- Joined
- Nov 30, 2012
- Messages
- 46
I recently had lunch with a friend who's a 25 year oil man. In spring 2016 he lost his small oil company. Even though it's all he knows, he has walked away from O and G.
I asked, "what is REALLY the motivation behind OPEC keeping prices low?"
The following is not his exact wording, but the gist of it is as close as I remember it.
He said:
A few years back, OPEC let the price of oil get to 80, 90, 100. This allowed high cost projects, like the Canadian Oil Sands, and more importantly, shale deposits in the US to be exploited to unprecedented levels. Production rose, along with investment in the sector. The Americans were producing some serious oil, and we in Alberta were more than happy to swim in the money, assuming it would never end.
OPEC saw this as an erosion of their market share, and their power. So they reacted the only way they knew how: open the valves.
Their goal is to knock out the high priced producers-especially the US.
And as we can all see first hand, their plan has been a resounding success. True, OPEC aren't making the kind of money they used to, but they only need $10-12 to make money, so they can hold out indefinitely to kill the producers that need 50-60 to bust even.
I asked him, "will it ever bounce back anywhere near where it was?"
No. OPEC has learned their lesson. They will allow the price to creep up, but it will never be high again(80+). They want to keep the high cost producers-especially the U.S. out of the game; on their knees.
So *if* he is right, and OPEC has really decided that this is the "new normal," then Alberta is going to be hurting for a very long time, maybe decades. And those who are waiting for the Alberta Advantage to kick in soon, should hook their wagon to a different star, maybe even in a different place. This has huge implications for those of us who own real estate in Alberta.
Your thoughts? And please, no whining about how it's all the current federal and provincial governments who are at fault for our woes. Neither has a lick of control over oil prices.
I asked, "what is REALLY the motivation behind OPEC keeping prices low?"
The following is not his exact wording, but the gist of it is as close as I remember it.
He said:
A few years back, OPEC let the price of oil get to 80, 90, 100. This allowed high cost projects, like the Canadian Oil Sands, and more importantly, shale deposits in the US to be exploited to unprecedented levels. Production rose, along with investment in the sector. The Americans were producing some serious oil, and we in Alberta were more than happy to swim in the money, assuming it would never end.
OPEC saw this as an erosion of their market share, and their power. So they reacted the only way they knew how: open the valves.
Their goal is to knock out the high priced producers-especially the US.
And as we can all see first hand, their plan has been a resounding success. True, OPEC aren't making the kind of money they used to, but they only need $10-12 to make money, so they can hold out indefinitely to kill the producers that need 50-60 to bust even.
I asked him, "will it ever bounce back anywhere near where it was?"
No. OPEC has learned their lesson. They will allow the price to creep up, but it will never be high again(80+). They want to keep the high cost producers-especially the U.S. out of the game; on their knees.
So *if* he is right, and OPEC has really decided that this is the "new normal," then Alberta is going to be hurting for a very long time, maybe decades. And those who are waiting for the Alberta Advantage to kick in soon, should hook their wagon to a different star, maybe even in a different place. This has huge implications for those of us who own real estate in Alberta.
Your thoughts? And please, no whining about how it's all the current federal and provincial governments who are at fault for our woes. Neither has a lick of control over oil prices.