Mulcair, Lougheed, Stelmach

[TimG]

A good post on the economics of refineries in Alberta

http://andrewleach.ca/uncategorized/more-on-upgrading/

It appears that Alberta is already subsidizing the NWU refinery that is being constructed:

Government guaranteed that the proponent would receive a 10% return per annum on prior capital costs of $329 million plus facility construction costs of up to $5 billion, and that they would be reimbursed by the Crown for operating and sustaining capital costs as long as those costs do not exceed specific benchmarks. In other words, the downside risk that the spread collapses is borne by the government, not by the refiner, since they would still be paid to process the bitumen even if they were doing so at a loss.

It also points out that restricting export of crude lowers the price and this amounts to "subsidy" because producers make less for the product they produce.

This graph should make every single Albertan very angry – your natural resources are being sold at prices up to $40/bbl below comparable world prices. Unfortunately, anger does not always make for the best decisions. You can likely build a refinery anywhere on the planet and make money with an $80/bbl bitumen:diesel spread, but that doesn’t mean we should build more refineries in Alberta today. A refinery is not a short term investment, so you can’t make a decision based on today’s spreads.

Edited July 14, 2012 by TimG

[punked]

The problem is separating the politics from sound economics. From an economics perspective, what's the use of refining here in Canada if the finished product is so expensive (due to the increased costs to companies) no one will buy it? China and other countries can produce the same product at a lower cost due to lower wages and essentially disregarding GHG emissions. From a dollars and cents perspective, with regard to ramping up our refining capabilities seems to me we're in a no win situation.

On the other hand, talk about the potential of thousands of high paying jobs falls mostly into the political realm.

Anyway, there are complex questions around this "to refine or not to refine in Canada" quandary, not easy for a layman such as I to comprehend. When politics and economics come into play together it's a veritable maze.

Almost all our oil is refined in the good old US of A. This has very little to do with China, the oil is trapped in the interior of the country and the only pipes that lead out go to the US. You make no sense when we look at actual reality.

[waldo]

The fact is there no need for additional refining capacity in North America.

But the real issue is there is too much refining capacity in North America. That is why no one is building refineries.

A good post on the economics of refineries in Alberta

huh! Make up your mind - discussing 'refinery economics' hardly fits your "over capacity" narrative.

[Shady]

I say build more refineries as well as the pipeline. Build, build, build, and when they're done, build some more.

[waldo]

GHG emissions will occur regardless whether it happens here or China GHG emissions do not respect borders, if it occurs here we have more control over the technology used to reduce those emissions to minimal levels...

You are now adopting a skeptical position on GHG control which will get you called a 'denier' by the GHG wackos. It is also a position that would require that Canada reject any future Kyoto protocol since the premise of such agreements is that emissions in developing countries are less important than emissions in developed countries.

the stated MLW member, 'wyly', fact negates your baseless attempt to foster AGW/CC denial. Most certainly those atmospheric emissions are borderless; more pointedly, they become an additional subset of the ever-growing outsourced emissions from developed to developing countries adding to the complement of developing country emissions that associate to exported products to developed countries.

[WWWTT]

I say build more refineries as well as the pipeline. Build, build, build, and when they're done, build some more.

When did you start getting it?

However I think this pipeline should go east,not west.

WWWTT

[WWWTT]

The problem is separating the politics from sound economics. From an economics perspective, what's the use of refining here in Canada if the finished product is so expensive (due to the increased costs to companies) no one will buy it?

That's not the way I see it.

In fact the way I see it,if government helps subsidize building the refineries right here to offset the cost,the cost for us at the pump should go down too.Increase productivity,reduce business expenditure and attract more investment!

However this would require more regulation of gas pricing to prevent the distributors from raping the consumers.And the conservatives would be the worst possible candidates to ever do this.I think they would feel to uncomfortable telling the oil companies what to do as opposed to kissing their asses and asking them "how high do you want me to jump?" or "yes sir,right away sir"

Actually I think the conservatives lack any real vision that is required in order to grab the bull by the horns and accomplish what is necessary.

WWWTT

[bush_cheney2004]

....Actually I think the conservatives lack any real vision that is required in order to grab the bull by the horns and accomplish what is necessary.

I agree...what you need is real vision like that of Marc Lalonde and PM Trudeau. Their NEP made Albertans and the west really happy!

[capricorn]

In fact the way I see it,if government helps subsidize building the refineries right here to offset the cost,the cost for us at the pump should go down too.Increase productivity,reduce business expenditure and attract more investment!

