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Old Jun 10th, 2008, 10:49 PM   #1
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NAFTA and Oil

I'm not an expert in either of these areas, but I am going to post a few quotes to see how the members of this forum feel regarding the current fuel situation in Canada.
I always learn much from both sides of most debates here. I am going to quote some thoughts from the net. They may or may not be biased, but at least set a direction for the dialogue.


Quote:
Canada exports 67 per cent of its oil to the U.S. yet 40 per cent of Canadians are totally reliant on offshore, mostly Middle Eastern, oil. The three leading Middle Eastern countries upon whom 36 per cent of Ontarians and 90 per cent of Quebecers and Atlantic Canadians depend are Algeria, Iraq and Saudi Arabia.

Before the North American Free Trade Agreement, 30 per cent of Canada's oil was exported to the U.S. NAFTA has more than doubled Canada's oil exports south.
The five proposed new pipelines from Alberta's tar sands to the U.S. will commit 75 to 80 per cent of Canada's oil to the American market. Yet it is the taxpayers of Alberta and Canada who will pay the staggering environmental costs and subsidize the extraction bills.

...Canada is the only oil-producing country -- and the only western industrialized country -- not to have a Strategic Petroleum Reserve (SPR). The International Energy Agency (IEA) requires net import nations to maintain emergency 90-day oil reserves. Net export nations are not obliged to keep SPRs because the IEA sensibly assumes no country exports without ensuring domestic needs first. The IEA has no mechanism for a nation that doesn't control its own resources.
http://www.energybulletin.net/39947.html

Quote:
On March 8, 2006, Premier Klein made a remarkable and admirable pledge. “If we see oil drying up and we see the Alberta supply being threatened and the Canadian supply being threatened, we can do whatever is necessary to ensure that Canada receives its supplies first” .
Quote:
Indeed, Alberta has plenty of oil, more than enough to meet Eastern Canadians’ needs, and export surpluses. But Alberta cannot supply Eastern Canada, even if a crisis hit and they were freezing in the dark, because NAFTA reserves Alberta’s oil for Americans’ security of supply. Although Canada is a net exporter of oil, we import almost one million barrels per day to meet 90% of Quebec’s and Atlantic Canada’s needs, and 40% of Ontario’s. At the same time, Canada exports 63% of its oil and 56% of its natural gas production to the US. Those export levels are currently locked in place by NAFTA’s proportionality clause, which states that Canada must continue exporting the same proportion of oil and gas as in the past three years, even if Canadians run short. As well, there is not sufficient, east-west pipeline capacity to fully meet Eastern needs.
Quote:
Oil security’, ‘oil independence’ and even ‘domestic ownership’ are frequently discussed in the United States and other countries, but not in Alberta or Canada
Quote:
Oil Shockwave, a scenario developed by the U.S. National Commission on Energy Policy, warns that oil disruptions could lead to a world shortfall of three million barrels, 4 per cent of global supply, a day. The world price would rise to $161 (U.S.) a barrel. Gasoline would cost $5.74 (U.S.) a gallon ($1.78 Canadian a litre).
Mexico could weather such a supply shock. Its independent policy ensures first access for domestic needs. The US has a nationally-oriented plan and an emergency stock pile. Of the three NAFTA countries, only Canada has no plan. If there is an energy tsunami, in which of the three NAFTA countries is citizens survival most at stake?
Quote:
Positive things to learn from the US case: 1) priorize security of supply for domestic citizens and industry, 2) adopt energy self-sufficiency policies, 3) get in line with American and Canadian public opinion and ensure domestic ownership and control, and 4) develop large strategic reserves of oil and gas for use in emergencies, and to ride out supply crunches and price shocks. Alberta should develop its own emergency reserves.
Quote:
Canada must first regain control over energy supply and use. Our NAFTA partners already have this. Only Canada must export a majority of its energy in perpetuity. Canada, with Alberta’s backing, should demand a Mexican exemption. Mexico is in NAFTA and got an exemption from proportionality. Why can’t we get the same? If the U.S refuses to budge on this, we are allowed to unilaterally leave NAFTA by giving six months notice. NAFTA isn’t of much use. The U.S. ignores rulings favourable to Canada, and insists on those, like proportionality, which aren’t. If one party ignores an agreement, other parties aren't bound by them either.
http://www.polarisinstitute.org/an_e...ze_in_the_dark


Quote:
Canada is a net exporter of oil, with 2007 net exports of 1.0 million bbl/d. Almost all of the countries exports flow to the United States, and it is consistently the top supplier of U.S. oil imports.

