Canada’s oil boom is over

“The only debate is how painful and persistent the bust will be”


This week’s issue of the Economist declares that Calgary’s oil boom is officially over. “The only debate is how painful and persistent the bust will be—not just for the biggest city in Canada’s richest province, Alberta, but for the whole country.” Inevitable comparisons are made to Alberta’s last bust in the 1980s, but the Economist seems to think that things could be even worse this time, thanks to the compounding effect of the global credit crunch. Most ominously, perhaps, the article notes that the new Obama administration in the U.S. may take exception to our “dirty” oil sands product, which requires more processing than oil from other sources. As the article notes, the new chair of the House energy committee, Henry Waxman, is a green crusader who wrote part of a bill that seemed to ban U.S. government agencies from buying oil sourced from oil sands.

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Canada’s oil boom is over

  1. Shile the cost of crude oil is slipping down in price almost every day, why is it that the oil companies continue to charge so much for gasoline at the pumps.

    When was the last time we were paying close to 80 cents a litre and what was the cost of crude at that moement. It should be the same today or maybe a bit higher due to inflation, etc.

    Does anyone know? Does the government care? Or are the oil companies pouring money into political parties to ensure no new laws or limits are enforced?

    • Although I agree that the high price of gas at the pumps does not seem to be tied to the price of a barrel of oil, I still think it is incredibly INEXPENSIVE! Consider what goes into delivering a litre of gasoline into your car – extraction, refining, delivery to start – and even so it competes with buying bottled WATER! Think about that. Then consider the probable effects that burning all that oil has on the atmosphere and global climate. I think we need a higher price at the pump to motivate us to look at other sources. Europe’s prices are approximately double what we pay and have been for years – and guess what? – just like with recycling programs and charging for plastic bags they are years ahead of us in terms of investing in alternative energy sources. I appreciate that people need jobs, but using natural gas to get oil out of sand does not make sense.

      • Sir, I just have to say, screw you and your idea for even higher unjustified prices at the pumps. Oil companies seem to find reasons to up the price at the pumps no matter what the situation.With oil at 35 a barrel it is obvious we are being ripped off again. Why do I think anyone volunteering for higher pump prices is just an eco-loser who can’t afford a car. They are usually the kind of people who mooch free rides around with friends and are then sooo self rightious that they don’t own a car. I also grow increasingly bored with people who find some country somewhere charging higher taxes on gas or anything else for that matter and think we should imitate them. Enough is enough, taxes on gas, cars, registration is more than enough for the “sin” of not having to drive though a snowstorm on a bike or be mugged by a crack addict on public transit. Cheers.

        • I don’t know about your location, but prices have gone way down in mine.

          I gotta agree with you about the taxes and registration though.

          • They had been trending down along with crude as it slid to 35 a barrel. However a shortlived spike of about 10 dollars started prices going up. I’m fine with that, however the price collapsed again to around 35 but for some inexplicable reason the price at the pumps keeps going up. Now the oil co. are saying that it’s not just the price of crude. Funny that was all the excuse they needed when crude was going through the roof. I mean, they just can’t have it both ways.

    • There’s a simple answer as to why gas hasn’t gone down as much as you might have expected: they’ve discovered that people will pay that price.

      • That is why it needs to be controlled by the Feds. Of course people will pay whatever the companies ask for it is an essential for daily living. See my next post.

        • That’s the whole point of competition and anti-trust legislation, so that the companies compete against each other. Your simplification of economic reality is not helpful. If a company charges whatever they want, then they go bankrupt. If a company tries to collude with all the other companies to set prices, then they go to jail.

          • Dumb companies go bankrupt. Smart companies take advantage of their economies of scale, first-mover advantage, and barriers to entry to ensure that their competitors don’t get a leg up to begin with, then jack the prices to gouge consumers once again.

            The idea that all monopolies must fail is simply a statement of belief, there is no economic law that guarantees it or even implies it will happen.

    • The price of oil at the pumps isn’t determined by the price at the well head or the refinery. These days it’s more often determined by the buckos in the futures market.

  2. Oh, really? Don’t bet on it. All that oil that lubricates the world? That comes from Alberta; grade A, #1.

  3. Robert – funny that the oil companies don’t share your enthusiasm. With oil prices at $35, they are barely turning a profit on the extraction of heavy oil, let alone the huge prices required to build the producers. As they power down their plans for the next few years the overheated Alberta economy is going to feel it. Even when oil prices rise again (which may not be for a few years) it will still take some time for the effects of that to be felt.

    And the last time that oil was at $35 – $40 a barrel was around 2004. At that time, the rice of gas per litre in Ontario was between $0.68 and $0.88. Or about what it is now. So we can dial down the conspiracy theories.

    • Thanks that is what I needed to know. If the price of gas in 2004 is about the same at the pumps and close to the same a barrel of crude, then I am OK with this. Was the price of crude the same prior to 2004? And if so, what was the cost of gas at the pumps at that time? There should be some reasonable correlation, don’t you think?

