Oil

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tidal
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Re: Oil

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AltaRed wrote:Shell's and Saudi Aramco's loss is competitor gains. Crap happens from time to time. Don't worry. The profits will continue to roll.
Yep, just keep thinking that, and NOTHING can go wrong. Spend more, make more, it's automatic.
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Re: Oil

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tidal wrote:
AltaRed wrote:Shell's and Saudi Aramco's loss is competitor gains. Crap happens from time to time. Don't worry. The profits will continue to roll.
Yep, just keep thinking that, and NOTHING can go wrong. Spend more, make more, it's automatic.
Just a friendly drive by, but we both notice that the money men haven't stopped investing yet.

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Re: Oil

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newguy wrote:
tidal wrote:
AltaRed wrote:Shell's and Saudi Aramco's loss is competitor gains. Crap happens from time to time. Don't worry. The profits will continue to roll.
Yep, just keep thinking that, and NOTHING can go wrong. Spend more, make more, it's automatic.
Just a friendly drive by, but we both notice that the money men haven't stopped investing yet.
Oh, gee, ya think? And they've never, ever made a misstep before. Therefore, remain calm.
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Re: Oil

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tidal wrote:Oh, gee, ya think? And they've never, ever made a misstep before. Therefore, remain calm.
An analogy would be someone owning a $30,000 business car and damaging it in a sideswipe with a tree. A costly error it is being without wheels for awhile, but the solution to a $5000 mistake and loss of operating revenue is not a write off of the car. Shell and Aramco will see their financials hurt, but hardly a company breaker.
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Re: Oil

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AltaRed wrote:
tidal wrote:Oh, gee, ya think? And they've never, ever made a misstep before. Therefore, remain calm.
An analogy would be someone owning a $30,000 business car and damaging it in a sideswipe with a tree. A costly error it is being without wheels for awhile, but the solution to a $5000 mistake and loss of operating revenue is not a write off of the car. Shell and Aramco will see their financials hurt, but hardly a company breaker.
You are thinking WAAAAAYYY too small.

They have ALREADY invested in assets which will be written off by 50% or more, likely MUCH more. But they are investing even MORE.

No way that could happen. No way we could ever over-invest in internet startups. Or mortgages. As long as money is being invested, it means money will be made. Car repairs, acquisitions, new plants. As long as the money spigots are open, that's proof.

It's different this time. It's oil.
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Re: Oil

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All aboard the oil price roller coaster - The Globe and Mail
The report is by Leonardo Maugeri, a former oil company senior executive who is now at the Kennedy School’s Belfer Center for Science and International Affairs. He analyzed all the world’s major oil formations and exploration projects field-by-field. He concluded that oil production is growing so quickly in the United States and several other countries that global oil output capacity could grow by nearly 20 per cent from the current 93-million barrels per day to 110-million by 2020.

“The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades,” he says, while pointing out it will probably trigger similar exploration and development worldwide. His estimate is that the United States could still increase oil production by 3.5-million barrels per day and by 2020 become the second largest oil producer in the world after Saudi Arabia.

The report states that the four countries with the highest potential in terms of production capacity growth are – in order – Iraq, United States, Canada, and Brazil. Much of this increased capacity comes from “unconventional sources” such as U.S. shale/tight oils, Canadian oil sands, Venezuela’s extra-heavy oils, and Brazil’s pre-salt oils. Maugeri says the shale oil fields in North Dakota and Montana alone could become the equivalent of the Persian Gulf.
I remain doubtful that all projected Oil Sands plants will be built.
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Re: Oil

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Peter

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Re: Oil

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Shakespeare wrote:I remain doubtful that all projected Oil Sands plants will be built.
It is virtually certain they will not. There are always way more ambitious plans and fantasies than there is realism. I've seen it my whole career. Announcements with fanfare make for good press and stroking of egos, but do not necessarily translate into reality. Yet another curve ball is that piece on Isreal's potential - which is hard to take at anywhere close to face value, but stranger things have happened.

