Saturday, December 13, 2008

The Bloom Is Off The Boom!

I don't like any bailout, not even one little bit. It goes against every Conservative principal in my body. It goes against every good economic principal you will find in any economics textbook. So far we have been focusing on an auto bailout, but what happens if the oil sands needs help?

Manufacturing in Ontario is not just about the auto industry. Think "dirty" oil. That's right the oil sands are a major source of manufacturing in Ontario, and right now the bloom is off the boom.

Some oilsands math
Gary Lamphier, The Edmonton Journal
Published: Thursday, November 13

One day, it would be nice if the oilsands bashing lobby deigned to explain a few things to the rest of us.

Such as. If the oilsands are shut down -- as the good folks at Greenpeace would very much like -- or even significantly scaled back, where will the billions of dollars in federal equalization money that Alberta's (oilsands-dependent) taxpayers ship to Ottawa each year, come from in future?

Just wondering. It's a small-minded little nitpick, I realize. With Ontario now a "have-not" province, and the country's manufacturing sector flat on its back, you'd think Quebecers, among others, might like to know. Especially in the middle of a provincial election campaign.

Ontario's Biggest-Ever Trade Mission Seeks Oilsands Contracts

Economic development ministers rarely work the floor at a trade show but that's what Ontario's Sandra Pupatello did last week in Edmonton at the National Oilsands Buyer/Seller Forum. "We've brought 208 people here representing 134 companies," says Pupatello (shown at left). "This is the largest trade delegation ever assembled by Ontario, even bigger than our trade mission to China [in 2005]."

Clearly, Ontario industry is hungry for bitumen-fueled business. Central Canadian metal-working companies and other suppliers, suffering from slowdowns in auto manufacturing and forestry, see the oilsands as their most promising opportunity for growth. Government preparations for this forum included a 282 page directory of potential oilsands suppliers in the province, available in printed and digital versions. Trade officials even produced a lapel pin combining the Alberta and Ontario flags.

The economic crisis and collapse in oil prices have pushed the sector to the brink, resulting in the delay of some $40-billion in new projects, taking 800,000 barrels a day of expected production growth -- about half of what had been expected -- off the table, according to CIBC World Markets.

Meanwhile, existing projects are close to losing money at today's oil prices. According to a recent Merrill Lynch report, many oil sands projects need US$38 a barrel oil to break even. Oil prices settled at US$46.28 a barrel on Friday, keeping projects in the black for now, but curtailing developers' ability to fund expansion.

Industry watchers say companies that scaled back won't be rushing to jump back in, even if oil prices recover above US$90, the level many say is required to build new projects.

Other problems would have to be resolved: mounting costs, tight financing and, of course, environmental challenges. The oil sands' poor image could lead to even tougher environmental legislation.

The implications of a no-growth period for the oil sands are grim, not just for Alberta, but the entire country. The oil sands boom has been Canada's economic engine over the past decade. The country's rise as a major global oil producer would stall and the United States would see its energy security options reduced.

For the last decade the oil sands have been driving the economy, now we have Saskatchewan and Newfoundland entering the have provinces because of oil, but for how long? Meanwhile Toronto Liberals, Quebec separatists and the NDP think the gravy train is never ending. They are busy plotting the downfall of our elected government so they can throw money at the unions. Those same unions that will not compromise, those unions that except the taxpayers to bail them out so they can continue to live in lala land on the taxpayers dime.

Quebec is so union heavy that they are like the mafia, that's why Quebec continues to suck 8 BILLION more out of Canada than they put in. I am sick of it, and so are the intelligent Quebecers. What does Quebec think will happen if the oil sands slow down? It really ticks me off when they spout off about their $7 a day, daycare that the rest of Canada is paying for. They are too ignorant to be embarrassed about freeloading on the rest of Canada. They think it is their right because they are special/different/unique. Well the fuse is getting shorter out here, and Iggy is not going to sell any better in the west than Dion did, so the divide will continue.

The bloom is off the boom out here in hicks ville Alberta, and the east better get prepared for the consequences, it's not going to be pretty. Alberta is debt free, and has some reserves for a rainy day, so we will be okay, can Quebec say the same thing?


wilson said...

There are 23 coalition seats in the West, next election will they be able to save half?

Ontario has been paying Quebec $7 daycare too, and that may account for Ontarians rising up against the coaltion, big time.
I think we are all sick of the whining and Duceppe's demand list.
And I'm sick of everything Albertan being criticized by the opposition and the media.

revanche said...

I am not too troubled about the slowdown in the oilsands. It is a resource we have only begun to exploit. New technologies are ever-advancing the viability and profitability of this resource.

When the world economy recovers, so will the price of oil and the West can get back to it's role of financing socialism in the rest of Canada.

You had an interesting post a while back. Ontario's share of the oilsands take represents 102 billion into their economy. A staggering figure.

I admit that every time some idiot back east goes engages in a west-bashing orgy, I wonder what would happen if the West had an Obama moment and legislated to keep more of those spin-offs at home?

As long as conservatives rule Alberta, Canada is safe; however, all bets are off if lefties get in in Edmonton. Protectionism is always the easiest vote-getter.

Bec said...


With the lefties getting it WRONG again by electing Dr. David Swann, as their provincial leader, Alberta, will stay tory blue.
Nothing fresh, exciting or creative there. He does complain well though.

wilson said...

Layton told CTV's Question Period
" it's reasonable for Ignatieff to want to assess the situation and see what Harper's Conservatives will offer in a budget promised for Jan. 27."

WHAT!!! If it's reasonable to see the budget, what was all that coalition b.s. about the economic statement!

Jack can read polls, glory be.

wilson said...

This could help ease the pain, an infrastructure project worth getting behind:

West Coast Teddi said...

Wilson ... excuse my "ignorance" but is this the pipeline backed by Gov. Sarah Palin? Or does she just want any line to be built? Gas only or both?

In the "good old days" when I was in the patch I would know these things but now on the west coast it is all about banning non existent tanker traffic and reliving the Valdez incident.