When oil falls below $70....

[August1991]

As private consumers, we all enjoy now lower prices when we buy gas. But collectively as Canadians, how do we feel?

Can Albertan taxpayers continue to pay equalization to the federal governemnt? Can Ontario and Quebec governments continue to have budget deficits - with lesser equalization payments?

Whether oil or electricity or even music/comedy, in French or English, we Canadians produce honest raw material. When the world price of a natural, honest resource falls, I reckon that we lose.

Edited November 30, 2014 by August1991

[Wilber]

For a while anyway. It's a cycle and prices are getting near the point where a lot of these new sources aren't profitable. As prices go down, consumption will rise causing prices to go up again.

[jacee]

As private consumers, we all enjoy now lower prices when we buy gas. But collectively as Canadians, how do we feel?

I think slowing down oil sands and pipeline development for some sober second thought is a good thing.

Can Albertan taxpayers continue to pay equalization to the federal governemnt? Can Ontario and Quebec governments continue to have budget deficits - with lesser equalization payments?

Equalization varies with revenues, etc. so automatically adjusts to changed circumstances.

Whether oil or electricity or even music/comedy, in French or English, we Canadians produce honest raw material. When the world price of a natural, honest resource falls, I reckon that we lose.

Diversify the economy.

avoiding-the-resource-curse-managing-extractive-industries-for-human-development-/

Another key to avoiding the resource curse is economic diversification, as demonstrated by the development of agriculture and the industrialization of oil exporters like Indonesia and Malaysia. Where these sectors can become competitive, they help create economies better able to withstand shocks, including those of volatile prices.

Value added ... don't ship crude, refine and manufacture.

.

Edited November 30, 2014 by jacee

[Keepitsimple]

I think slowing down oil sands and pipeline development for some sober second thought is a good thing.

Equalization varies with revenues, etc. so automatically adjusts to changed circumstances.

Diversify the economy.

avoiding-the-resource-curse-managing-extractive-industries-for-human-development-/

Another key to avoiding the resource curse is economic diversification, as demonstrated by the development of agriculture and the industrialization of oil exporters like Indonesia and Malaysia. Where these sectors can become competitive, they help create economies better able to withstand shocks, including those of volatile prices.

Value added ... don't ship crude, refine and manufacture.

.

Jacee - we've been through all this before. Refining all our crude means the production of jet fuels, diesel fuel, kerosene, motor oil, lubricating fluids. etc - most of them more dangerous to transport than oil itself......and all those products have to get to market - by rail, truck, and ships. Do you really think the eco-nuts would go for that? These retro-cavemen want to keep oil in the ground - period! That's why it makes sense to transport most of our oil through safe pipelines to other countries (in addition to our own) - like the US - where their refineries are already in place - and close to the huge markets they already serve.

As for diversification - that's not for government to do - it's for private enterprise - unless you're a fan of the USSR's central planning. If there's money in something, business will follow. Government can help through tax incentives and certain infrastructure but they can't "create" a market. You only have to look as far as Ontario's Green Energy fiasco to see how many billions can be squandered.

So Jacee - are you all right with the transport of all those flammable products by truck, rail and sea?

Edited November 30, 2014 by Keepitsimple

[Peter F]

Jacee - we've been through all this before. Refining all our crude means the production of jet fuels, diesel fuel, kerosene, motor oil, lubricating fluids. etc - most of them more dangerous to transport than oil itself......and all those products have to get to market - by rail, truck, and ships. Do you really think the eco-nuts would go for that? These retro-cavemen want to keep oil in the ground - period! That's why it makes sense to transport most of our oil through safe pipelines to other countries (in addition to our own) - like the US - where their refineries are already in place - and close to the huge markets they already serve.

As for diversification - that's not for government to do - it's for private enterprise - unless you're a fan of the USSR's central planning. If there's money in something, business will follow. Government can help through tax incentives and certain infrastructure but they can't "create" a market. You only have to look as far as Ontario's Green Energy fiasco to see how many billions can be squandered.