That said, I think what we are going to see happen is a shift in investment to more 'certain' regimes, and less in politically volatile locations such as the Caspian Sea, Sakhalin Island, and even Africa. Why risk one's marbles there?
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Re: Oil

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AltaRed wrote:That said, I think what we are going to see happen is a shift in investment to more 'certain' regimes, and less in politically volatile locations such as the Caspian Sea, Sakhalin Island, and even Africa. Why risk one's marbles there?
You mean the roughly 10% of oil and gas production that is privately-owned will shift away marginally from projects in states they are not crazy about? That should make a big difference.
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Re: Oil

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tidal wrote:
AltaRed wrote:That said, I think what we are going to see happen is a shift in investment to more 'certain' regimes, and less in politically volatile locations such as the Caspian Sea, Sakhalin Island, and even Africa. Why risk one's marbles there?
You mean the roughly 10% of oil and gas production that is privately-owned will shift away marginally from projects in states they are not crazy about? That should make a big difference.
The WSJ piece is not terribly relevant nor accurate. The Iranians and Venezuelans have demonstrated no ability to increase production without external help (and capital). . The Africans, including the Arab countries, are in a similar place. The Saudis couldn't weld a pipe without expat help. IOW, it is not necessarily about reserves nor control. It is about expertise, motivation and capital.
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Re: Oil

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AltaRed wrote:
tidal wrote:
AltaRed wrote:That said, I think what we are going to see happen is a shift in investment to more 'certain' regimes, and less in politically volatile locations such as the Caspian Sea, Sakhalin Island, and even Africa. Why risk one's marbles there?
You mean the roughly 10% of oil and gas production that is privately-owned will shift away marginally from projects in states they are not crazy about? That should make a big difference.
The WSJ piece is not terribly relevant nor accurate. The Iranians and Venezuelans have demonstrated no ability to increase production without external help (and capital). . The Africans, including the Arab countries, are in a similar place. The Saudis couldn't weld a pipe without expat help. IOW, it is not necessarily about reserves nor control. It is about expertise, motivation and capital.
It matters because there are far too many hydrocarbon reserves already, and every owner of said resources is going to do whatever it takes to try to squeeze out more than their fair share from the shrinking amount that can still be extracted before their competitors can. High cost producers will be stranded. Expertise, motivation, and real capital will be bought by those with the best deposit economics.
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Re: Oil

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Oil. The last chart!
=====================
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~~~>Click to see fullsize!<~~~
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Re: Oil

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Something I've mentioned a few times. Baaaaad news for unconventional oil deposits, in particular. Most will be written off, strange as it seems. Coal deposits too. We are fortunate that even more capital is not already being obliterated on pipelines.

Biggest asset write-down, from the biggest industry the world has ever seen, coming. And we get to try to invest through it.

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Re: Oil

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Something I've mentioned a few times. Baaaaad news for unconventional oil deposits, in particular. Most will be written off, strange as it seems. Coal deposits too. We are fortunate that even more capital is not already being obliterated on pipelines.
Unfortunately, the oilsands have become the easy whipping-boy for environmental groups. I guess if they started targeting personal energy consumption, it would likely hit too close to the bone.

Significant deterioration of oilsands would be baaad news. If you have a pension plan or index fund you are probably heavily invested in oil. The benefits that make their way into the tax system through employment, investment returns, royalties and service industries are not replaceable. The only logical result would be a deterioration of our standard of living, higher national debt and severe strain on social programs such as healthcare.

You may still say it is worth the cost - f... our pension plans, retirement portfolios and social programs. If it makes a significant improvement to the global environment, it is worth the cost. But will it make any significant impact on the global environment? The oilsands contribute 0.1% to global carbon emissions. Are the Americans going to stop driving their pickup trucks when the oilsands are shut down? Are the Chinese going to halt development, building more infrastructure and purchasing more automobiles? Are the young emerging Indian population going to forgo many of the comforts we enjoy in the west? Is there any Canadian industry on the horizon that could come close to replacing the revenues that make their way into national coffers?

So all that a targeted movement on a single relatively small (in the scheme of things) emitter such as oilsands will do is destroy that industry and drag down the Canadian economy and our standard of living. 99.9% of the global carbon emissions will continue to make their way into the atmosphere.
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Re: Oil

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Continued oilsands development will be constrained by the price (or lack thereof) of oil. We may be entering a prolonged period of sub-$100 oil as shale oil and multiple other technological opportunities suppress prices. Shutting down the oil sands by whatever means will have almost zero carbon impact. Relax, be happy and enjoy life like everyone else.... or if one is so inclined, be my guest and worry for all of us.
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Re: Oil

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Oil sands oil is marginal oil - high cost, too far from many markets. It is vulnerable to almost any technological advance that allows development or replacement closer to markets.

Most of that oil will stay in the ground for economic reasons.

