“In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun, who’s made a fortune of more than $4 billion in the oil business, according to data compiled by Bloomberg. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”
Oil futures in New York plunged as much as 3.8 percent to $70.87 a barrel today, the lowest since August 2010.
At the moment, some U.S. producers are surviving because they managed to hedge the prices they get for their oil at about $90 a barrel, Fedun said. When those arrangements expire, life will become much more difficult, he said.
Upon further reflection, I believe it’s time for Canada to institute a “human rights tariff” on foreign oil from corrupt and repressive states – a 25% surcharge on Saudi imports would kick things off nicely.
Saudis want Obomber to bow lower and call him uncle. Why do “people” keep on calling the Saudis “allies”; they are opposed to Canadian oil, along with the Russians and the US plays along.
Putin will be going nuts over this dive in oil prices.
The surcharge, as you call it sounds like a marvelous idea… but in practice would be nearly worthless. Once oil is on a tanker, it goes wherever the markets take it. Most of that Saudi oil would simply ship to a different port, and something else would end up in Canada. There would be a small shift in pricing because of the logistical disruption, but not much overall change.
People forget that Oil is a very fungible commodity.
A human rights tariff on Mid-East and Venezuelan oil? Brilliant idea!! It makes so much more sense than a carbon tax. I’m going to start lobbying for it right now.
Putin won’t care as much as you might think about the decline. The ruble has declined against the US dollar, so the effect will be limited. The real hit is against the American shale producers and the Canadian oil sands, again a bit less in our case because of the decline in the Cdn $ relative to the US.
But the Bloomberg analysis is right, this is intended to wipe out the marginal suppliers, particularly in the US.
As for tariffing Saudi oil, it won’t work. It’s OPEC, not just the Saudis. Secondly, we import about $3 billion from them and export about $1 billion to them. Details here:
http://www.canadainternational.gc.ca/ci-ci/assets/pdfs/fact_sheet-fiche_documentaire/SaudiArabia-FS-en.pdf
So expect all our exports to be hurt disproportionately.
Second, the WTO won’t recognize a “human rights” tariff. Canada would automatically be in the wrong, and subject to punitive tariffs on its exports. That includes Alberta potato farmers shipping to the ME.
Third, as DaveK rightly pointed out, oil is totally fungible once it’s out of the ground.
Why not just nuke Saudi Arabia, and be done with it? Oil problem: solved. Muzzie problem: solved. (tongue only slightly in cheek)
Canada is a very difficult place to do business. Trade barriers exist between provinces that add huge costs and impediments to interprovincial commerce.
If premiers are now going to impose a greenhouse gas tax on goods entering their territory you might want to ask the question, ‘for what reason does the country exist’? Are SK and AB not entitled to world prices for their commodities? If they can’t get to tidal water they will forever be beholding to a single market.
If the premiers maintain this foolishness AB and SK should institute a trade war and impose a greenhouse gas tax on the auto industry, steel producers, implement industry, fish mongers and the like.
Well, I don’t know too much, but I’d call “whistling past the bone yard (pure projection)” on Mr. Fedun, especially since the Russian finance minister let the cat out of the bag earlier this week or late last week (firing, firing-squad, or Siberia, or all three, to follow for the latter; take your pick): the decline in oil prices, along with sanctions over Ukraine, has cost the Russian treasury somewhere around $140 billion per year (assuming, of course, that any number that THEY produce can be even remotely trusted).
That can’t possibly end well: it probably cost Mr. Fedun, assuming HE survives, about 35 to 40 percent of his allegedly claimed personal wealth, more or less (depending, of course, upon how HE was personally hedged; he looks haggard, and not like Merle, in the photograph, to be honest).
Meanwhile, back here in the real world, Joe Oliver, apparently, based his financial update on a $70 USD per barrel, which, if Mr. Fedun is to be believed, portends even larger surpluses, and even more tax cuts and/or lower fuel prices for the Great Dominion and its people (although, on the basis of Mr. Fedun’s logic, probably larger surpluses, and more tax cuts).