So Jacee - are you all right with the transport of all those flammable products by truck, rail and sea?

I'm curious how all those flammable products get transported now. Or does one need to go to the refinery to get them?

[sharkman]

Tax revenue will no doubt be affected. What I'm wondering though is how did the Alberta and Canadian governments ever survive when oil was sitting at $45/barrel in Jan of 2009? Also, in the early 2000's 45 was considered pretty expensive and governments were thought to be raking it in at such a high price. Since the price can be quite volatile, governments have no business making budgets based on tax revenue from historically high oil prices.

[Argus]

I'm curious how all those flammable products get transported now. Or does one need to go to the refinery to get them?

The point is they don't get transported as far. No one is talking about a refinery in Nova Scotia shipping jet fuel to Calgary. Refineries generally serve local areas. The big ships carrying oil carry -- oil, not jet fuel or gasoline or kerosine. If that train which derailed in Quebec had been carrying Alberta bitumen nobody would have died.

Edited November 30, 2014 by Argus

[Argus]

Tax revenue will no doubt be affected. What I'm wondering though is how did the Alberta and Canadian governments ever survive when oil was sitting at $45/barrel in Jan of 2009? Also, in the early 2000's 45 was considered pretty expensive and governments were thought to be raking it in at such a high price. Since the price can be quite volatile, governments have no business making budgets based on tax revenue from historically high oil prices.

Well, we had deficits, that's how. And I believe Alberta still had a piggy bank which some far sighted premier established some time ago. It's all gone now, though since the last few Alberta premiers have been barely capable of writing their own names without assistance and used it all up -- while running deficits anyway.

[Peter F]

The point is they don't get transported as far. No one is talking about a refinery in Nova Scotia shipping jet fuel to Calgary. Refineries generally serve local areas. The big ships carrying oil carry -- oil, not jet fuel or gasoline or kerosine. If that train which derailed in Quebec had been carrying Alberta bitumen nobody would have died.

The train was transporting a refined product you say? Wasn't KeepItSimple suggesting that such refined products do not get transported?

[Argus]

The train was transporting a refined product you say? Wasn't KeepItSimple suggesting that such refined products do not get transported?

That was Bakken crude. It's an unusual kind of shale oil which is highly flammable. The stuff from the oil sands is not.

[Keepitsimple]

The train was transporting a refined product you say? Wasn't KeepItSimple suggesting that such refined products do not get transported?

My point is that there are refining points in the US and other countries that serve their local markets. We send them oil - they refine it into the various products. What has been suggested by Jacee is that we do all the refining - that means we would have to somehow get the finished more "flammable" products to the end customers in those countries by truck, rail, sea or air. It's always possible of course that Jacee was implying that we should not export any oil products - just refine for Canadian use, period and just for Toronto and Montreal areas. Is that what Jacee was thinking (or not thinking....)?

[Moonlight Graham]

Oil needs to be $500 a barrel for a long enough period so that more sustainable technology will become viable economically so as to reach a critical mass where it can permanently replace fossil fuels as the world's the main energy source.

[TimG]

Oil needs to be $500 a barrel for a long enough period so that more sustainable technology will become viable economically so as to reach a critical mass where it can permanently replace fossil fuels as the world's the main energy source.

At $500/barrel (in today's dollars) the world economy would collapse. In addition, technologies that convert coal to oil are viable at a much lower price. The only real option are new technologies that are competitive with oil in the $100-200 range. So far nothing looks viable but generally speaking whenever a option appears viable the (nuclear, fracked natural gas, et. al.) the eco-luddites are quick to scaremonger and shut it down which only serves to perpetuate our dependency on oil. Edited December 1, 2014 by TimG

[Boges]

It's funny, people don't want anyone to use oil but are more than happy to enjoy the public services that the taxes on the oil pay for.

We could retrofit cars to run on Natural Gas and it would be better for the environment? Why aren't we doing that? No Excise tax on Natural Gas and if they put one on then many of the people would see a great increase in the price of heating their homes. In an arctic country where home heating is pretty much a human right.