Canada’s total oil production (including all liquids) was 3.36 million bbl/d in 2007. The country's oil production has steadily increased as new oil sands and offshore projects have come on-stream to replace aging fields in the western province. Overall, EIA predicts that oil sands production will increase even further in coming years and more than offset the decline in Canada’s conventional crude oil production: according to the May 2008 Short Term Energy Outlook, EIA expects Canadian oil production to increase to 3.42 million bbl/d in 2008 and 3.59 million bbl/d in 2009. Canada consumed an estimated 2.34 million bbl/d of oil in 2007. The country sends over 99 percent of its oil exports to the U.S., and it is consistently one of the top three sources of U.S. oil imports.
Quote:
Even though Canada is a net oil exporter, it imports sizable quantities of crude oil and refined products. According to the International Energy Agency (IEA), Canada imported around 1.2 million bbl/d of crude oil and refined products in 2007. Canada’s major population centers in the eastern part of the country are not well connected to its principle production facilities in the western interior, meaning that it is often easier to import oil along the coastlines rather than transport it domestically. Most oil imports come from Algeria (crude oil), Norway (crude oil) and the U.S. (refined products).

Quote:
Refining
OGJ reported that Canada had 1.97 million bbl/d of crude oil refining capacity in January 2008. While Alberta contains most of Canada’s crude oil production, a large portion of its refining capacity resides in the more-populated eastern part of the country. Alberta has four refineries, with total capacity of 437,400 bbl/d, whereas Ontario and Quebec have a combined 919,600 bbl/d of refining capacity. According to Natural Resources Canada, the largest single refinery in the country is Irving Oil’s 280,000 bbl/d St. John plant in New Brunswick.
In January 2007, Irving Oil initiated the environmental review process for the construction of the 300,000 bbl/d Eider Rock refinery in Saint John, New Brunswick. The facility would occupy land near the company’s existing refinery and under-construction LNG terminal (see Natural Gas section for more information). The project would cost an estimated $7 billion and supply both the domestic market and potential exports to Boston and New York. If completed, the facility would be the first grassroots refinery in Canada in the last 20 years.
http://www.eia.doe.gov/emeu/cabs/Canada/Oil.html

I wonder if Canada should have had a strategic oil policy? Is it to late to consider?
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Old Jun 10th, 2008, 11:10 PM   #2
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I think an analogy is in order...

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Old Jun 10th, 2008, 11:15 PM   #3
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I was not aware of that.
Thank you - very interesting.
Now to figure out where to rent it.

BTW, I had to look it up.
There Will Be Blood (2007) - Plot summary
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Old Jun 11th, 2008, 03:31 AM   #4
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This should be kept in mind if President Obama wants to renegotiate NAFTA -- now the Canadians have a(nother) reason to join him at the table.

PS. Just for the record, McCain's position on NAFTA should terrify every Canadian. Google "NAFTA highway" and visit the top hit* if you want to know more.

*The top hit, btw, is a solidly right-wing site. This isn't some "liberal conspiracy."
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Old Jun 11th, 2008, 05:14 AM   #5
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Ouch

Quote:
An ominous warning that the rapid rise in oil prices has only just begun

By Danny Fortson, Business Correspondent
Wednesday, 11 June 2008


Spanish lorry drivers stage a go-slow in central Madrid yesterday in protest at the rising cost of diesel

The chief executive of the world's largest energy company has issued the most dire warning yet about the soaring the price of oil, predicting that it will hit $250 per barrel "in the foreseeable future".

The forecast from Alexey Miller, the head of the Kremlin-owned gas giant Gazprom, would herald the arrival of £2-per-litre petrol and send shockwaves through the economy. His comments were the most stark to be expressed by an industry executive and come just days after the oil price registered its largest-ever single-day spike, hitting $139.12 per barrel last week amid fears that the world's faltering supply will be unable to keep up with demand.

Mr Miller's prediction is well beyond even the most heady market forecasts, the most extreme of which fall between $150 and $200 per barrel, and was explained only by vague references to demand from the developing world. It nonetheless stoked an already febrile atmosphere of growing public anger across Europe over a soaring fuel cost that is wreaking havoc at nearly every level of the economy.

The British Government was urging motorists yesterday not to panic-buy petrol in anticipation of a strike on Friday by lorry drivers who deliver petrol to forecourts for Royal Dutch Shell, assuring motorists that contingency plans would ensure sufficient supplies.