And while we are it, I was curious as to what, on a “modified” American basis, the Canadian unemployment rate would be: 5.6% in Canada; 5.8% in the USA. The evidence for all of this is here:
http://www.budget.gc.ca/efp-peb/2014/pub/toc-tdm-eng.html
Thankfully us American and the Fracking company’s will innovate such as fracking w/out water to drive down production cost.So **** you
The Ay-Rabs hate fracking/drilling in North America. They are selling far less because of it. They will get the price down to the point where N.A. companies will find it too expensive to opereate and we’ll be buying Ay-rab oil. Then all our equipment in mothballed and they’ll jack up the price again.
“In 2016, when OPEC completes this objective of cleaning up the American marginal market,”
Well I’ll be shocked, shocked I tell you, if this Russian oil tycoon’s wishes, er, um, “warnings” of the OPEC goat humper’s crushing of western oil by 2016, don’t come true.
He looks like a trustworthy fellow.
Here’s some rare footage of distinguished OPEC delegates arriving a little late for their big pow wow.
http://www.youtube.com/watch?v=EgnxQ8VvdC0
Hugh Betcha!
Oil soared to $140USD in 2008, crashed to $43USD in 2009 and has averaged in the $95USD for much of the last 3 years. Oilsands cost of extraction is in the neighbourhood of $50USD-$60USD even at $75-$85USD market price the extraction companies are still in the green. I expect further refinements in extraction technology will drive the cost of production lower on the oilsands side going forward.
Putin and the ME would like the price in the $75-85 region as it finances all their invasion and social policy programs ie staying in power.
The blip to the low 70s is likely in the run up to the Christmas travel season, so don’t expect it to stay there too long.
Cheers
Hans Rupprecht, Commander in Chief
1st Saint Nicolaas Army
Army Group ‘True North’
this will mean SFA to 90% of the SDA readers but Saudi is packers plus biggest customer .
meaning , they are into the crappy rock too.
I like the idea of a tariff. Canada, the U.S. and Mexico should put a $30 tariff on all oil imports to provide stability for North American production. That’s what Pierre Trudeau would have done if he wasn’t a communist. Give Canadians more than world price instead of the fraction of world price he allowed Canadian oil companies.
…Saudi is packers plus biggest customer .
Good to know who to talk down for giving aid to the enemy. For they certainly are our enemy in more ways than one. Talk about ‘dirty oil’, and corps like packers plus right in the dirt with them.
It might be legal, but that don’t make it right. Just more proof publicly traded corporations have no soul and no morals or ethics beyond those they make up to suit themselves.
The love of money is the root of all evil.
“Here’s some rare footage of distinguished OPEC delegates arriving a little late for their big pow wow.”
And here they are debating: https://www.youtube.com/watch?v=fTTP61_9Acc
In honor of our most famous child soldier could we call it a Omarsharia Tariff
What a load of hopeless BS. The energy sector expanded in North America because the spike in prices few years ago made this development profitable. The costs of development was paid for once and the technology is here now. If OPEC keeps prices low then Canadian consumers benefit. If some less profitable domestic producers can’t keep up with the competition then good riddance to them.
Now suppose that the low prices that benefited Canadian consumers and made investing in Canada more profitable relative to an alternative with higher energy prices end in 2016. What would happen then? The new spike in prices would immediately jump start domestic production at a higher level. Especially that the tech is already here, it will not need to be developed again. So either OPEC needs to keep prices low or the domestic producers will bring it down. Meanwhile R&D and tech is progressing making extractions of previously non-profitable deposits more and more profitable. And it is progressing in North America probably faster then anywhere else in the world. We are slowly winning this battle.
What would be the worst thing possible? An idiotic tariff of course. Like every protectionist measure it merely discourages innovation and gives privileged position to domestic producers who then milk the consumers that have no alternative sources of supply. And since they will innovate less because of the guaranteed market, they will become less profitable internationally and their exports will be lower. Hence, there will be little effect on the producers and only the domestic consumer will get a shaft. That is provided the tariff works.
And I will not work unless the tariff is applied to all imported oil, from good and bad guys alike. If merely a tariff is slapped on unethical oil then there will be enough ethical competitors who will fill up the void at slightly higher prices. The net effect would be marginal.