Government subsidies? Of course, those subsidies have to be paid by someone, namely the taxpayers. Read my lips. The government doesn't have any money. How will you fund those subsidies if not by raising taxes or cutting services. Pie in the sky looks yummy....

Actually I think the conservatives lack any real vision that is required in order to grab the bull by the horns and accomplish what is necessary.

What it comes down to is some visions are more affordable than other visions.

[cybercoma]

What it comes down to is some visions are more affordable than other visions.

There is no crisis of affordability. The government is running debt at around 4% of GDP. Compare that to the early 90s. The need for austerity in Canada is myth.

[WWWTT]

I agree...what you need is real vision like that of Marc Lalonde and PM Trudeau. Their NEP made Albertans and the west really happy!

If you say so I guess?

WWWTT

[WWWTT]

Government subsidies? Of course, those subsidies have to be paid by someone, namely the taxpayers. Read my lips. The government doesn't have any money. How will you fund those subsidies if not by raising taxes or cutting services. Pie in the sky looks yummy....

Obviously some requirements have greater importance than others.

Vision requires how you categorize what is important to strengthen our economy for now and into the future!

I have not seen anything significant from the conservatives to indicate that they posses vision.

WWWTT

[TimG]

There is no crisis of affordability. The government is running debt at around 4% of GDP. Compare that to the early 90s. The need for austerity in Canada is myth.

People like you are the recent Europe is a basket case.

First: Canada's debt-GDP ratio is around 84%. This is the same as France. Your 4% figure is nonsense.

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Second: The best time for austerity is long before a crisis hits (I am personally in favour of tax increases if . The reason why Europe is in trouble now is because governments refused to show restraint in the good times.

[wyly]

The problem is separating the politics from sound economics. From an economics perspective, what's the use of refining here in Canada if the finished product is so expensive (due to the increased costs to companies) no one will buy it? China and other countries can produce the same product at a lower cost due to lower wages and essentially disregarding GHG emissions. From a dollars and cents perspective, with regard to ramping up our refining capabilities seems to me we're in a no win situation.

most of our refinied oil comes from the US none from China, US costs to refine will be similar to what it would cost here at to the US price the cost of transporting the oil there then returning the refined products back here...even then we pay less than Europeans do for fuel, with higher costs than us Norway has no problem selling it's oil...

On the other hand, talk about the potential of thousands of high paying jobs falls mostly into the political realm.

it's about economic stability, being heavily reliant on a resource based economy it's stable, fluctuating world prices result in boom and bust cycles a well developed manufacturing sector reduces the severity of the up and down cycles...

it's the energy corporations deciding where to build refineries, they make their decisions based on their bottom line, profit...they're not individuals making considerations on what's good for a community, some corporate oil bean counter in Texas doesn't care, their shareholders don't care...this is the normal procedure of any company, reduce overhead, waste, consolidate, profit.. I do the same in my business but because I'm an individual I can make moral decisions and not always take the cheapest option, sometimes I hire people I don't need just to give them a job...

Anyway, there are complex questions around this "to refine or not to refine in Canada" quandary, not easy for a layman such as I to comprehend. When politics and economics come into play together it's a veritable maze. :

agreed so let's not automatically dismiss something because it was the NDP promoting the idea and not today's conservatives as a lot of forum ideologues are doing... Lougheed promotes the same idea and it's okay “We should be refining the bitumen in Alberta and we should make it public policy in the province,” “That would be a better thing to do than merely send the raw bitumen down the pipeline and they refine it in Texas. That means thousands of new jobs in Texas.”

Mulcair promotes it and it's lunacy from the wacko lefties, the NDP doesn't understand the economics of oil like conservatives like Premier Lougheed ...

Edited July 15, 2012 by wyly

[punked]

People like you are the recent Europe is a basket case.

First: Canada's debt-GDP ratio is around 84%. This is the same as France. Your 4% figure is nonsense.

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Second: The best time for austerity is long before a crisis hits (I am personally in favour of tax increases if . The reason why Europe is in trouble now is because governments refused to show restraint in the good times.

The best time for austerity is not in the middle of a slump. I thought Hoover was the only person left in the world after the great depression to believe that. Seriously you have not idea what you are talking about.

BTW France is borrowing on the market at a historic low so I don't know why being like France is a bad thing here.

Edited July 15, 2012 by punked

[Michael Hardner]

There is no crisis of affordability. The government is running debt at around 4% of GDP. Compare that to the early 90s. The need for austerity in Canada is myth.