In Spain, the regional government of Catalonia enacted an emergency action plan to bring in fresh food and fuel supplies after nearly half of its forecourts ran dry and supermarkets shelves were left bare. The situation was the result of the second day of an "indefinite" nationwide strike staged by lorry drivers in Spain seeking their government's help to contain the effects of expensive petrol. Scattered protests by drivers and fisherman in France and Portugal also continued yesterday.

In a speech to the European Business Congress in Deauville, France, Mr Miller offered little prospect of relief. He warned that the world was experiencing a fundamental shift in energy prices that will end at a "radically new level. We expect that the oil price will approach $250 per barrel in the foreseeable future".

Philip Shaw, an economist at Investec Securities, warned that oil at that level would exert an extraordinary drag on the economy at a time when it is already decelerating at a rapid rate. "The word is ouch," he said. "Forecasts are forecasts though, and I think it should be treated with some level of scepticism."

The most visible result of $250 oil would be at the petrol pump, which is already at a record 116.9 pence per litre for unleaded. Because more than half of that price, about 68p, is due to duty and taxes, the general rule of thumb is that each $2 increase for oil means a 1p increase of petrol at the pump. Oil at $250 a barrel would mean an increase of almost 60p in petrol prices, even before VAT.

The price of everything from food to energy would see significant price rises. Household electricity and gas bills are particularly vulnerable. Power companies have begun warning of a second round of major tariff increases for household bills this year that they say they will need to push through just to break even.

Mr Miller placed some of the blame on financial speculators for oil's price rise – it has more than doubled in the past year – but said that the primary reason is simple supply and demand, driven by the rapidly expanding countries of the developing world, principally China and India.

It is a view shared by the International Energy Agency. In its monthly oil report, the developed world's energy watchdog said yesterday that the "abnormally high prices [for oil] are largely explained by fundamentals". But whether the price of oil will reach $250 is uncertain at best. Most expect it to reach a breaking point before that figure. The IEA said that the high price would eventually "choke off" demand and a balance between supply and demand would return.

What is certain is that for Europe, Mr Miller's role will become increasingly important as head of the continent's single biggest gas supplier. He also warned against "protectionist tendencies" in Europe, where worries have grown that the company is being used as a blunt negotiating tool of the Kremlin. "The relationship between Gazprom and Europeans is one of mutual dependence. We rely as much on European consumers as they depend on us," he said.

"In all frankness, I am concerned about certain protectionist tendencies resurfacing in the EU ... How wise it is that the European Commission invents an 'anti-Gazprom clause' to keep investments which are so needed for more efficient satisfaction of raising demand."


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Old Jun 11th, 2008, 08:42 PM   #6
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Originally Posted by chas_m View Post
This should be kept in mind if President Obama wants to renegotiate NAFTA
This has already come up: globeandmail.com: Ottawa plays oil card in NAFTA spat

In the short term, I wouldn't be surprised if oil prices come down a bit towards the end of Summer in an attempt to stop Obama from becoming "President Obama". China's demand will drop a bit as they slow things down to prepare for the Olympics, and the US could release some of its reserves to temporarily depress prices. Gas prices will start to come down a bit (not a lot, but they will be less than in the Summer), and voters will think all is well with the world. Early in the new year, prices will start climbing again.

I hate it when I leave my tinfoil hat off all day...
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Old Jun 11th, 2008, 09:12 PM   #7
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Originally Posted by chas_m View Post
*The top hit, btw, is asolidly right-wing site. This isn't some "liberal conspiracy."
This conspiracy originated with the right, so why shouldn't it be represented there? Or does the fact that the site leans right give the rumour more legitimacy?
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Old Jun 11th, 2008, 09:39 PM   #8
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I think it would be more logical for Canadians to use Canadian oil, rather than import it from afar.

Why do we send all of our raw materials elsewhere to be processed/ manufactured and then buy them back at the elevated cost.
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Old Jun 11th, 2008, 09:47 PM   #9
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Originally Posted by Ottawaman View Post
I think it would be more logical for Canadians to use Canadian oil, rather than import it from afar.

Why do we send all of our raw materials elsewhere to be processed/ manufactured and then buy them back at the elevated cost.
Cost efficiency.
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Old Jun 11th, 2008, 09:53 PM   #10
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Originally Posted by PenguinBoy View Post
In the short term, I wouldn't be surprised if oil prices come down a bit towards the end of Summer ..... Gas prices will start to come down a bit (not a lot, but they will be less than in the Summer).... Early in the new year, prices will start climbing again.

I hate it when I leave my tinfoil hat off all day...
That's what oil has done every year.

When it happens again this year, it won't mean your conspiracy is true. Well, no more than the weather getting colder in winter and warmer in summer.
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