Oil prices drop to under $50/barrel

[Red Mile Style]

I read about this on another website, but apparently after two or three quarters of oil under $60 the Alberta economy would be severely threatened. Which leads to ideas that perhaps OPEC is purposely doing this to kill the boom (in Alberta and other places in the world).

Which begs the question, is it low enough right now to do some damage (if it stays on this course) or does it have to go lower?

I personally think that unless the provincial government does something in terms of royalties, this has the potential to have a huge, HUGE impact on Alberta. I don't want to think about all those people that have taken out morgages etc. If this blows up to the degree that some are speculating we're talking an enormous impact economically, socially, politically...

Any thoughts?

[michalek]

link ?

[SeeGeeWhy]

Historically, the oilpatch has been profitable at a price of $20/bbl (give or take a few dollars).

The surge to complete marginal projects will recede, but Alberta's economy will be able to handle it.

[Flames in 07]

Originally Posted by Red Mile Style

I read about this on another website, but apparently after two or three quarters of oil under $60 the Alberta economy would be severely threatened. Which leads to ideas that perhaps OPEC is purposely doing this to kill the boom (in Alberta and other places in the world).

Which begs the question, is it low enough right now to do some damage (if it stays on this course) or does it have to go lower?

I personally think that unless the provincial government does something in terms of royalties, this has the potential to have a huge, HUGE impact on Alberta. I don't want to think about all those people that have taken out morgages etc. If this blows up to the degree that some are speculating we're talking an enormous impact economically, socially, politically...

Any thoughts?

My God, the world is ending, crude is at $50. That is in-freakin-sane.

All projects on the board make money at $50. Some service companies and labourers may have to adjust some of their expectations about compensation, but everything works at 50 bucks. Almost all work at $40.

[TurnedTheCorner]

Oil under $60 means an Alberta recession in 6-9 months? Not likely. There's such a thing as stable, normal growth - that's what we'd be returning to, not a recession or severe threat to the Alberta economy. Sheesh.

And worsening the royalty regime will avoid this?

[Flames in 07]

Royalties are 1% before payout ... RMS, what else would you propose?

[Agamemnon]

$50/barrel is still really high for oil. If it drops to the 20's I'd start to be a bit concerned about some of the more extravagant projects and growth, but otherwise I think things will keep humming along. If they drop below, say, $15, THEN we've got a huge problem on our hands.

[browna]

The econonmy didn't cpllapse when we had were hovering around the 20$ barrel mark for a year less then decade.
Except for the nightmare of it dropping to that level in the next 6 months, even IF it gets to that level in 6 more years, it will be a graudal change and those involved with the market will mostly be able to adapt.

[brownie]

I know in the Oilsands,like Suncor and Syncrude it costs them roughly 9 bucks to produce a barrell of oil.

[photon]

Shh you guys! Everyone is supposed to freak out about $50 a barrel oil and then we will graciously buy their houses for only 10% below market value before everything crashes!

[Red Mile Style]

Originally Posted by TurnedTheCorner

Oil under $60 means an Alberta recession in 6-9 months? Not likely. There's such a thing as stable, normal growth - that's what we'd be returning to, not a recession or severe threat to the Alberta economy. Sheesh.

And worsening the royalty regime will avoid this?

No... but putting money from royalties into social programs for people who will be ****ed if this happens could alleviate some impacts.

Originally Posted by Flames in 07

Royalties are 1% before payout ... RMS, what else would you propose?

I don't know... Starting a North American/North Atlantic Economic Council or something to compete with OPEC, as to not let them determine the oil economy.

Ah crap, I'm giving ideas to the enemy.

I'm going to smoke a joint and when I think of something else, I'll let you know.

[jolinar of malkshor]

Originally Posted by Red Mile Style

No... but putting money from royalties into social programs for people who will be ****ed if this happens could alleviate some impacts.

Not sure if you were aware....but we have 14 billion dollars sitting and a little piggy bank called the heritage trust fund....not to mention the government has commited to increase the amount in this fund. What more do you want?

[skins]

Originally Posted by brownie

I know in the Oilsands,like Suncor and Syncrude it costs them roughly 9 bucks to produce a barrell of oil.

I heard this the other day too. Most companies in the oilsands say they can turn a profit at around $12, but some companies (like Suncor) are aiming to get down to $9.

50 bucks a barrel is nothing to worry about. I'd venture to say 30 bucks isn't either.

[Bill Bumface]

I'd worry a lot more if gas prices pooped the bed.

[Hack&Lube]

No worries until it drops to the 20s. With emerging 2nd world industrial powerhouses coming into the world economy consuming more and more oil (such as China), oil prices will probably never dip that low again.

[mykalberta]

Its been reported by Shell and others that anything less than 32.50 - and they take a hit on the oilsands with the current price for labour etc.

Oil will not get to those levels, not with a Venezualan government propped up by high oil prices.

The only people that might be taking a hit are those being paid 30$/hour to drive a pickup truck - sorry, I dont feel sorry for those people if their grease job gets hacked.

MYK

[Red Mile Style]

Okay, I solved the Alberta possible economic crisis.

It's called the National Oil Program (NOP), and basically it will nationalize the oil industry so the people can get the profits instead of big oil.

No need to thank me. It's just what I do.

[Red Mile Style]

Originally Posted by jolinar of malkshor

Not sure if you were aware....but we have 14 billion dollars sitting and a little piggy bank called the heritage trust fund....not to mention the government has commited to increase the amount in this fund. What more do you want?

It's been a few years since I took Alberta and Provincial politics, but when I was, I was under the impression that a lot of money went missing from that fund. Plus, it's really unnaccountable. Resources are apparently taken out of there without any responsible governing of it.

Does anybody know the specs of the Heritage fund? How much is in it, how that is calculated, when does it get used etc..

[mykalberta]

I dont know the details either, I can only go by what the government reports:

"
Heritage Fund 2nd Quarter Update
November 15, 2006
At September 30, 2006, the fair value of the Heritage Fund stood at $15.4 billion. The net assets of the Fund increased by $995 million in the second quarter of 2006-07.
Contributions, inflation-proofing and unrealized capital gains accounted for the increase during the quarter.
"

http://www.finance.gov.ab.ca/business/ahstf/index.html

MYK

[Red Mile Style]

Originally Posted by mykalberta

I dont know the details either, I can only go by what the government reports:

"
Heritage Fund 2nd Quarter Update
November 15, 2006
At September 30, 2006, the fair value of the Heritage Fund stood at $15.4 billion. The net assets of the Fund increased by $995 million in the second quarter of 2006-07.
Contributions, inflation-proofing and unrealized capital gains accounted for the increase during the quarter.
"

http://www.finance.gov.ab.ca/business/ahstf/index.html

MYK

Hey, thanks for posting that!

That is quite a substantial amount of money, but Alberta's economy rests *largely* on a non-renewable resource. Is this enough to sustain the province *when* the oil runs out? Plus, if I remember correctly (and it's completely possible that I am making this up) the administration of this fund is wonky. But, again, I can't really say. However that seems to be a large sum of money, and it is growing, so I do feel better about the whole situation.

I guess maybe a more diversified economy would please me. Maybe invest some of this money into other ventures that can prove to be beneficial after the economy is no longer oil-based. I just don't want to see people in the hundreds of thousands being screwed over and signing their lives over to banks without anything there for them.