I think maybe you meant deficit ?

Debt/GDP ratio is 83.5%.

[Shady]

The need for austerity in Canada is myth.

We're not experiencing any austerity in Canada. Just some very modest reductions. Reductions that are far less significant than in the 90s.

[punked]

We're not experiencing any austerity in Canada. Just some very modest reductions. Reductions that are far less significant than in the 90s.

Does the doublespeak make you tired? What is Austerity? Here is the Oxford English definition.

difficult economic conditions created by government measures to reduce a budget deficit, especially by reducing public expenditure

[wyly]

People like you are the recent Europe is a basket case.

First: Canada's debt-GDP ratio is around 84%. This is the same as France. Your 4% figure is nonsense.

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

Second: The best time for austerity is long before a crisis hits (I am personally in favour of tax increases if . The reason why Europe is in trouble now is because governments refused to show restraint in the good times.

and people like you who are under the impression because you vote conservative automatically make financial geniuses making broad generalizations about European economics....here some current european unemployment figures Norway 3%, Austria (4.1 %),Denmark 4.5%, the Netherlands (5.1 %), Luxembourg (5.4 %) and and Germany (5.6 %)....canada 7.2%...lumping in still developing eastern european countries and basket cases like greece is a smoke screen all the while you ignore that ultra conservative basket case south of our border...

[TimG]

lumping in still developing eastern european countries and basket cases like greece is a smoke screen all the while you ignore that ultra conservative basket case south of our border

It does not change the correctness of my statement: the time for austerity is long before any crisis arises. The government need to be balanced. If the general population does not want to increase their own taxes (which is the case in Canada) then the spending must be cut.

[punked]

It does not change the correctness of my statement: the time for austerity is long before any crisis arises. The government need to be balanced. If the general population does not want to increase their own taxes (which is the case in Canada) then the spending must be cut.

So the time for Austerity is always is what you are saying? I disagree. The time spend is during the bad times when the private sector wont pick up the slack and the time to cut is during the boom. I know you think the opposite is true but that is bad economics.

[TimG]

The time spend is during the bad times when the private sector wont pick up the slack and the time to cut is during the boom.

The boom times are gone. The world is entering a low growth phase as it deals with the massive debt bubble and an aging workforce (what has happened in Japan over the last 20 years is our future). Counter cyclical theory does not apply if there is no likelyhood of a future boom. Government and private sector debt but be cleaned up now. Edited July 15, 2012 by TimG

[punked]

The boom times are gone. The world is entering a low growth phase as it deals with the massive debt bubble and an aging workforce (what has happened in Japan over the last 20 years is our future). Counter cyclical theory does not apply if there is no likelyhood of a future boom. Government and private sector debt but be cleaned up now.

Oh yah that is it? You have declared boom times are gone forever. Well if that is what conservatives believe and that we must now put up with high unemployment and low services I think it is time for you guys to stop governing. Boom times are gone.

Japan BTW this years GDP growth will be 6%. Think of what we doing only a few years ago with 3-4% growth. The countries which are stimulating a growing fast and out growing the debt they are creating. But never mind that Tim thinks boom times are gone.

We are caught in a liquidity trap and if more people would learn what that is we could get out of it and start growing again.

[WWWTT]

If the general population does not want to increase their own taxes (which is the case in Canada) then the spending must be cut.

Then that's where the real debate starts,isn't it?

Are more jails,tougher prison sentences(increasing the cost),increased military spending,increased government MP staff,increased government minsters and associated budgeting,GST cuts and corporate tax cuts more beneficial than increasing infrastructure,social assistance,etc,etc?

WWWTT

[bleeding heart]

If the general population does not want to increase their own taxes (which is the case in Canada) then the spending must be cut.

Liberal and NDP voters are the most supportive of this proposal [raising taxes], the results showed, but 58 per cent of Conservative voters are also in favour of it.

"This attitude toward paying slightly higher taxes is reflected equally in high income and middle income Canadian households. It's only their governments who are offside," says the report, the first from the newly established think tank.

(And when it comes to those making 250 000 or more...83% of Canadians are in favour of it.)

http://www.cbc.ca/news/politics/story/2012/04/10/pol-broadbent-poll.html

It would appear, at least by implication, that Canadians don't want to pay way more; and the hypothetical raise, "slightly," doesn't tell us a lot, I concede.

But it does tell us that yoru declarative sentence is in fact flatly untrue.

Edited July 15, 2012 by bleeding heart