Oil Crashing

[hal53]

Originally Posted by Bergerboy

I think you missed my point. I feel we should not export crude. It should all be upgraded and refined here. Its more profitable in the short run to export it is correct. In the long run exporting all of the resources in raw form is a mistake. Imagine all of the spinoff work and stability if we built all of the upgrading and refining infrastructure here. It would be a long term solution for the country. The problem is that everyone wants to rip and tear so they can fill their own pockets selfishly without leaving anything for the future. This is why trades peole make between $40-$50 an hour and the average house is $450,000, and trucks are 50-60K. Wage goes up and the cost of living is right beside it so there never is a winner. The funny thing is that if things were back to the mid 90's when trades made $20-$25 an hour, trucks were 30K and a good house was $200,000 you would pay less taxes and insurance and actually live a better lifestyle.

This could all be true or maybe my mom shook me too much when I cried...who knows.

It is easy to build a refinery here..just find investors that will give you a billion dollars up front, then wait while you go through up to 10 years of regulatory hearings and finding a place that the locals will not go ballistic when you announce the plans to build. Then about 2 years of construction and when it's finally online, your investors can start receiving very, very slim returns on their 12 year old investment. That is why......

[dmcbride]

Originally Posted by Bergerboy

I think you missed my point. I feel we should not export crude. It should all be upgraded and refined here. Its more profitable in the short run to export it is correct. In the long run exporting all of the resources in raw form is a mistake. Imagine all of the spinoff work and stability if we built all of the upgrading and refining infrastructure here. It would be a long term solution for the country. The problem is that everyone wants to rip and tear so they can fill their own pockets selfishly without leaving anything for the future. This is why trades peole make between $40-$50 an hour and the average house is $450,000, and trucks are 50-60K. Wage goes up and the cost of living is right beside it so there never is a winner. The funny thing is that if things were back to the mid 90's when trades made $20-$25 an hour, trucks were 30K and a good house was $200,000 you would pay less taxes and insurance and actually live a better lifestyle.

This could all be true or maybe my mom shook me too much when I cried...who knows.

I agree with your post. Even more so, the bolded part.

[79ford]

Originally Posted by Macdrizzle

Conocophillips just began first oil in Eldfisk which is a large offshore operation up in Norway. Prices don't seem to be affecting the large companies very much.

I think stuff like this is part of why we have a major glut. All these types of projects take 5-10 years to get into production. All those big projects that started looking feasible in 2006-2008 are engineered, built and starting to come online now. We are in the glut part of the cycle now. Bajillions already spent and it is cheap to just produce oil so the pedal is going to the floor on production. Even an abhorrent waste of money like kearl lake if you subtract the 12 billion boon doggle cost the project can produce barrels for 28$.

I wouldnt mind a slowdown, i couldnt even keep up with the prices of housing when it came to saving a down payment... been chasing 20% down for 4 years and it just keeps getting away and i get decent raises and a pay scale change once a year or so. There needs to be some sort of reality check in alberta.

[Map Maker]

Drilling rigs are down 30% in Canada over the last month.
Drill rigs are down 3% in the US.
Up internationally.

Prices wont change until those numbers change.
I do think US is showing how strong their industry is.

[AbAngler]

Originally Posted by 79ford

I wouldnt mind a slowdown, i couldnt even keep up with the prices of housing when it came to saving a down payment... been chasing 20% down for 4 years and it just keeps getting away and i get decent raises and a pay scale change once a year or so. There needs to be some sort of reality check in alberta.

I really feel bad for the younger generations who are trying to get into the housing market (among other things). Without major help, 20somethings these days are hooped.

[Bergerboy]

Originally Posted by hal53

It is easy to build a refinery here..just find investors that will give you a billion dollars up front, then wait while you go through up to 10 years of regulatory hearings and finding a place that the locals will not go ballistic when you announce the plans to build. Then about 2 years of construction and when it's finally online, your investors can start receiving very, very slim returns on their 12 year old investment. That is why......

Then why were the refineries and upgraders ever built in the US and down East if there is no incentive due to a 12 year cash drought? They seem to have built them and made it profitable. The oil sands projects faced a similar dry spell for the investors and they still got off the ground. Just must be one of them mysteries.

