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Here I thought pipelines were long term infrastructure. I had no idea a substitute drama teacher had such a transformative influence over the future of the country.
When substitute drama teach becomes a PM for 10 years - he does.
And since substitute drama teacher is about as high of a position he should ever hold - that effect is negative.

Not sure if you ever did evaluate capital projects in your career, but discounted cash flow analysis has first years the project comes online as most significant part of ROI. And if first 10 years have to be spent in court with uncertain outcome - that ROI will naturally be negative in vast majority of cases
 

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Discussion Starter · #803 ·
Again, I don't have a dog in this fight. Canada's energy policy has been subpar more often than it has been stellar. I guess I can take consolation in that we are not unique in that aspect.

The challenges are difficult due to shear geography and size for Canada to get its resources to market let alone the complications of bureaucracy that you mention upthread. I am not sure why we continue to hamper our own progress with politicking every opportunity. Even construction of the railroads post confederation became a contentious issue that delayed construction. Perhaps it is just tradition for Canada to get in its own way.

Although a smaller producer of energy the Scandinavian countries have done a better job in resource development including overcoming environmental hurdles and creating an investment fund with the profits to spur further growth. Unfortunately, they are nowhere near the size of the major players in how much they can produce and export. Russia knows they have the largest stockpile. If people think the situation surrounding energy supply is bad now wait till this winter. Something's got to give or we may have an energy shortage.

Natural Gas by Country 2022 (worldpopulationreview.com)
 

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Only a couple of years ago there was a massive glut of oil around the world.

There was a growing surplus in 2018 before the pandemic further cratered demand.


Tankers were floating around looking for a place to unload, reserve tanks were filled to the brim, and the price of oil was lower than the cost to produce it.

That scenario existed despite embargoes on Venezuela, Iran, and other countries who were not producing due to war.

There was a massive oversupply and fuel prices were cheap.

In that economic reality oil companies weren't interested in investing more of their own capital.

They were closing down operations and laying people off. They didn't want the TM pipeline because it didn't make financial sense.

They are forecasting a surplus of 1 million barrels of oil a day in the near future, which could increase if sanctions are removed.

Boom and bust cycles mean far more to the capital investment scenario than anything else.

 

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I doubt regulations or taxes in Canada are a big factor in the decisions to spend capital on new projects.

Many of the oil companies recognize they are in a sunset industry and new capital spending today requires an extended payback period.

It is a risk / reward calculation for them, and some are choosing to spend on alternative energy projects instead.
 

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Norway is building an enormous sovereign wealth fund.

The OPEC countries have built enormous wealth funds and are diversifying their investments to survive a future of declining oil revenues.

What has Alberta done all these decades ?

I think it is well documented they started out on the right path when Peter Lougheed was the Premier, but since he left the oil royalties have served as a source of general government revenues to provide lower personal and corporate income taxes, avoid a sales tax, and hand out annual "prosperity" cheques.

A steady procession of Conservative governments in Alberta spent the oil revenues as if there was no end to it.

The critics of Trudeau are misguided to place all the blame at his feet. He has spent the past 3 years dealing with a global pandemic.

Stephen Harper didn't build or buy a pipeline. Justin Trudeau bought the TM pipeline and approved the Line 3 replacement.

Recently, Premier Jason Kenney announced that higher oil royalty revenues "balanced the budget".

That is great for Albertans today.......but what about the future generations when oil revenues go into decline ?

Alberta is collecting high royalties based on the price of oil today. Where is the investment for the future ?

The ability for royalty rates to change based on the price of oil is sometimes referred to as a 'sliding scale.' The government has designed royalty rates to change based on the price of oil, so the risk and reward is shared between industry and government. When prices are high the royalty rates are higher, and when prices are low the royalty rates are lower.

 

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You can't compare sovereign states with province that has majority of their income and taxes siphoned away by rest of the country

And I am sorry, but if you think that massive red tape and court cases dragging a decade are not influencing capital investment decisions - you are simply not a very smart person
 

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Discussion Starter · #808 ·
Alberta's good fortune is also a large boon to all of Canada. How do you think the national debt is going to be repaid? Where is the money going to come from to keep manufacturing plants like Bombardier in operation next time they need a bailout? I am glad that the AB minister announced provincial debt repayment and investment in the Heritage fund. Although the resource revenue in SK will be much lower in comparison to AB perhaps it will finally result in a balanced budget. Perhaps if oil goes to $200 a barrel they will be able to create a fund for that province.
 

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That's almost a 100% increase from the current price.

It won't happen.
Maybe that's what people said back in the 2000s as they saw the oil bull run 3x from $25 to $75, then hit a resistance around $75 in 2006 as oil retreated below $60, maybe then they thought "$140 won't happen, that's double the $70 where we've just hit resistance". And then...

I bet that $150 oil is still achievable within 2022. Then $200 oil could happen in 2023-2024.

If the recession doesn't happen this year, the bear market will continue as inflation will stay high due to commodity prices rising and rates who can't be increased anymore.
 

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You can't compare sovereign states with province that has majority of their income and taxes siphoned away by rest of the country

And I am sorry, but if you think that massive red tape and court cases dragging a decade are not influencing capital investment decisions - you are simply not a very smart person
Loads of excuses. It would be credible if AB wasn't high spending, low tax jurisdiction. They are happy being grasshoppers when they could be ants.
 

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Discussion Starter · #816 ·
This won't happen.
I don't think it will either but I wouldn't rule it out. The comment was more about this country's failure to transform commodity booms into sovereign wealth funds that generate returns in perpetuity as has been done elsewhere. My own province has more diversity in its commodity revenue and has ran defecits for a number of years. If individuals are looking to educate themselves on finances most governments are a bad example to follow.
 

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Loads of excuses. It would be credible if AB wasn't high spending, low tax jurisdiction. They are happy being grasshoppers when they could be ants.
Low tax? Are you kidding me? The federal taxes alone make Canada and all provinces included a highly taxed country. Albertan taxes are high - they are just not as stupidly high as other provinces.

Prior to NDP coming to power Alberta had a nice heritage fund and very little debt. Obviously now that has changed. This year portion of debt will be repaid, heritage fund will be added to, and Alberta will continue propping up bankrupts out east. What else do you want?
 

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Prior to NDP coming to power Alberta had a nice heritage fund and very little debt. Obviously now that has changed. This year portion of debt will be repaid, heritage fund will be added to, and Alberta will continue propping up bankrupts out east. What else do you want?
Revisionist history? It was small before the NDP took power, and continues to be small.

I should hope Alberta could manage to balance the budget with oil at USD$120/barrel.
 

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I don't think this analysis makes sense. If the carbon tax is rising to $170/tonne by 2030, then any investment that costs $150/tonne per tonne reduced with result in cost savings. Or are they just double counting the impact of the carbon tax? I'm pretty suspicious of the article given that it doesn't cite the source of the analysis. If it was done by an O&G or right wing think tank I think we can be comfortable that they are being flexible with the truth.
 
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