$50 bbl of Oil

[Fobulous]

Reading in the Herald this morning, $50 bbl of oil could soon be a reality again.

For anyone that works in the patch, what does this mean as far as job security? Long term growth?

Last year as oil crept up to $50, $60, $70.... this city was probably in it's best shape and headed for big things... now as we head the other way around is this city in big trouble?

[pepper24]

Regarding your last sentence, the reason is that new projects are budgeted based on the price of crude oil and natural gas. When the price was $50 heading to $60, the crude price for projects was budgeted at $50. The $10 jump was a positive. When the price of oil was $100 now heading to $90, the price of projects was budgeted at $100.

Infrastructure already in place benefits from the high price of oil, minus any negative changes in running operations such as increased input costs, rising salaries etc.

[burn_this_city]

The only way it hits $50 is with a world wide recession

[Fobulous]

Originally Posted by fotze

There are probably 150 articles written per day from experts predicting the oil price. Some still say $200 oil is not far. T Boone Pickens doesn't think it will sink far below $100.

The thing you have to remember, those who were hired on most recently will be the first to be let go.

Those who were hired on most recently, and also those who work for a redneck run and gun company.

[SeeGeeWhy]

It would probably mean that a few of the big mining projects would be put on hold, and that a few of the upgraders would stop construction.

Most SAGD operations are still profitable at that price point, and so are most conventional/mature properties.

I am not certain if the Bakken type oil plays are very profitable at that point due to their completion requirements and the lack of an effective EOR technique that can be used to extend the life of those plays.

Don't be confused, in the long term, oil prices are going to continue to climb, and Alberta's product will be in high demand.

$50/bbl oil might actually be a good thing for the global economy, stimulating development and helping to avoid stagflation in what appears to be a general slowdown. (Help lubricate an overheating engine)

[browna]

The media will pick the most outrageous or controversial analyst of the 5 they talk to.

When things were humming along a few months ago, the Canadian dollar was supposed to be at $.50 higher than the US dollar by now, and oil was supposed to be $190bbl if you listened to a particular analyst by now.
(sometimes, idiot investors actually started listening to these people, but that's another topic).

Now, when things are uncertain, they talk to someone else and Oil will be sub $50, and the CDN $ will by lucky to stay about $.70 US.

But, casual readers lap this stuff up as gospel, as if some of these analysts are highly knowledgable, as opposed to in reality, many of them being mostly speculators and people who just want their name in the paper.

[Daradon]

I don't really see oil going down to 50 dollars per barrel either. The world demand is far too high. Even if north america cuts it's usage (which is unlikely) you have to remember that China is growing like crazy in their industrial sector and will continue increasing their demand for quite a while.

I believe we'll see a new high next summer. Not increases as big as we've seen over the past few years, but I doubt the price is going to level off or drop (on a yearly basis) any time in near future.

For the sake of the argument, if oil DID drop that much that quickly I'm sure you'd see a HUGE slowdown in the oil and gas sector, layoffs in nearly every oil and gas company big and small, and a slowdown in the Albertan and Canadian economies as well.

[shane_c]

As someone who has to heat there house with oil I say bring it on.

[Azure]

Article 6 months ago said it was going to hit $200/bbl.

Funny how things change.

[Claeren]

Originally Posted by burn_this_city

The only way it hits $50 is with a world wide recession

Um.... you know that is exactly the point right? The world IS looking at a world wide recession -- in fact it is increasingly looking at a world wide depression.

The big question is what Natural Gas does. If it tanks than Alberta feels the heat, if it holds/grows then it is not so bad....





Claeren.

[Claeren]

Originally Posted by fotze

The thing you have to remember, those who were hired on most recently will be the first to be let go.

I was talking to my Uncle a few months ago, he retired a couple years back as a very very senior member of one of the big oil sands pioneers, and he was telling me about the last 2 times this all happened (early-mid 1970's and then more-so in early 1980's?) and it was actually a lot of the people at the top that lost their jobs first (all the way up to vice presidents). People who had been promoted far too quickly to fill spots they should never have been in and were now overpaid v. their skills were all gone (<sound like half of Calgary at all!?). The only senior people who kept their jobs were the ones with long term senior level experience to back them up, were underpaid to begin with relative to responsibilities and/or (and most importantly) those who were critical parts of projects that were going to produce near-future earnings for the companies in question.