[overthere]

Tax revenue will no doubt be affected. What I'm wondering though is how did the Alberta and Canadian governments ever survive when oil was sitting at $45/barrel in Jan of 2009? Also, in the early 2000's 45 was considered pretty expensive and governments were thought to be raking it in at such a high price. Since the price can be quite volatile, governments have no business making budgets based on tax revenue from historically high oil prices.

Alberta balanced their budget, contributed to equalization and started to run a budget surplus when oil was $10-$20 through the 1990s. They will find a way.

Not to worry, the gravy train is not yet stalled.

[Moonbox]

Whether oil or electricity or even music/comedy, in French or English, we Canadians produce honest raw material. When the world price of a natural, honest resource falls, I reckon that we lose.

Not really. High oil prices offer very little good to Ontario. I highly doubt the equalization we receive (lol) and the relatively minor business we do supporting the oil industry even come close making up for the increased manufacturing and transportation costs or the competitive hit our exports take with a higher Canadian dollar.

I'm happy Alberta is doing well, but I'd be happier if they were exporting more oil at a lower price than the other way around.

Edited December 1, 2014 by Moonbox

[Moonlight Graham]

At $500/barrel (in today's dollars) the world economy would collapse. In addition, technologies that convert coal to oil are viable at a much lower price. The only real option are new technologies that are competitive with oil in the $100-200 range. So far nothing looks viable but generally speaking whenever a option appears viable the (nuclear, fracked natural gas, et. al.) the eco-luddites are quick to scaremonger and shut it down which only serves to perpetuate our dependency on oil.

Well oil going to $500 overnight certainly wouldn't be a good thing. There would be no time to adapt.

I'm not an expert on sustainable technology, but why not do something like put solar panels on the roofs of most homes and buildings. ie: Homes could power themselves and charge electric cars, and any excess can be sold onto the grid for use by businesses and the state etc. I believe to add solar panels to a house would cost up to 10k, and even less if the technology is mass produced.

Edited December 1, 2014 by Moonlight Graham

[Wilber]

Solar is becoming less expensive and a real alternative for some electricity generation but it has limited value in our northern climes. Short days and weak sunlight limit the amount of power it can produce during the winter when demands are highest, except for peak air-conditioning periods which don't last very long in much of the country. We don't use our AC more than a month in a year. We use our furnace a lot more than that. The trouble with electricity is you can't store large amounts of it. The storage is in the fuel being used to produce it or the water behind the dam.

[TimG]

I'm not an expert on sustainable technology, but why not do something like put solar panels on the roofs of most homes and buildings.

Because the grid would still have to have enough non-solar capacity to provide power when the sun does not shine. This means the cost of the panels themselves is largely an irrelevant factor. The true costs of renewables come from the backup generation and the grid designed to handle sudden variations in supply.

any excess can be sold onto the grid for use by businesses and the state etc.

Except the grid often cannot use the power because other sources already provide enough kW to meet the demand and reducing the output of existing sources costs money. In Texas wind turbines owners often have to pay the grid operators to take the power because the grid operators need to be compensated for the costs incurred by accepting the power (wind turbines owners do this to collect federal subsidies).

Solar and wind cannot practically exceed 10-15% of the grid capacity. For the rest we need coal, gas or nuclear and that will never change. When fossil fuels get expensive we will need nuclear and eventually fusion.

Edited December 1, 2014 by TimG

[Wilber]

Except the grid often cannot use the power because other sources already provide enough kW to meet the demand and reducing the output of existing sources costs money. In Texas wind turbines owners often have to pay the grid operators to take the power because the grid operators need to be compensated for the costs incurred by accepting the power (wind turbines owners do this to collect federal subsidies).

Partly true. During peak solar producing times the power generated can decease the amount of fuels being used to produce power and keep reservoir levels high. The capacity to produce non solar power would still have to exist to meet demands when solar isn't available.

[Wilber]

Double post

Edited December 2, 2014 by Wilber

[TimG]

During peak solar producing times the power generated can decease the amount of fuels being used to produce power and keep reservoir levels high.