[rugatika]

Originally Posted by Bergerboy

Then why were the refineries and upgraders ever built in the US and down East if there is no incentive due to a 12 year cash drought? They seem to have built them and made it profitable. The oil sands projects faced a similar dry spell for the investors and they still got off the ground. Just must be one of them mysteries.

http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6

[79ford]

Originally Posted by hal53

It is easy to build a refinery here..just find investors that will give you a billion dollars up front, then wait while you go through up to 10 years of regulatory hearings and finding a place that the locals will not go ballistic when you announce the plans to build. Then about 2 years of construction and when it's finally online, your investors can start receiving very, very slim returns on their 12 year old investment. That is why......

It is easier to just add capacity at existing facilitys... petro can used to be a 12 000 barrel facility in 1950's now it is a 145 000 barrel facility. Imperial went from 135k to 190kbpd.

There has been some pretty heavy expansion over the years. Rumours i hear are there is some massive expansion coming as companies are discovering the advantage of using price advantaged crude to manufacture products.

And margins on refining are skewed numbers people factor the barrel cost in and neglect manufacturing cost vs margin as a true measure of profitability.

It costs about 0.25$ per liter to manufacture diesel. Oil costs about 0.33$ per liter.

That liter of diesel sells for 0.85 $ out the back door (tank) (

Sooo 0.27$ per liter margin for spending .25$ to refine a liter of diesel.

Oil cost is essentially irrelevent because it is like a chunk of gold, it may change shape but there is no loss ( assuming crude bounces around in a range over the years)

It is wrong to assume that a one hundred dollar barrel of oil turns into a 170$ barrel of diesel. Spending 40$ per barrel to capture a 30$ gain in manufacturing is essentially a 75% margin vs using 140$ cost of barrel and manufacturing to capture 30$ and calling that 20% margin

[Bergerboy]

Originally Posted by rugatika

http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6

Thanks rugatika, from the information he/she posted in a link
"Ground was broken in March 2013 for construction of a new refinery in Dickinson, North Dakota. The 20,000 barrel per stream day (bbl/sd) Dakota Prairie facility is scheduled to open in December 2014."
This sure makes the ROR on this type on investment much shorter than Hal or I were thinking.

[79ford]

Originally Posted by Bergerboy

Then why were the refineries and upgraders ever built in the US and down East if there is no incentive due to a 12 year cash drought? They seem to have built them and made it profitable. The oil sands projects faced a similar dry spell for the investors and they still got off the ground. Just must be one of them mysteries.

All the companies that ship raw bitumin have refineries in the usa... cenovus, exxon, conoco. They want to refine it at their facilities.

No one burns bitumin in their car or heavy equipment lol. Its just a matter of who gets to take that bitumin and capture the margin for turning it into usefull fuels.

[Wild&Free]

Originally Posted by AbAngler

I really feel bad for the younger generations who are trying to get into the housing market (among other things). Without major help, 20somethings these days are hooped.

A home is a great investment, owning multiple homes is an even better investment but makes it more difficult for people to own their first one. Most starter homes I've looked at are advertised as investment rental properties. greed is what it boils down too. That and foreign real estate investing...

Originally Posted by 79ford

It is easier to just add capacity at existing facilitys... petro can used to be a 12 000 barrel facility in 1950's now it is a 145 000 barrel facility. Imperial went from 135k to 190kbpd.

There has been some pretty heavy expansion over the years. Rumours i hear are there is some massive expansion coming as companies are discovering the advantage of using price advantaged crude to manufacture products.

And margins on refining are skewed numbers people factor the barrel cost in and neglect manufacturing cost vs margin as a true measure of profitability.

It costs about 0.25$ per liter to manufacture diesel. Oil costs about 0.33$ per liter.

That liter of diesel sells for 0.85 $ out the back door (tank) (

Sooo 0.27$ per liter margin for spending .25$ to refine a liter of diesel.

Oil cost is essentially irrelevent because it is like a chunk of gold, it may change shape but there is no loss ( assuming crude bounces around in a range over the years)

It is wrong to assume that a one hundred dollar barrel of oil turns into a 170$ barrel of diesel. Spending 40$ per barrel to capture a 30$ gain in manufacturing is essentially a 75% margin vs using 140$ cost of barrel and manufacturing to capture 30$ and calling that 20% margin

1l oil /= 1l of diesel.

study distillation processes.

