Or longer?

    Imagine if no pipelines get built, ever (and this is what I think will be the case until a conservative majority government gets in). We're well and truly fucked.

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    Oil production cuts are what Butts/liberals and the ndp wanted all along.

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    Well… I could make the argument that rail capacity is near limitless.

    Realistically any section of track only has a train going over it for however long the shipment is. If you had transport in a continuous loop (empty oil cars heading north, full cars heading south) then rail capacity could arguably 10x fairly easily - just by building more containers.

    There is no "daily limit" as to what a rail section can handle, it really doesn't wear down any quicker if you use it 10x more. Without heat buckling and earthquakes, arguably they could last millenia.

    You would see a lot more interruptions along the south leg of the C-train though.

    PS: What I find interesting is that French citizens are rioting over things like high fuel prices. You can sell the wheat for cheap, but if the loaf of bread still costs people $5 to eat - anger will ensue.
    Last edited by ZenOps; 12-02-2018 at 01:18 PM.
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