Saudi oil minister's message for high-cost crude producers: 'get out' of market

So this means the oil sands are basically fucked. They'd have to find a way to dramatically drop production costs, or wait until the Saudis reserves drop significantly.
Nothing the gov't of Canada or Alberta could really do about it.
Very bad news!

SA has 13% of world oil production. How the fark can they dictate prices like that?

Russia also has 13% and certainly doesn't like these low prices.

Because the most desired customers in China, India, Japan, and Europe will favour Arab oil due to easy low-cost production and rapid tanker delivery capability.

Pretty sure that the gate just got slammed shut for the next half generation on a vital part of the Canadian economy. Everyone in this country, not just in Alberta and Saskatchewan, better get ready to suffer because this isn't going to be over for a very long time. And the transfer payment conduits are going be massively declining in the next two years. You people that wanted Alberta shut down altogether? Be careful what you wished for because the financial tsunami is going to clobber you just as hard as it did to us.

In light of all this, does building those pipelines to tidewater still make sense?

Seems to me, a question is how much of what he said is bluff?

Maybe as part of the infrastructure program to have them in place for when the price recovers next decade and as a job creation plan. The companies though will withdraw their contribution so if it happens it'll be as a government-only project. Ditto with refineries or upgrades north of the US border because the investors that are remaining aren't going to spend a penny on any new developments in this kind of price climate.

On a side note it was reported yesterday that more and more of the yearly lease payments that the companies pay to farmers and other landowners for access to wells are delinquent. This is the opening part of the next stage of the collapse, as the smaller companies that exploited those wells begin to abandon them wholesale. It'll be a bigger massacre on the stock market soon of junior and medium-sized oil companies than was seen in the early 1980's. Hundreds of them will be out of business altogether over the next couple of years.

I'd like to think so. This is one of the examples I would cite when explaining why globalization isn't a good thing. If we are able to pipeline our oil nation-wide, and ban the imports of foreign oil, we could effectively isolate ourselves from outside markets. It wouldn't be pretty at first, the only people who'd be making money are the ones contracted to build pipelines and refineries. But in the long run, the rest of Canada can make money while paying $50-$60 per barrel ($1.00-$1.20 per litre at the pump isn't unbearable), and Alberta + Sask can get by producing less oil at that level.

In effect, we'd be sharing the pain, but also the wealth. You'd end up with less of a rich-side/poor-side outcome like what we've had over the past 15+ years.

We might have to amend/exit some FTAs, but I'm okay with that.

I don't think we have any FTAs with oil exporting nations. I was thinking along the lines of what you just said, but it seemed much more difficult to me than you make out. I mean, how much oil do we import vs export? I would guess our domestic market is pretty small compared to our exports to the US. And if we followed such a plan, we should also refine all our own oil, ban imports. And that would fark us re NAFTA. Undoing that particular treaty would be a huge mess. I doubt we could do it.

That's the rub, the GATTs and FTAs and the fact no majority would support doing anything 'socialist'. Screwed from both ends.
And to Thanos: WHO are those who want Alberta production shut down and are happy with Albertans being out of work? Three Green extremists? Nobody in the real world! That's a knee-jerk bogeyman claim, even more nebulous than any 'silent majority'.
Really, I'm not trying to dump on you, half my town went to Alberta when the mill closures started, half the families I met in Newfoundland had people working there, I have family there in your same boat. There's no need for imaginary bad guys.

With regards to NAFTA, both pres candidates who are likely to win are both up for renegotiating it.

In a way, the Americans are in the same boat we are. I get they are addicted to cheap oil, but for all we know they could end up coming to us about setting a minimum domestic oil price.

Quick search said we produced 2 750 000bbd, and our consumption was 2 250 000bbd as of 2008 and 2010 respectively.

At 50-60 bucks per barrel thats 110-120 million dollars of economic activity per day just supplying out needs... so to the tune of $40 billion a year from just extraction. Not great, but nothing to turn our nose up at either.


I think all we really need is the political will to legislate an import ban, a minimum domestic price point, and to allow pipeline construction/expansion and more refineries.

Read the comments in the article you yourself attached to this thread when you created it. There's no way that all those "Alberta better get used to it" bullshit isn't posted with the most malicious glee that the people who submit these kind of comments can muster up in their dark little hearts. At least the Germans have the grace to admit that this kind of emotion is shameful, and they labelled it as such. Canadians of this type though? If these comments are genuine, and genuinely felt, then the fuckers making them would gladly stand on the sidewalk and laugh right in their neighbours faces as they're getting evicted from their house.

Arab oil is sweeter; easier to turn into high value products like gasoline.

it isn't really 'sweeter' that refers to SO2 content, Canadian Oilsands are generally 'sweet' it is all about how far down the carbon chain the oil is, and how heavy (viscous) it is. Light oil is significantly easier to refine than bitumen. So your right in one aspect, it is much cheaper and simpler to turn light oil into refined products like gasoline etc than say heavy oil.

Doesn't matter how light or heavy it is, SA accounts for 13% of world production, yet can swing the world price at will.

SA has a ~ 1$ Trillion reserve fund, they are playing a game a chicken with the rest of the world. They were seeing their market share drop due to light / tight producers in Russia, USA etc coming on stream. So their reaction was to 'punish' them because theoretically SA has some of the 'best' oil on the planet.

What do I mean by best? It is light, API's above 30, highly over pressurized so it flows to surface easily so it is fairly cheap to produce. The drawback is, SA is hugely inefficient. They have a massive bloated organization and infrastructure that costs massive money to maintain, hence, their $1T reserve fund is just over half depleted.

They are betting that others will give up before their reserve fund does. In another 12-18 months their reserve fund will be gone. Once SA has to start financing instead of paying cash, my guess is they will be the first to turn down the taps. US is very efficient in their tight oil plays, they can still make money at $30 oil. SA SHOULD be able to, but due to their massive bloated inefficient empire, they can't.

Most analyst predict SA will blink first once their money runs out.

In the mean time, other energy giant's like Canada will continue to suffer. We don't get $30 for our heavy oil we get around $15 because there is a WCS select differential that is applied to Canadian HO. This is because we have no access outside of North America. IF we did, we would be getting $30 for our oil. We could survive at $30 for HO in Alberta. But until a pipeline gets our oil off the continent, we can't survive. Cenovus lost $641 Million last year because of this differential. We are loosing $15 per barrel of oil we produce. The only good thing, is a weak Canadian $ because all oil is traded in US greenbacks AND we have 2 refineries in the US. Other E&P companies, are not that lucky.

Encana just announced another 20% work force reduction, CVE will soon do something similar.