[79ford]

Originally Posted by Wild&Free

A home is a great investment, owning multiple homes is an even better investment but makes it more difficult for people to own their first one. Most starter homes I've looked at are advertised as investment rental properties. greed is what it boils down too. That and foreign real estate investing...



1l oil /= 1l of diesel.

study distillation processes.

I study them every day well 4 on 5 off 5 on 4 off. The overall cost looks alot different than the manufacturing return. How do you think exxons and chevrons etc pull 33% returns on equity with these miniscule margins everyone talks about?


If you buy an ounce of gold, twist it into a ring for 50$ then sell that same ounce twisted into a ring for an extra 150$ how much money did you make for the 50$ you spent twisting the ring?

Mind you not every product from oil is worth a tonne of money but it is worth more than the oil started out as. Maybe pitch and asphalt dont get much but the diesel, jet fuel, gasoline and fuel oils are expensive.

[ren008]

Originally Posted by AbAngler

I really feel bad for the younger generations who are trying to get into the housing market (among other things). Without major help, 20somethings these days are hooped.

Yup. For a large number of young people not making the big oil bucks a crash is the only way they will ever get a piece of their own with the inflated prices and lack of comparable wage increases. Call it jealosy if you must, but i think there is very little sympathy out there for buddy when he is whining about being unable to afford his toys anymore after years of cleaning up at a zero education gig.

The good times always end and anyone with any sense always plans ahead to at least some degree.

[avb3]

Originally Posted by Wild&Free

A home is a great investment, owning multiple homes is an even better investment but makes it more difficult for people to own their first one. Most starter homes I've looked at are advertised as investment rental properties. greed is what it boils down too. That and foreign real estate investing...



1l oil /= 1l of diesel.

study distillation processes.

So what kind of an investment is it when real estate crashes? As it has and will again.

[Bergerboy]

Originally Posted by 79ford

All the companies that ship raw bitumin have refineries in the usa... cenovus, exxon, conoco. They want to refine it at their facilities.

No one burns bitumin in their car or heavy equipment lol. Its just a matter of who gets to take that bitumin and capture the margin for turning it into usefull fuels.

Hmmmm...I looked through this thread and I cannot find out where anyone mentioned the direct consumption of bitument by the consumer. Weird since whoever wrote that does not know that there is a ton of uprgading and refinement to take bitumen to a usable product, it must have been great as it made you "lol". We all know that the companies that hold the land rights, and ship the product, also want it upgraded at their facilities. This is true. The thing that most Candians seem to forget is that bitumen that these foreign investors (yep good ol' USA is a foreign country) are recovering is a Canadian natural resource. The foreign investors can pay to have the upgraders and refinement processes built up here.

Here is a great read. http://www.desmog.ca/2013/02/28/if-c...are-we-so-debt

[Macdrizzle]

Originally Posted by Bergerboy

I think you missed my point. I feel we should not export crude. It should all be upgraded and refined here. Its more profitable in the short run to export it is correct. In the long run exporting all of the resources in raw form is a mistake. Imagine all of the spinoff work and stability if we built all of the upgrading and refining infrastructure here. It would be a long term solution for the country. The problem is that everyone wants to rip and tear so they can fill their own pockets selfishly without leaving anything for the future. This is why trades peole make between $40-$50 an hour and the average house is $450,000, and trucks are 50-60K. Wage goes up and the cost of living is right beside it so there never is a winner. The funny thing is that if things were back to the mid 90's when trades made $20-$25 an hour, trucks were 30K and a good house was $200,000 you would pay less taxes and insurance and actually live a better lifestyle.

This could all be true or maybe my mom shook me too much when I cried...who knows.

Cost of living will always increase as a result of inflation. You can't compare the cost of oranges in the 90's with the cost of oranges right now. Same goes with your annual salaries.

[Bergerboy]

Originally Posted by Macdrizzle

Cost of living will always increase as a result of inflation. You can't compare the cost of oranges in the 90's with the cost of oranges right now. Same goes with your annual salaries.