Canadians better start thinking about alternative means of making money.
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Re: Oil

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That Rolling Stone article is now online.
... Which is exactly why this new number, 2,795 gigatons, is such a big deal. Think of two degrees Celsius as the legal drinking limit – equivalent to the 0.08 blood-alcohol level below which you might get away with driving home. The 565 gigatons is how many drinks you could have and still stay below that limit – the six beers, say, you might consume in an evening. And the 2,795 gigatons? That's the three 12-packs the fossil-fuel industry has on the table, already opened and ready to pour.

We have five times as much oil and coal and gas on the books as climate scientists think is safe to burn. We'd have to keep 80 percent of those reserves locked away underground to avoid that fate. Before we knew those numbers, our fate had been likely. Now, barring some massive intervention, it seems certain.

Yes, this coal and gas and oil is still technically in the soil. But it's already economically aboveground – it's figured into share prices, companies are borrowing money against it, nations are basing their budgets on the presumed returns from their patrimony. It explains why the big fossil-fuel companies have fought so hard to prevent the regulation of carbon dioxide – those reserves are their primary asset, the holding that gives their companies their value. It's why they've worked so hard these past years to figure out how to unlock the oil in Canada's tar sands, or how to drill miles beneath the sea, or how to frack the Appalachians.

If you told Exxon or Lukoil that, in order to avoid wrecking the climate, they couldn't pump out their reserves, the value of their companies would plummet. John Fullerton, a former managing director at JP Morgan who now runs the Capital Institute, calculates that at today's market value, those 2,795 gigatons of carbon emissions are worth about $27 trillion. Which is to say, if you paid attention to the scientists and kept 80 percent of it underground, you'd be writing off $20 trillion in assets. The numbers aren't exact, of course, but that carbon bubble makes the housing bubble look small by comparison. It won't necessarily burst – we might well burn all that carbon, in which case investors will do fine. But if we do, the planet will crater. You can have a healthy fossil-fuel balance sheet, or a relatively healthy planet – but now that we know the numbers, it looks like you can't have both. Do the math: 2,795 is five times 565. That's how the story ends....
I agree with Shakespeare - the biggest threat to the oil sands is economic. In a scenario where there are too many hydrocarbons, the high cost projects are most at risk. Even if you just look at things from a game theory point of view, it's hard to see how the Saudis - for instance - wouldn't work towards a price that still allows them to get as much of their oil out at acceptable profit, but cripple higher cost competitors... let their oil be shuttered, not that of the House of Saud.

For most environmentalists, this is an extremely bitter pill to swallow. There had been some faint "hope" that some sorts of "peak" issues for hydrocarbons would impose a de facto carbon price. But if you look at natural gas, coal, oil prices, this really does not look like it's in the cards. So you have this additional headwind for alternatives to compete with. It actually looks to make the transition even more daunting (although there may be a silver lining of good news if a lot of the emissions go towards new infrastructure build.)

It suggests that a carbon price would need need to do more of the heavy lifting. And obviously we don't have much of a carbon price (although Mexico, Australia, Korea and many others are going on their own...). But eventually we will have one... which would be potentially more bad news for projects like the oil sands. I think I have previously quoted a key takeaway from a recent M.I.T. study:
... with CO2 emissions (constraints) implemented worldwide, the Canadian bitumen production becomes essentially non-viable even with CCS technology... (Demand) for petroleum products which still emit CO2 when used... can be met with conventional oil resources that entail less CO2 emissions in the production process...
... Elsewhere in the same study:
The niche for the oil sands industry seems fairly narrow and mostly involves hoping that climate policy will fail.
Which I think is a hell of risky bet. I agree with Shakespeare's points about the oil sands: "Most of that oil will stay in the ground for economic reasons... Canadians better start thinking about alternative means of making money."

@ Spidey - the emission numbers you are using for the oil sands are bogus, light by roughly an order of magnitude. It's easy to confirm this just by knowing the production rate, the emissions per barrel, and global emissions. The talking point numbers you are using probably only account for the emissions from extraction and processing up to the pipeline, etc. Your misleading statistic would be like saying that the emissions from all fossil fuel extraction is only about 5% of the total emissions, and so therefore if we completely stopped all fossil fuel extraction - 100%! -, then global emissions would only fall by 5%. It's absurd.

Your solution - that we should load up our pension accounts and economy with companies that are quite likely speeding towards fail - is not my idea of sound investing or economic management.

I'll also note that - just as when I presented exactly these same numbers, for instance back in late December 2011 through the first week of January 2012 - that no one is disputing the numbers themselves. They are simply responded to with either (a) a bunch of entirely human considerations that essentially ignore the carbon discrepancy (e.g. above: "benefits that make their way into the tax system through employment, investment returns, royalties... strain on social programs such as healthcare... pension plans, retirement portfolios and social programs... Americans...driving their pickup trucks... Chinese... building more infrastructure and purchasing more automobiles... Indians... forgo many of the comforts we enjoy in the west?"); or (b) pretend there are no consequences to blowing through the lower end numbers.