      I still think that energy (electricity, coal, wind and solar energy) needs to be controlled, not just by what people are willing to pay (because people will pay whatever to get around and heat their homes, etc.) but by government. If not, then we will always be tied into what the energy company demands for energy. It is something all Canadians will use and it could be life or death for some of us.

      The gas companies should have to make roposals to the Feds whenever they need to…not want to…..raise the price of gas at the pumps. Some Department in the Fed Government should be watching this. Methinks!

      • Just before the first oil shock in 1973, crude was $2/barrel. If I remember correctly, gas was about $0.25/Imperial gallon, or about $0.05/litre. With crude at $40 today, that implies $1.00/litre gas.

        Seems like it’s reasonable to me.

  4. Let’s not forget that under a normal economy, the current world demand for oil outweighs the available supply. It will take at least 50 years for this trend to reverse based on new resources and new technologies that still need to be developed.

    Today’s low price is based on the economic downturn.

    The economic downturn is short term.

    Alberta will continue to be a major world supplier.

    • Yes, Alberta will continue to be a major world supplier (ah, the muscular pride in those self-confident words!). And we will all continue to pretend that climate science is a big fat hoax, until about 2070, by which time we’ll be somewhere between 500 and 600 ppm CO2 in the atmosphere and GM temperature will be three degrees or so above pre-industrial. By then it’ll be obvious to everyone (except to Kody, who will be a hundred-year-old CPC organizer at a new senior’s home operating on balmy Baffin Island) that climate scientists were not making shit up and that denialists were ecocidal buffoons twerped by paid-off right-wing opinion-leaders like Rush Limbaugh and Terence “Nutcrackers” Corcoran. But it’ll be way too late by then, because seventy gigatonnes of methane will be unstoppably bubbling up from melting permafrost all over the far north of the planet (heck, it probably already is – we won’t need to wait for sixty more years, the party has already started, woo ha!), and Earth will be on the way to a new equilibrium, involving crocodiles extending their range a couple of thousand miles north and deserts replacing the entire tropical forest belt.
      It’s never too late to start paying a little attention to reality, folks. Start by paying attention to what actual working climate scientists who publish peer-reviewed papers on their own areas of expertise say. Might help you figure out that carbon dioxide, unlike nitrogen and oxygen, interacts differently with infrared than with visible-band light, and why that matters.

      • Well it’s 30 below in “southern” Canada and 50 below in northern Canada so i’m not too worried about being “smoked out” just yet. But keep those donations coming in to Big Al and company, I hear he needs a lot of cash to keep that mansion nice and toasty warm don’t ya know. I guess Suzuki needs lots of cash to keep the tour bus filled with diesel and to fly to Europe with his daughter to preach about “conservation”. No doubt Bono is feeling the pinch keeping the gulf stream fueled up to make it to his next awards show. So keep the money rolling into those fraudsters and have a nice day. Gotta go plug in the block heater now or the car will be a block of ice by morning. No “global warming” in sight just yet. Cheers

        • Mr. Moores, “Global Warming” is not the same thing as “Local-area-X Warming”

        • Moores, climate scientists project that La Nina effects may keep the climate cooling slightly, on average, over much of the globe until the middle of the next decade. The signal of the current transient La Nina effect is still stronger, as yet, than the signal from elevated atmospheric GHGs, but that will change. The danger of global heating is longer-term, and will show its effects with increasing clarity in the second half of this century. The reason for the delay is the huge capacity of the oceans to soak up heat. It is as though you return to your house in winter, and turn up the thermostat. The house does not instantly warm up; it takes a few hours. So it is with the planet, except the lag is measured in decades. By increasing GHG levels, we have effectively cranked up the planets thermostat. Unfortunately, we can’t afford to wait and see what happens before we take action. By the time, a few decades hence, when the effects of having pumped atmospheric GHGs to extreme levels are no longer matters of projection, but are causing real-time disaster clear even to scientific illiterates, it will be too late, because we can’t simply suck GHGs back out of the atmosphere with the speed and ease we put them there. They will stay at elevated levels for centuries.
          Scientists can see we’re in a fast car speeding toward a cliff, and they’re warning us. Al Gore is a popularizer of what the mainstream working climate scientists are saying; it’s not about him, and sneering at him will not make reality go away. Folks like you apparently think we shouldn’t believe the scientists until we’re actually over the cliff. Our grandchildren will pay for this willful ignorance and irresponsibility with greatly diminished lives, the replacement of tropical forests with deserts, rising sea levels, unprecedented storms and heat-waves, a global mass extinction of species, and other phenomena. But it will be after your time, so I expect you and your kind will go to your graves ranting your clueless denialist nonsense and sneering at people like Al Gore and Dr Suzuki, as though you knew something they don’t.