Billionaire Prince Alwaleed bin Talal has clearly had an impact on Saudi policy
http://news.sky.com/story/1121610/saudi-prince-fracking-is-threat-to-kingdom
Their strategy is to undercut all competition to keep the N.America dependent upon them. Obomber is probably happy to bend and obey.
Also, it is not clear to me how this fits in with a political/religious struggle with Iran. There are many dimensions to this.
An idiotic tariff of course.
Short sighted. We pay through a tariff, or pay through military force to mitigate their violence.
Either way we pay, but military force has an end and we aren’t subsidizing their violence.
“Short sighted. We pay through a tariff, or pay through military force to mitigate their violence.”
Ugh because if we stop buying their oil they will become less violent? Is that it? You think you can starve them enough that they will not be able to export violence?
You honestly believe that a Canadian tariff could achieve that?
Because others will not buy their oil?
Hate to break it you but violence they will export until a military confrontation makes exporting violence a bad idea.
You honestly believe that a Canadian tariff could achieve that?
Because others will not buy their oil?
Heh, you’re like the kid who says, ‘but Mommy, all the other kids are doing it’.
No morals whatsoever…strengthen the enemy because it stuffs bills in your billfold.
Morals? So we went from economic arguments, to military/strategic arguments, to morals now?
Damn your case is getting weaker with every post.
How is making Canadian consumers poorer in the name of a futile gesture moral?
ISWYDT. heh
…morals now?
Damn your case is getting weaker with every post.
Out of their own mouths they convict themselves…
Last time I checked it wasn’t the road to heaven that was paved with good intentions. And good intentions is all you got.
@Colonialista: “What a load of hopeless BS.” I agree 100% on all points.
Market forces will adjust and find a level of production and cost that will be in accordance with demand. Marginal players will come and go accordingly.
A tariff would simply be unenforceable.
Last time I checked it wasn’t the road to heaven that was paved with good intentions. And good intentions is all you got.
Now you’re projecting like a typical leftist. One fact you can’t get around, you advocate continuing to strengthen the enemy in order to fatten your own pocketbook.
David and Colonialista are right. A price spike produced the spike in unconventional oil production, and a price decline will kill off the most expensive producers. Blathering about morals is irrelevant. The principle driving markets is cost. All that’s being demonstrated here is that protectionist idiocy is not limited to the loony left.
Blathering about morals is irrelevant.
Yes, forget proper behaviour, it’s all about the love of money…the root of all evil.
I guess nobody is getting the relevance of my second link.
Yes, no need for a tariff if we supplied ourselves. And create our own prices. It’s the height of idiocy for an energy rich country to be buying energy, especially from enemies.
These fools go over there giving the savages our technology, strengthening them, so we have to expend more resources defending against them. Damn fools in love with their short term gain.
Well the good thing about the decline in price is that the brightest minds in our chemical engineering, mechanical engineering, etc…employed in the oil patch (in the US and Canada) have a problem to solve–how to make extracting oil even cheaper than they’re doing it now. If anyone would have told me that the US would become a net exporter of oil 20 yrs ago, I would have wrote them off as a whacko…The biggest difference between us (US&Canada) and them (the Gulf states)–is that we actually use science, technology and research to do things better….note that all the Gulf States hire our oil-patch cast-offs–the old guys who can’t cut it anymore in our “neck of the woods”. In other words, they use our “B” team.
Sadly, you’ve not made it…yet.
“One fact you can’t get around, you advocate continuing to strengthen the enemy in order to fatten your own pocketbook.”
I see so we are back to the strategic military argument. Meanwhile back in the real world the only effect this tariff would have would be on Canadian consumers who would end up paying more at the pump. So Canadians get poor, Canadian economy gets weaker and Saudis sell as much oil as they would otherwise they just sell it elsewhere.
Yay that will show them.
And now back to economic argument we return (in case someone is keeping track we went like this: economy->strategy->morals->strategy->economy):
“Yes, no need for a tariff if we supplied ourselves. And create our own prices.”