Even with solar there are problems because just as evening peak demand approaches solar is switching off and other sources have to be ramped up quickly. In California estimates are that by 2020 a 13GW gap will have to be closed in 3 hours. Closing this gap comes with a cost that is often greater than any savings that may accrued due to lower fossil fuel consumption.

http://judithcurry.com/2014/11/05/more-renewables-watch-out-for-the-duck-curve/

In Germany, fossil fuel plants are closing because they are not running consistently enough to generate a profit for the operator which leads to brown outs when renewables are offline. This has created an absurd situation where the existing fossil fuel plants need to be subsidized by the government.

The only rational grid plan given current technology is one that limits wind/solar to ~10% of grid capacity. If wind/solar are under this limit they can provide net benefits by reducing the marginal consumption of fossil fuels. Above ~10% and the costs of wind/solar will exceed the benefit for the foreseeable future.

Whether we like it or not nuclear will have to provide the large portion of our power in the future. As long as this option is blocked fossil fuels will be used instead.

Edited December 2, 2014 by TimG

[overthere]

Because the grid would still have to have enough non-solar capacity to provide power when the sun does not shine. This means the cost of the panels themselves is largely an irrelevant factor. The true costs of renewables come from the backup generation and the grid designed to handle sudden variations in supply.

Except the grid often cannot use the power because other sources already provide enough kW to meet the demand and reducing the output of existing sources costs money. In Texas wind turbines owners often have to pay the grid operators to take the power because the grid operators need to be compensated for the costs incurred by accepting the power (wind turbines owners do this to collect federal subsidies).

Solar and wind cannot practically exceed 10-15% of the grid capacity. For the rest we need coal, gas or nuclear and that will never change. When fossil fuels get expensive we will need nuclear and eventually fusion.

I've hammered at this reality for years, and am glad to see you writing about it.

You cannot turn massive conventional systems off and on as the sun shines or doesn't, and the wind blows, or doesn't. And we absolutely MUST have totally secure supplies of electricity.

So the renewables are mostly simply expensive redundancies, and cannot even replace the conventionals reduindancies a system must have for breakdow, maintenance.

If you add renewables to the grid in the expectaion that they 'll be extensivley used, you also must upgrade everything downstream to handle the increased (and unnecessary? new laod: power transmission lines, substations etc.

This is just not as simple as bolting a panel to your roof and connecting to the grid. You still need a line running the other way to provide 100% of your household demand when your panels produce zero.

[Wilber]

I've hammered at this reality for years, and am glad to see you writing about it.

You cannot turn massive conventional systems off and on as the sun shines or doesn't, and the wind blows, or doesn't. And we absolutely MUST have totally secure supplies of electricity.

So the renewables are mostly simply expensive redundancies, and cannot even replace the conventionals reduindancies a system must have for breakdow, maintenance.

If you add renewables to the grid in the expectaion that they 'll be extensivley used, you also must upgrade everything downstream to handle the increased (and unnecessary? new laod: power transmission lines, substations etc.

This is just not as simple as bolting a panel to your roof and connecting to the grid. You still need a line running the other way to provide 100% of your household demand when your panels produce zero.

Unless the nuclear option is taken more seriously, expensive redundancies will be necessary if we are to take reducing CO2 emissions seriously. this will only happen when people realize the cost of doing nothing is greater than the cost of doing what's necessary to reduce emissions.

[overthere]

Unless the nuclear option is taken more seriously, expensive redundancies will be necessary if we are to take reducing CO2 emissions seriously. this will only happen when people realize the cost of doing nothing is greater than the cost of doing what's necessary to reduce emissions.

The worst emitter is of course coal, which is in decline.

I would venture that few people know how the grid works, and its central position in our privileged lives. An utterly reliable supply of electricity is taken for granted, until it is not there

'Expensive redundancies' is a term that is in itself redundant, any redundancy is by definition both expensive and absolutely essential. The redundant capacity has to be as reliable as the main sources too. Not just generating capacity, but to a lesser extent transmission capacity too.