Sorry, the atmosphere doesn't care about any of these things. It only responds to carbon.

Image

I do get the point that we are perhaps no smarter than yeast, and that we will head over the ecological cliff. Certainly plenty of prior examples of human civilizations doing exactly that. I just still find it hard to believe that we won't act in the face of a clear threat.
Last edited by tidal on 19 Jul 2012 16:37, edited 1 time in total.
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Re: Oil

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We will not act in a significant way because the majority of carbon emissions come from the tailpipes of land, sea and air vehicles. Things virtually everyone aspires too.
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Re: Oil

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Without having been there (I haven't, but once discussed it with a Bechtel engineer working on the Syncrude design) it is not possible to visualize how massive the mining plants are. About 2 tonnes of sand has to be moved for one barrel of oil. That means Syncrude has to move, process, and replace about 600000 tonnes a day of sand. :shock: :shock: :shock: :shock:

The amount of machinery needed for this is incredible - not only the moving, but the processing. The engineer told me that one little corner of the original plant was a machine of 2000 tonnes - the size of a WWII destroyer.

All this steel has to be moved up one overcrowded two lane highway.

It is inevitable that the mining projects will collapse under their own weight - constantly over budget as problems getting steel and workers in materialize. And the best mining leases are already taken.

If more plants are built after the current plans are finished, they will likely be SAGD or possibly solvent extraction.

Meanwhile, alternatives keep getting developed.
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Re: Oil

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@ Spidey - the emission numbers you are using for the oil sands are bogus, light by roughly an order of magnitude. It's easy to confirm this just by knowing the production rate, the emissions per barrel, and global emissions. The talking point numbers you are using probably only account for the emissions from extraction and processing up to the pipeline, etc. Your misleading statistic would be like saying that the emissions from all fossil fuel extraction is only about 5% of the total emissions, and so therefore if we completely stopped all fossil fuel extraction - 100%! -, then global emissions would only fall by 5%. It's absurd.
That is consistent with my point. As Altared says, "
the majority of carbon emissions come from the tailpipes of land, sea and air vehicles"
. And I've made the similar point, "
I guess if they started targeting personal energy consumption, it would likely hit too close to the bone."
Hampering oil sands development will only move production to other locations, it will not make any significant difference to overall emissions.

Suppose, we elected Prime Minister Tidal. What would you do with the oil sands? Shut them down?
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Re: Oil

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Spidey wrote:
@ Spidey - the emission numbers you are using for the oil sands are bogus, light by roughly an order of magnitude. It's easy to confirm this just by knowing the production rate, the emissions per barrel, and global emissions. The talking point numbers you are using probably only account for the emissions from extraction and processing up to the pipeline, etc. Your misleading statistic would be like saying that the emissions from all fossil fuel extraction is only about 5% of the total emissions, and so therefore if we completely stopped all fossil fuel extraction - 100%! -, then global emissions would only fall by 5%. It's absurd.
That is consistent with my point. As Altared says, "
the majority of carbon emissions come from the tailpipes of land, sea and air vehicles"
. And I've made the similar point, "
I guess if they started targeting personal energy consumption, it would likely hit too close to the bone."
Hampering oil sands development will only move production to other locations, it will not make any significant difference to overall emissions.

Suppose, we elected Prime Minister Tidal. What would you do with the oil sands? Shut them down?
Spidey, your point misses the point because the point is that the "extra" emissions that come from the oil sands are not just the extraction emissions. That's just "in addition" to the tailpipe emissions. So if you are looking to price the negative externality of carbon emissions, then the oil sands gets proportionately more than the conventional oil deposits. Which would make their already higher-cost projects even LESS cost competitive with, well, their competitors.

The concept that you keep putting forward about "if consumers also had to bear the burden of the carbon price" - look, that is not bug, it is a FEATURE of a carbon price. It is what you are TRYING to do. Read all the idols of the rightest-wing economic theory - Friedman, Hayek, Pigou, I could go on and on - and this is what they all recommend.