The amount of economic illiteracy that you have managed to pack into this statement is breathtaking.
How, pray tell, are you going to create prices?
How are you going to make sure that we supply ourselves without some form of import restrictions?
How are you going to make sure that we supply ourselves without some form of import restrictions?
Duh, because we’re more capable than savages who only know how to hire immoral second rate oilmen to produce their violence tainted oil.
Do you understand that price of oil is set on global market and that Canada cannot control this price?
Would you order Canadian companies to sell for less at home than they can sell for abroad in order to prevent foreign oil from being consumed in Canada? Is that what you mean by “create prices” (and is your name Jimmy Carter by any chance?). Does it need to be explained to you why this is not a good idea?
What mechanism are you proposing to implement to make sure that Canadians consume Canadian oil?
Why does it matter whose oil we are consuming if we are a net exporter?
Do you understand that price of oil is set on global market and that Canada cannot control this price?
Ah, second rate oilman thinking…if opec can control prices, we, and the US, can as well. Only we can do it better because we have the expertise and they only have second rate oilmen who have risen to their level of incompetence.
It matters because we’re enriching our enemies and traitorous second rate oilmen.
It matters because it pi$$es off the leftists and traitors who support our savage enemy.
Build pipes east, west and south, open them up and watch our enemies and their hired second raters starve.
In case you didn’t notice OPEC is loosing control of prices rather rapidly.
So you want to control prices of Canadian oil (want to nationalize them too while at it?) And do so in concert with US that is sabotaging our exports? Briliant idea.
“Build pipes east, west and south, open them up and watch our enemies and their hired second raters starve.”
See this is the first time you are making sense. Absolutely! And this is all that is needed. Build the pipelines and let them supply as much oil to the global market as it is profitable this is enough to neuter the Saudis (at least partly) without hurting Canada in the process.
So you want to control prices of Canadian oil (want to nationalize them too while at it?) And do so in concert with US that is sabotaging our exports? Briliant idea.
Heh, pretty easy to get the one worlder types going. I guess it’s the only religion they have…
Cal2- where did you see that Packers Plus is so big in Saudi???
The western pipelines are under construction and on schedule. The eastern pipelines have to go through Ontario and Quebec so who knows if/when that will happen. The southern pipeline just means more oil exported south like now at deflated prices by existing pipelines, rail or barge.
“Heh, pretty easy to get the one worlder types going. I guess it’s the only religion they have…”
The fact that after publicly demonstrating that you are an economic imbecile you are still happy with yourself is telling.
Once Canada has export alternatives to the west and (hopefully) to the east we can negotiate future supply to US from a much stronger position.
The fact that after publicly demonstrating that you are an economic imbecile you are still happy with yourself is telling.
Yup, quite happy to not be a part of the one worlder religion.
Much to your surprise it will be broken soon enough…:-)
Just shut up already. You are economically illiterate. You’re incapable of holding a coherent argument for two consecutive posts and have an attention span of a retarded amoeba. Repeating “one worlder religion” as if it meant something does not make you sound smart or insightful it makes you sound pathetic and ridiculous.
One of the marks of a one worlder is their fanaticism…much like a leftist. It actually is leftist but they don’t realize it.
It’s a very old religion, the tower of babel all over again. Chicken in every pot, create prosperity for everyone, and all that rot. Same aim as all the other leftists, just a different approach.
The southern pipeline just means more oil exported south like now at deflated prices by existing pipelines, rail or barge. John Galt
Pipeline transport is fundamentally cheaper, and since it is private owned, such transport will be competitively priced with the other means of transport you mention. The removal of this bottleneck will bring Canadian producers the world price, as the bitumen will wind up in what is probably the greatest market for heavy oil in the world, the LA/Texas Gulf Coast, ( many of those refineries are optimized for heavy oil refining). So the southern pipeline means more oil exported south, at higher, not lower, prices than those currently received.
Keystone wil bring enormous benefits to oil sands, and Bakken producers, and Gulf Coast refiners: the NA oil industry. That is why the watermelons are fighting to the last ditch to stop it. (If it hurt producers, they would be for it. )