Monday, October 22, 2007

This Time It's Permanent

If we can get it right, this boom could last forever.

In the past the Alberta oil and gas booms and busts have been tied to two pivotal details - access to markets and the world price of oil.

But things changed two years ago when the production of petroleum from the oil sands surpassed conventional production for the first time.

No longer is the oil industry in Alberta reliant on discovering oil and gas, fighting for a place in the market, and at the mercy of international oil prices.

Okay, that may be overstating the case, but the oil patch in Alberta is now a commodity like coal. We have an almost unlimited supply of petroleum in the oil sands and the international demand for oil is strong and getting stronger.

The Alberta government has the opportunity to create a stable and sustainable economic climate. Or at least there is more of a chance now than ever before.

The royalty rate issue, so dominant in the daily news, is actually just a temporary distraction.

The real question is much larger. Can Alberta manage the boom, this time, in a way that will create economic, social and environmental stability?

Thursday, October 4, 2007

Reinventing the Energy Resources Conservation Board

History repeats itself so often its hard to keep up with all the examples.

The royalty review process is much in the news these days, but three past chairmen of the conservation board or the energy and utilities board wrote a letter to the public recently, defending the reputation of their august employer.

And venerated it once was, if it is now in for some close examination and criticism in light of the fact that is has not once, but twice, hired private investigators to pose as landowners and spy on the public.

But the really interesting part to the letter by G.W. Govier, G.J. DeSorcy and M.N. McCrank was their passing reference to the plan to separate the Alberta Energy and Utilities Board into its two parts - the Energy Resources Conservation Board and the Pubic Utilities Board.

More than a decade ago, for cost-cutting and political reason, these two very different organizations were amalgamated. It was never a very good fit and the administration of the natural resources and the public utilities in Alberta suffered.

Referring to the current government's plan to give each organization its independence, they wrote: "We support this and we believe it will lead to more efficient operations in both areas."

Efficiency is good in government, as in business. As is wise and knowledgeable personnel.

The Alberta government created the conservation board almost 80 years ago during an oil boom and it is today giving it back its mandate. Times may have changed but the challenges are similar and many because boom times always bring out some of the worst aspects of our greedy nature.

We can only hope we learn from our mistakes. For more on this topic please see my chapter titled OOPS: Mistakes and Lessons on page 137 in PUMPED: Everyone's Guide to the Oil Patch.

Wednesday, September 19, 2007

Alberta's Royalty Review - A Different NEP?

Words can be frightening. There is a shudder going through many people in Alberta this fall. Is Alberta about to announce its own NEP?

This week's report by the panel appointed by the Alberta government to investigate the provincial oil, gas and bitumen royalty is being greeted by some as an intrusion into the free enterprise system.

Can you imagine the reaction to this panel's report if its members had been appointed by politicians in Ottawa instead of Edmonton?

A careful readying of the report reveals the shocking assumption that the people own the resource. That they have not been getting a fair share of the profits - for many years. It suggests a modest increase in royalty "take" of about 20% more, if the price of petroleum stays stable.

It calls for government to pay closer attention to the numerous complicated forces that affect the petroleum industry. And for a new government agency to report more frequently and in a clearer manner to the public. For new levels of taxation to make sure the owners of the resource do not lose billions of dollars that is their due.

The panel's report even calls for a Crown Land Conservation Tax on all petroleum, forestry, mining and agricultural activities on government land. The $750 million raised each year would fund research and innovation programs to assure that resource extraction in the future is done with careful consideration for the environment.

And it calls for cumulative effects monitoring. Tens of thousands of oilwells do make a difference.

Had these recommendations been forced on Alberta by Ottawa - like climate change - we could blame it on the Liberals, the NDP or the Green Party. But these suggestions, and many more, came from a business savvy panel of Alberta residents.

Alberta's new premier will respond to this report in a few weeks. Perhaps October 2007 will be remembered as the month when the people of Alberta finally stopped blaming others for their problems - Ottawa, interest rates, the strong dollar, the American economy.

If the people of Alberta are brave enough to create their own Natural Energy Plan that takes charge of the development of their resources, they could provide leadership to the whole country.

Alberta's NEP of 2007 could accomplish what the NEP of 1980 failed to provide - a comprehensive, flexible and responsible reaction to high world oil prices.

For more details on seven previous national energy programs, dating back to Sir John A. Macdonald, and on the forces that create the booms and busts, see the chapters on these topics in PUMPED: Everyone's Guide to the Oil Patch.

Thursday, September 6, 2007

Is This Normal?