It was a lot of the inbetween people, those with some on the job experience but small pay cheques, that stayed.

Just thought it was interesting.




Claeren.

[burn_this_city]

Originally Posted by Claeren

Um.... you know that is exactly the point right? The world IS looking at a world wide recession -- in fact it is increasingly looking at a world wide depression.

The big question is what Natural Gas does. If it tanks than Alberta feels the heat, if it holds/grows then it is not so bad....





Claeren.

I don't think the world is in a full on recession yet. If the bailout fails to grease the wheels then absolutely.

[flamesfever]

Originally Posted by Claeren

I was talking to my Uncle a few months ago, he retired a couple years back as a very very senior member of one of the big oil sands pioneers, and he was telling me about the last 2 times this all happened (early-mid 1970's and then more-so in early 1980's?) and it was actually a lot of the people at the top that lost their jobs first (all the way up to vice presidents). People who had been promoted far too quickly to fill spots they should never have been in and were now overpaid v. their skills were all gone (<sound like half of Calgary at all!?). The only senior people who kept their jobs were the ones with long term senior level experience to back them up, were underpaid to begin with relative to responsibilities and/or (and most importantly) those who were critical parts of projects that were going to produce near-future earnings for the companies in question.

It was a lot of the inbetween people, those with some on the job experience but small pay cheques, that stayed.

Just thought it was interesting.




Claeren.

Your uncle was absolutely right. Anyone who was considered superfluous, was let go. I recall the VP's being particularly hard hit.

I think it pays not to become a victim of the "Peter Principal" i.e. rise to a level of incompetence or redundance.

[macker]

Originally Posted by burn_this_city

The only way it hits $50 is with a world wide recession

Starting in 5-4-3-2-1....

[Claeren]

Originally Posted by burn_this_city

I don't think the world is in a full on recession yet. If the bailout fails to grease the wheels then absolutely.

$700 billion is nothing.

It is a tiny drop in the bucket.

America does not have a liquidity problem, it has a solvency problem.

There is simply not enough capital in the entire country to support the level of debt in the entire country and the only solution left is to print money to try and make up the difference > there is no way in which this ends well over the short-medium term.


Some really good reading:
http://www.minyanville.com/






Claeren.

[Azure]

What ever happened to being optimistic?

I don't think a $13 trillion dollar GDP is going to crash overnight.

[Burninator]

I swear predicting what the market is going to do is about as reliable as predicting the weather.

[burn_this_city]

Originally Posted by Claeren

$700 billion is nothing.

It is a tiny drop in the bucket.

America does not have a liquidity problem, it has a solvency problem.

There is simply not enough capital in the entire country to support the level of debt in the entire country and the only solution left is to print money to try and make up the difference > there is no way in which this ends well over the short-medium term.


Some really good reading:
http://www.minyanville.com/






Claeren.

Warren Buffett seems to think the US treasury will turn a profit off the $700 billion bailout. I agree they can't just keep spending but they need to do something to avoid a full on crash.

[Claeren]

Originally Posted by burn_this_city

Warren Buffett seems to think the US treasury will turn a profit off the $700 billion bailout. I agree they can't just keep spending but they need to do something to avoid a full on crash.

You must have missed the "fine print" in regards to Buffet's recent moves into the market and his big buys into GE and GS:

http://www.minyanville.com/articles/.../index/a/19300

If I was getting those terms I would be buying too... If anything it should show how bad the situation is not how good it is.



And the only thing that grew faster than the American economy these past few years is the amount of debt in that economy:

[Claeren]

And just for the record I do NOT necessarily think that oil prices will plunge or the economy will collapse.

It is more that there is not going to be a big rebound either. It will take a long time for this to all work itself out, maybe 5 years maybe 20 years.

And do not confuse market volatility with a turn-around, this market is not going to suddenly turn into some big long bull market again any time soon.



Claeren.