It's not an ideological argument in terms of economics. If there is a negative externality, then we should price it, and Greg Mankiw (Bush's CEA chair), Alan Greenspan, George Schultz, on and on and on agree. What you are getting from "the right" these days on this point is not "right wing" economics. It's political-puppet-speak of fear-mongering and obfuscation on behalf of a threatened oligarchy. And so they don't mainly argue that there shouldn't be a price imposed, but rather that there is not enough reason to. Which is cloud cuckoo-land scientifically. And I'm not saying that as an insult, these are the the facts of the matter. The actual economic arguments from even people like the American Enterprise Institute (AEI), etc. consistently argue for a carbon price, preferably a tax at source.
Hampering oil sands development will only move production to other locations, it will not make any significant difference to overall emissions
This is either economically illiterate or cunningly obtuse. If you put a price on carbon for the oil sands AND it's competitors, then not only would - all things being equal! - there be less demand for their product overall, but you would ALSO see more relative market share go to lower-carbon-intensity extractors. Which is the double whammy that the oil sands doesn't want, and why they pollute the discourse with the non-sequiturs you ate up and parrotted above about "0.1%", etc.

People ARE going to choose a carbon price over cheap flights to Vegas at some point. If you are a corn farmer in the US right now, you are really having to ask yourself hard questions. Things change. Slaves are free, women vote, gays marry, your cousin is a monkey, etc. All were heresy.

Don't worry, I will never be prime minister, and, besides, despite what your question implies - and the current occupant seems to believe - it doesn't make you king and you just impose willy-nilly your own fetishes. But in all my increasingly frequent meetings with politicians and bureaucrats - I spent most of five decades before I had even a half dozen except for licence renewals, etc., now they are on my calendar more than I wish - and op eds, talks, etc., I am consistent. I think we should get a price on carbon, a meaningful and rising price, and let the market sort it out for the most part. I would like to the see the price as revenue neutral to the government as possible - but recognize that we don't live in a perfect world... In the end, I think simple propositions like this do threaten the oil sands in a competitive market (although I will also note that the "official" positions of many oil sands producers companies is for a carbon tax...) but if they can surprise us all, all the better.

Reality is on the side of pricing carbon, leaving most of the hydrocarbons in the ground. And then go back on what that implies for proven carbon reserves and the capital markets valuations of their owners as it currently stands.
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Re: Oil

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tidal wrote:I'll also note that - just as when I presented exactly these same numbers, for instance back in late December 2011 through the first week of January 2012 - that no one is disputing the numbers themselves.
I didn't have to
tidal wrote:this leaves a budget of 565 GtCO2 for the remaining 40 years to 2050*." Even if you back that off to a probablility of 50% of exceeding 2°C warming, you still end up with a remaining budget of about 1450 GtCO2.
But when I started reading the article with 3 or 4 significant digits I had to stop. I'll give them 2.5 sig figs on the 565 number so they imply that they know the number is between 562.5 and 567.5 . I would be much more inclined to believe them if they said they think the number is around 5 or 6 hundred.

We know that in the short term (a decade or 2) that the solar cycle will have a greater effect thane CO2 so what happens in 10 years if there's still no meaningful increase in temps? Then we decide to keep pumping oil. What happens if there is a measurable increase like 1 deg.? Then I bet we raise the target to 3 deg. :lol:

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Re: Oil

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Hampering oil sands development will only move production to other locations, it will not make any significant difference to overall emissions
This is either economically illiterate or cunningly obtuse. If you put a price on carbon for the oil sands AND it's competitors, then not only would - all things being equal! - there be less demand for their product overall, but you would ALSO see more relative market share go to lower-carbon-intensity extractors. Which is the double whammy that the oil sands doesn't want, and why they pollute the discourse with the non-sequiturs you ate up and parrotted above about "0.1%", etc.
A light-bulb just went on regarding why the oil-sands are the whipping-boy of American environmentalists when they have significant problems in their own back yard - such as burning massive amounts of coal for electricity generation on the east coast. Rather than a politically unpalatable measure such as a user-based carbon tax, the idea is to remove oil-sands production from the market and drive up the price (having the same effect as a tax) due to reduced supply. Hopefully other concerns will be considered such as North-American energy security, defense and economic considerations but I realize that these issues are of little significance compared to environmental concerns to some.
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Re: Oil

Post by AltaRed »

There have been a number of 'wells to wheels' studies done that show that oil sands are competitive with other hydrocarbon sources, worse than some, better than some. What matters is the total picture and if carbon is taxed by the user, that is where reality would make the oil sands to be less of an ogre than it really is. That is why the oil sands is willing to go that route.

Economics of production (cost of marginal production) is a marketplace phenomenon compared to the contrived emotions associated with CO2 emissions.
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Re: Oil

Post by CROCKD »

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