Housing prices in Calgary just fell $20,000. The price of natural gas is down again. Hurricanes are ripping through the Gulf of Mexico.

Do any of these events affect the Great Alberta Oil Boom? Surely this one can't be over already!

But, as songwriter Bruce Cockburn wrote, "The trouble with normal is it always gets worse."

Just when we think the Alberta economy is stable, and booming forever, we once again experience the annoying realities of a fast-paced life. And of being a relatively small economy linked closely to the international petroleum world.

Dozens of factors determine the severity and length of each part of Alberta's booms and busts. For more details on how to live through the cycle with relative peace of mind see my new book: Pumped: Everyone's Guide to the Oil Patch - in stores now!

Monday, August 20, 2007

Oil Discovery! Great News!

I just discovered another source of gasoline - 1000 litres or about six full barrels. Each and every year, forever!

Where? In my gas tank. Our minivan was stolen last winter and we replaced it with a smaller, more energy efficient car.

The old van used about 10 litres per 100 kilometres on the highway but our current ride uses only about 6 litres - sometimes even less. Based on 15,000 kilometres per year, that is a savings of about 1000 litres of gasoline.

This oil discovery cost nothing to find. There are no transportation costs. No pollution or noxious emissions. No greenhouse gasses either.

It's like money in the bank. And a source of income no one can tax either - that's a real plus. At a loonie a litre, that's $1000 in my pocket.

Back in the 1970s, in a time of crisis, President Jimmy Carter and the Congress of the United States forced car and truck companies to make their vehicles more efficient.

Efficiency is a great idea and it explains why Europeans pay so much more for gasoline at the pump that we do in North America; public policy there supports high pump prices which in turn encourage rational consumption of a hard-to-find and expensive resource. Efficiency also increases their national security by making them less vulnerable to foreign sources of petroleum.

The North American economy is experiencing an oil squeeze today - except this time there is no large supply of cheap oil to exploit after the crisis passes. Gone are the days of $5 per barrel oil. Today, even $50 per barrel oil looks like a good deal.

It's time for voters, consumers, producers and governments to all work together to make the oil we consume each year go twice as far.

So the place to start is in your gas tank. How much gasoline is waiting for you to discover in your car?

For more on the price at the pump and ways we can greatly increase our effcient use of oil and gas products see Pumped:Everyone's Guide to the Oil Patch by David Finch

Thursday, July 26, 2007

Gas Price Down - Oil Price Up!?

What's up this week with the price at the gas pump? It's falling at the same time that the world price per barrel of oil is reaching a historic high!

And oil is predicted to hit $100 a barrel, perhaps even as soon as the end of this year.

No one complains when the price at the pump drops, but it is good to know why it goes up and down. Even if it seems to bear no relationship to the world price.

Supply and demand are the biggest factors in the day to day movement of the price at the pump. Seasonal demands. Refinery maintenance. Shutdowns for all kinds of reasons. Driving habits.

Did you know that many campground are empty in August throughout the Canadian West because most people take holidays in July?

The biggest part of the price at the pump is still taxes - two or three levels, sometimes more. For more details on this topic see Outrageous - The Price at the Pump in my new book, Pumped: Everyone's Guide to the Oil Patch.

If North American prices at the pump were to go to European or Japanese levels - say $2 per litre - we would all drive smaller cars and trucks and our demand for "foreign" crude could be greatly reduced.

Sounds radical, perhaps, but the price of oil is no higher for other G8 countries that it is for us in North America. It's just that their governments tax gasoline much higher at the pump in order to promote conservation.

There's a Conservative idea that makes sense to me.

Friday, June 29, 2007

Leduc Anniversary Celebrations

David Finch will be doing a pre-publication signing of PUMPED in Leduc on Saturday, August 11, 12-5 pm, at the Canadian Petroleum Discovery Centre
A 60th Anniversary community celebration! Oil show, home coming, strawberry tea, steak dinner and dance (Saturday night), rib cook-off (Sunday night), live music, working drilling rigs, Peter Puffin children's entertainment, old time games and family fun!

Tuesday, May 29, 2007

The Next Sixty Years

The Alberta government's Royalty Review Panel passed through Calgary last week and got several earsful of comments about what should be done about the income the people of Alberta get from oil and gas.

Individuals, companies and associations made good points, but each perspective was also short-sighted and preoccupied with a narrow agenda - making money for one just one group.

Sixty years ago drillers discovered a new oilfield at Leduc and today its all over - the oil and gas is gone.