          • I’ll tell you what Al Gore and David Suzuki don’t know: Its that there are thousands of scientists like myself who are closet skeptics of the whole AGW theory. Their propaganda machines have made it so that AGW skeptics feel like homosexuals in nazi Germany.
            Most of the time its non-scientists like Al Gore chattering at other non-scientists like a cacophony of parots, all of them reinforcing fad like ideas until they reach a religious fervor. Its all very sad.
            Look above at the “la nina” explanation and ask yourself if there is any real proof. Just this season Environment Canada predicted a warmer than average winter, and look what we got. I don’t mean any disrespect to them. I’m sure they are trying very hard. Most scientist work very hard to understand Nature, but that doesn’t make them automatically correct. Petitions and public opinion don’t make truth either. There is one truth independent of all perceptions. The truth is that we are in an ice age. The truth is that we can look into the past, and without any climate science at all, deduce that the warming trend should continue. Most of earths history has been warmer than it is today. Sea levels have been higher on average than today’s datum too. Much of that happened long before the appearance of man. You can look it up.
            The earth will do what it will do in the end. We can’t stop an ice age or a warm period, any more than we could hope to keep things in the exact same state forever.
            I personally hope for a cooling trend. The evidence (not the theories) suggests that might happen, and it would go a long way towards humbling the alarmists and their agenda. It might even return the spirit of science to its pure purpose of understanding nature, rather than a vehicle for political pursuits.

          • Ah yes.. the “anonymous” internet scientist. Surely a more trustworthy opinion than any other yahoo out on the internet because this one has called himself “Scientist”. What more proof could be needed on a site that allows us to make up any name we choose.

      • I agree thaty Alberta is one of the major world suppliers of oil. Being a Canadian Province, one would think that the price of oil in Canada would be cheaper than those in other countries like the USA, but it is not. I think that the reason for the high prices here has something to do with the taxes that the Feds and the Provincial Governments add to the cost of fuel.j The greediness of the Oil Companies also does add to this cost.
        So, if this is true, then the government can help our present economical woes by reducing the taxes on oil and gas as a way of helping those of us who need a car to go to work and make money to spend on our needs thus helping the economy….The Oil Companies can sell crude to Canadian Provinces for less. This too will help the consumer and our Economy. What do you think?

        • Sounds like the NEP to me. And *everyone knows* that the NEP left an entire generation of Albertans languishing in abject penury. I doubt they want to go there again

          • John, I am not asking Albertans to give the rest of Canada oil free……. I simply ask for some reasonably lower prices for Canadian Provinces. After all, did we not bail them out with our tax money when they were in trouble? All of Canada is in trouble right now. It is time to return the favour.

        • Gasoline is like sirloin steak, if you don’t like the price, don’t buy it!

          If you absolutely need it then pay the price!

          • That is the attitude that gets Canadian a bad name. We simply go with the flow regardless of the fact that we are getting ripped off. Or, you must be working for a Gas Company and do not want to help the others in Canada that are suffering under this economy. Thanks for the reply.

  5. Can’t we sell it to China?

    Seriously, where is that pipeline to the Pacific?

  6. Three points – 1. are these the same journalists who were projected $200/barrel 6 months ago? Frankly no one has any idea what the next 6 months/1 year will bring. 2. The price of gas is more dependent on simple supply and demand – how much demand for gas and the supply (as in the refinery capacity – and refinery capacity has not significantly increased since the ’80s while demand continues to move upward with just a few drops in demand) Finally 3. If the US would prefer to get its oil from the Middle East or South American countries – Venezala anyone? – who are at best fair weather friends to the US (and that will not change with the coming of Obama the Messiah) – then I’m find with that. Our ‘dirty’ oil will be just that much more valuable in the coming years and other countries will want it.

    • If the price of gas is dependent on supply and demand, as you ay……why is it that the moment crude rises in price the cost at the pumps goes up right away. But, when the price of crude falls, the price at the pumps does not drop at the same rate. It must be another reason beyond supply and demans… maybe greed?

      • Crude oil is sold as a commodity at the current “world market price”. It is based on basic supply and demand principals.

        The price you pay at the pumps is for refined fuels. The refined fuel market is a “local market price”. It is based on how much the refinery / distributor can get in that local market. If their cost of crude oil goes up today you can bet that instantly the pump price will go up. If the price of crude drops they will hold on as long as they can before they lower it.

        One way to get the price at the pumps down is to develop more refineries in Canada. If we added
        just 2 additional plants Ontario East and 1 or 2 out West – The price would come down. Maybe not equal to what refined prices are in the US but the difference would be closer.

        Review the following:
        * The population has grown in Canada over the last 20 years
        * The amount of vehicles has increased over the last 20 years
        * The amount of highways has increased over the last 20 years

        * The number of Canadian refineries has decreased over the last 20 years

        All current Canadian refineries are working at, or close to maximum capacity.

        This is a case of more demand and less supply at the “local level”.

        Provincial and Federal governments have not allowed a refinery to be produced in Canada in 20 years.
        This is due to everything from lengthy environmental impact studies that can take up to 10 years and the political fallout associated with a refinery in your backyard.

        The few refineries that we have here in Canada like the market the way it is. They can get more money at the pumps. Profits are up.

        Introduce competition (more refineries) and the price will drop.

  7. Thanks Chris for the great explanation. Much appreciated. Learned a lot from it. Mike