Ok. Thats about enough of this thread for me. Have a good day everyone.

[LCCFisherman]

Originally Posted by ren008

Yup. For a large number of young people not making the big oil bucks a crash is the only way they will ever get a piece of their own with the inflated prices and lack of comparable wage increases. Call it jealosy if you must, but i think there is very little sympathy out there for buddy when he is whining about being unable to afford his toys anymore after years of cleaning up at a zero education gig.

The good times always end and anyone with any sense always plans ahead to at least some degree.

Thank you from a young person not on the oil tit in NE Alberta!

[Wild&Free]

Originally Posted by avb3

So what kind of an investment is it when real estate crashes? As it has and will again.

Equity disappears, but many homes in Edmonton are chalk full of false value. 70 year old house, 1100 square feet, on a postage stamp lot is not over a quarter million dollars of value. The lot maybe due to area demand but not the extra 100k+ thrown ontop for the dilapidated out of code heat sieve of a home.

every speculator whether in commodities, stock, or property faces corrections from time to time.

Anyways, let's not derail anymore avb. housing cost rants are for another day.

[First Time caller]

Originally Posted by macdrizzle

cost of living will always increase as a result of inflation. You can't compare the cost of oranges in the 90's with the cost of oranges right now. Same goes with your annual salaries.

wtf???

[avb3]

Originally Posted by Wild&Free

Equity disappears, but many homes in Edmonton are chalk full of false value. 70 year old house, 1100 square feet, on a postage stamp lot is not over a quarter million dollars of value. The lot maybe due to area demand but not the extra 100k+ thrown ontop for the dilapidated out of code heat sieve of a home.

every speculator whether in commodities, stock, or property faces corrections from time to time.

Anyways, let's not derail anymore avb. housing cost rants are for another day.

We agree... On the valuations and not to derail.

The issue is multi faceted, as complex issues usually are. Boom and bust resource economies, which we are, will always result in those that think they have it made and the boom is never ending, and getting a wake up call.

Our government, which for decades has preached diversity in our economy, still is largely dependent on revenue flows from the oil sector. One of the things that seems to exasperate diversity in that economy is the high wages that are paid during the boom cycle in the oil patch.

This correction, will hurt those who have chosen not to get an education during or after high school, but went out made the big money, bought the expensive toys, and thought they were on a ride that would never end. Unfortunately, it will also hurt some tradesman who are in their late twenties to mid thirties, and may not have the senority to whether way off. They got their education, and have not necessarily had enough time to build up reserves. Those I feel sorry for, as they are establishing their families and their lives. If they did not over extend themselves over the past five six or seven years, they will do fine. If, on the other hand, however they bought into the "necessity" to have the latest and greatest bought on credit, they too will be badly hurt. How sorry should we feel for them under those circumstances?

[fargineyesore]

Originally Posted by avb3

We agree... On the valuations and not to derail.

The issue is multi faceted, as complex issues usually are. Boom and bust resource economies, which we are, will always result in those that think they have it made and the boom is never ending, and getting a wake up call.

Our government, which for decades has preached diversity in our economy, still is largely dependent on revenue flows from the oil sector. One of the things that seems to exasperate diversity in that economy is the high wages that are paid during the boom cycle in the oil patch.

This correction, will hurt those who have chosen not to get an education during or after high school, but went out made the big money, bought the expensive toys, and thought they were on a ride that would never end. Unfortunately, it will also hurt some tradesman who are in their late twenties to mid thirties, and may not have the senority to whether way off. They got their education, and have not necessarily had enough time to build up reserves. Those I feel sorry for, as they are establishing their families and their lives. If they did not over extend themselves over the past five six or seven years, they will do fine. If, on the other hand, however they bought into the "necessity" to have the latest and greatest bought on credit, they too will be badly hurt. How sorry should we feel for them under those circumstances?

Yeah right, like no Engineers, Geologists, or Environmental types will be laid off, just those that didn't get an education in or after high school.

[avb3]

Originally Posted by fargineyesore

Yeah right, like no Engineers, Geologists, or Environmental types will be laid off, just those that didn't get an education in or after high school.

Who do you think is the first to go? Then who do you think, are generally the ones who have a need to buy the toys they do? Most professionals that I know are fairly conservative in the way they live and think.