Where do we want to be sixty years from now? Will new technology have replaced oil and gas, coal and hydro? Not likely.

But we know the easy work is in the past. New sources of oil and gas are harder to find, more expensive to produce and demand a much higher price at the pump.

Let's take the long view, for a change. We need leadership at all levels - in industry, all levels of government, and in social groups too.

Albertans want plans that are sustainable, encourage innovative technologies, that are environmentally responsible and that show us to be careful stewards of our wonderful birthright.

Prosperity, stability and predictability - these were all requested at the Royalty Review Panel. Let's all think about the big picture, not just our individual interests, and find innovative new ways to share the wealth and assure our future.

Tuesday, May 15, 2007

Gas Price Jumps - A New Theory

An opossum "caused a power failure" after getting into an electrical substation recently and brought down an Exxon Mobil refinery in California...

Prices at the pump are now higher than after the Katrina hurricane shut down several refineries in the southern United States.

Conspiracy theories abound, again, and governments are once again under pressure to hold inquries into the outrageous profits being made by petroleum companies.

But the real reason pump prices go up is simple - people are willing to pay the price.

Good consumers shop around for the best price, change their consumption habits, reduce their reliance on one product and get on with life.

See "Outrageous: The Price at the Pump" in Pumped: Everyone's Guide to the Oil Patch coming this summer for more details on how you can reduce your "pump shock" when you fill up with gasoline.

Common sense prevails when we buy meat, bread and vegetables - why not when it comes to gasoline? There are lots of ways to save on transportation costs.

Watch out for opossums or possums, same thing - rabbits and gophers too.

Wednesday, May 2, 2007

Leduc - Life and Death of an Oilfield

Canadians gobble up oil and gas resources 100,000 times faster than nature creates them. That's why the story of a massive oilfield like the one discovered in 1947 near Leduc, Alberta is so important.
Imperial Oil drilled a discovery well and more than 1000 wells followed. Alberta went from a poor province to one of Canada's wealthiest in just a decade.
Pipelines built during the 1950s and 1960s transported oil and gas to central Canada and the mid-western United States as well as to British Columbia and California.
But by the 60th anniversary of the discovery of oil at Leduc, in 2007, it was all over. Leduc's productive days are done.
At its peak Leduc produced over a million barrels of oil each day - as much as is coming out of the oil sands today.
Leduc made Alberta rich and allowed it to become a powerful province in the dominion of Canada. Hospitals, roads, bridges, universities, skating rinks and swimming pools all came from its generosity.
Today, conventional oil is in decline in Alberta so producers are now counting on on smaller pools of oil and gas, coal bed methane and the oil sands to keep them in business. And they're looking elsewhere in Canada and overseas for more supplies.
Petroleum production from the North may one day become an important part of the Canadian supplies and Alberta is perfectly situated to help build the infrastructure to move oil and gas from remote areas to continental markets.
The days of easy wealth are behind us.

Tuesday, May 1, 2007

This October, 2007, Fifth House will publish
Pumped: Everyone's Guide to the Oilpatch
by David Finch

A witty, straight-from-the-hip guide to Canada's booming oil industry.

Seasoned petroleum historian David Finch engages and entertains as he acquaints us with the basic vocabulary and mechanics of Canada’s oil industry right through its most complex issues. Perhaps you know the answers to some of the basics: What is a barrel of oil? Where does it come from? How does it get into the gas tank? Why is oil so political? Do you recall the details of some of the programs? What was the National Energy Program, The National Oil Program, the Western Accord, and why did they matter? Are you well-versed enough in the politics to know the answers to these questions? Are we really running out of oil? What is the current state of the tar sands? What do “upstream,” “midstream,” and “downstream” mean? Who controls oil and gas in Canada and why does it cost so much if it belongs to us, the people of Canada? And finally, “Why does this industry dominate the world's economic and political arenas.”

With short chapters, illustrations, maps, photographs, and a user-friendly index-glossary, Pumped makes the complicated, jargon-rich, high-stakes world of petroleum exploration, excavation, and consumption easy to understand.

Finch provides a balanced, knowledgeable, and often-humorous primer on the mechanics, history, and politics of Canada’s oil industry.

Books will be available from Fitzhenry & Whiteside. Get your order in now - or contact Lyn Cadence at to invite David Finch to interpret the oil industry for your audience.

6 x 9, 224 pages,
40 photos, maps, illustrations, index, glossary/index
$22.99 pb
October publication
BUS070040 / BUSINESS & ECONOMICS / Industries / Energy Industries

TEC047000 / TECHNOLOGY / Petroleum