by Robert Lyman and Michelle Stirling ©2019

On March 18, 2019, in Yahoo Finance, Ryan Vanzo filed a report claiming Exxon’s production target costs meant Canadian oil sands stock were ‘dead’.  However, his article was filled with flaws about global oil markets, supply and demand, according to Robert Lyman, Ottawa energy policy consultant, former public servant of 27 years and diplomat for 10 years prior.

 

Lyman notes that Vanzo reported one significant fact, which is that Exxon Mobil has set a goal (not yet attained) of reducing crude oil production costs in the Permian Basin to U.S. $15 per barrel. The Permian Basin is the area that has most benefited from the application of fracking technology, and has caused total U.S. oil production to double from 8 million barrels per day in 2010 to 16 million barrels per day in 2018. The International Energy Agency projects U.S. crude oil production to continue growing by 3.7 million barrels per day to 2023. This is undoubtedly a major addition to world oil supply, and has made it possible to satisfy the continuing steady growth in global oil demand which reached al all-time high of 100 million barrels per day in 2018.

 

Lyman goes on to explain that Vanzo then leaps to a completely unjustified conclusion about the economic viability of Canadian oil sands production. The best way to view the world’s oil production is as coming from hundreds of different sources that vary in quality and cost, which the most important differences being between heavy and light crudes and conventional and non-conventional (i.e. tight oil, oil sands, and offshore production) crudes. These can be portrayed by a rising cost curve, or more accurately a series of cost curves for crudes of different quality. There have always been crudes that have a low cost of production and those with a high cost of production, with the marketability of the higher cost sources depending on demand trends. The Permian Basin oil is light crude, which competes with light crudes from all other places, but notably the Middle East. Oil sands crude is mostly heavy crude that competes with heavy crudes from many other sources, notably Venezuela. In other words, most Canadian oil sands crude does not compete with U.S. light crude oil produced from the Permian Basin. It competes with all the other sources of crude oil production in the world in meeting a seemingly voracious demand still growing at the rate of over 1.2 million barrels per day.

 

Various parties are publishing stories in the media which appear to be throwing up a lot of diversionary reports these days the objective of which seem to be to suggest that it is not the present federal and Alberta government policies on carbon taxes, pipeline regulation, and climate that are impeding oil sands development. This, it seems, is both self-justification and an attempt to influence the the forthcoming Alberta provincial election, and perhaps the Canadian federal election. Neither investors nor Albertan nor Canadian voters should be fooled.

 

Michelle Stirling, Communications Manager for Friends of Science Society points out that, furthermore, investors and members of the public should be aware of the concerted anti-fossil fuel and Tar Sands Campaign waged by foreign green billionaires, with the objective of pushing global cap and trade, a price on carbon and their vested interest in renewables.  The vast scope of this campaign was reported on by Matthew Nisbet in 2018 in a peer-reviewed study, a summary of which is here. 

 

This multi-million dollar, decade-long green trade war waged particularly against the Alberta oil sands in Canada, has shaken investor, insurer and bank confidence, primarily due to unrelenting attacks on the oil sands waged by green-billionaire-bankrolled environmental groups (aka “Tar Sands Campaign”). Part of this campaign appears to include that of the CDP and their damning Nov. 2016 report “In the Pipeline” which scared off some of the climate and carbon-risk obsessed institutional investors who are signatory to the UNPRI.

 

So if you are an oil sands stock owner, says Stirling, if you are going to think twice, perhaps you should be thinking twice about who is behind the dramatic drop in share value and pipeline Blockadia and what is their end game.  World oil demand continues to rise.  Why is Canada the only market in the world facing this green trade war?  Maybe we should do something about it.

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Robert Lyman, Ottawa energy policy consultant, former public servant of 27 years and diplomat for 10 years prior to that.  Michelle Stirling is Communications Manager for Friends of Science Society and a member of the Canadian Association of Journalists and the AAAS. 

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https://blog.friendsofscience.org/wp-content/uploads/2019/02/Big-Green-Money-NO-vs-PRO-FINAL-RevB-FEB-12-2019-1.pdf