Of course there will be some who will be affected by this, but because of their professions, they can readily find work elsewhere. The fellow who is not finished high school or just graduated and didn't get a trade, not as likely.

[fargineyesore]

Originally Posted by avb3

Who do you think is the first to go? Then who do you think, are generally the ones who have a need to buy the toys they do? Most professionals that I know are fairly conservative in the way they live and think.

Of course there will be some who will be affected by this, but because of their professions, they can readily find work elsewhere. The fellow who is not finished high school or just graduated and didn't get a trade, not as likely.

Love how you take the opportunity to insinuate that professionals are smarter than the average person. Hasn't been my experience. Some are real smart, others dumb as a post.

[PGH]

Originally Posted by fargineyesore

Love how you take the opportunity to insinuate that professionals are smarter than the average person. Hasn't been my experience. Some are real smart, others dumb as a post.

He's not insinuating that. He's stating a fact that educated, and higher educated people, have a better chance of finding employment compared to those without it or who lack education/designations. There are many industries that someone with business degree can work in for example when compared to industry specific trades. The first to go are those who are disposable - which are mostly those who work for wages in labor intensive industries.

[igorot]

Originally Posted by fargineyesore

Love how you take the opportunity to insinuate that professionals are smarter than the average person. Hasn't been my experience. Some are real smart, others dumb as a post.

Or the real world. Not what you know but whom you know

[jungleboy]

Originally Posted by avb3

Who do you think is the first to go? Then who do you think, are generally the ones who have a need to buy the toys they do? Most professionals that I know are fairly conservative in the way they live and think.

Of course there will be some who will be affected by this, but because of their professions, they can readily find work elsewhere. The fellow who is not finished high school or just graduated and didn't get a trade, not as likely.

Many times , being a profesional when the economy is in the toilet means you can't get job anywhere . Your profession is over populated so they can't hire you and you are over qualified for lesser jobs so you can't get those either. This downturn will hurt the majority whether you like it or not . This province runs on oil and gas .Everything is tied to it in some way or another,right down to the burger joints. We can only hope it doesn't take 10 years to recover .

I am stunned by the number of posters around here that seem to jump for joy at the thought of someone losing their jobs homes possessions. You should be ashamed of yourselves but I know most of you are not . Most are just an older more jaded version of the ones they wish hard times on

[fargineyesore]

Originally Posted by PGH

He's not insinuating that. He's stating a fact that educated, and higher educated people, have a better chance of finding employment compared to those without it or who lack education/designations. There are many industries that someone with business degree can work in for example when compared to industry specific trades. The first to go are those who are disposable - which are mostly those who work for wages in labor intensive industries.

If the work is there and the profession is in demand. I've seen situations where companies laid off hundreds in head office Calgary, but didn't touch the operations guys in the field.

Having an education is certainly better than none, I don't disagree, but a degree, etc. doesn't always save your bacon.

[whitetail Junkie]

Originally Posted by jungleboy

I am stunned by the number of posters around here that seem to jump for joy at the thought of someone losing their jobs homes possessions. You should be ashamed of yourselves but I know most of you are not . Most are just an older more jaded version of the ones they wish hard times on

I don't wish hard times on anybody,but I do Have ZERO sympathy for the guy in downtown Lethbridge who drives the $75,000 dodge Diesal,with the 24" lift and the Window sticker on the back window that reads,"Oil Life"......However thats Just one example,and like myself I know a lot of men in the patch have more brains then money.

[70chevy]

Originally Posted by jungleboy

Many times , being a profesional when the economy is in the toilet means you can't get job anywhere . Your profession is over populated so they can't hire you and you are over qualified for lesser jobs so you can't get those either. This downturn will hurt the majority whether you like it or not . This province runs on oil and gas .Everything is tied to it in some way or another,right down to the burger joints. We can only hope it doesn't take 10 years to recover .

I am stunned by the number of posters around here that seem to jump for joy at the thought of someone losing their jobs homes possessions. You should be ashamed of yourselves but I know most of you are not . Most are just an older more jaded version of the ones they wish hard times on

Well said! It's a shame people are jumping for joy that anyone would lose there home and everything they have worked for! Absolutely disgusting what society has come to