As most of us use gasoline, diesel or propane fuel for our direct transportation,
even on public transit buses, finding ways to cut back on our fuel use is the
biggest win. Start here to find ways to
save on your fuel consumption.
Do you think cycling is the answer? The meat engine (human power) is not particularly
efficient, and the story of how much energy we use to fuel ourselves is a nightmare.
If you can source electricity from non-carbon sources, and figure out how to keep
batteries alive (it takes knowledge and discipline), an
electric bike might be a better
way to reduce greenhouse gas emissions. Humans doing work emit carbon dioxide.
Human powered cycling may be great for your health and boast other advantages.
But when it comes to reducing GHGs, an electric motor doesn't produce them, and is
still quiet, takes up the same space as a regular bicycle, and is more energy-efficient.
Bitumen (Tar Sands)
The largest single CO2 emission point on the planet in 2012 was the Alberta Tar Sands.
This sub-standard oil substitute creates more CO2 per barrel produced than any
conventional crude oil, partly because of its inherent nature, and partly because it
requires so much more energy to produce than conventional oil. For conventional oil,
it takes the energy equivalent of one barrel of oil to produce anywhere from 15 to 80
more barrels of oil. The bitumen in the tar sands is so intractable, it produces only 4
barrels of output for each equivalent barrel of oil used. In fact, most of the heat
energy for processing the bitumen is actually taken from a higher quality fuel, that
produces less CO2: natural gas.
So, from a greenhouse gas emissions and climate change mitigation perspective, we would
all be better off just taking that natural gas to power our vehicles, and bypass the
tar sands altogether. Oil refineries and extraction also use a lot of electricity.
Turns out we could just use that same electricity to power electric cars instead of
making oil into gasoline and diesel, and cover the same distance. All while leaving
all that oil and CO2 in the ground, and reducing oil imports, financing terrorism
and destroying the planet.
Why is this relevant to transportation energy use? Because virtually all the bitumen
produced will be refined primarily to produce gasoline and diesel fuel to power our vehicles.
To make matters worse for the bitumen patch, not only is their operation a catastrophe
for our environment, it isn't even a good economic proposition. If you are invested in,
or thinking of investing in the Alberta 'oil' sector,
you should read this paper I researched and wrote in March 2013.
Within 3 weeks of posting the paper on bitumen as a questionable investment (see link
above), my forecasts regarding more pipeline failures and the questionable track record
for transporting oil safely by rail were realized in the news headlines.
March 27, 2013:
Minnesota dilbit train derailment
March 28, 2013:
Mayflower dilbit pipeline rupture
April 3, 2013:
Northern Ontario oil train derailment
(and these are just the dilbit spill events, multiple spills of regular oil, diesel fuel and gasoline are not included)
Maybe investing in green technology is beginning to look more attractive, say something that
absorbs and binds greenhouse gases on a long-term basis.
Things just keep getting worse with regard to tar sands and dilbit as an investment.
June 1, 2013:
The British Columbia government has determined that the Enbridge-led consortium's oil spill
response plan is not credible. As the Kinder Morgan pipeline likely has a carbon copy of
that plan for its proposed expansion, that initiative may also have problems now - beyond
the public resistance to putting more tankers in Vancouver Harbour.
In late April 2013,
the U.S. EPA called the State Department's environmental analysis of the Keystone XL proposal
inadequate, putting that route for exporting dilbit out of Alberta at risk.
Alberta dilbit proponents are so desperate that they are now proposing to reverse an
existing Canadian pipeline to carry dilbit east, instead of carrying imported light oil west
as it has done for 4 decades. However,
that proposal is also meeting stiff resistance, despite
the NEB's attempt to stifle public participation in the review process.
As of May 31, 2013, the WCS (Western Canada Select = tar sands crude) discount to WTI (West
Texas Intermediate is approximately US$20 per barrel ($93.61 - $73.82), or about 21%. North American crude oil inventories
are high, and the Canadian dollar is dropping agains the U.S. dollar as a result.
By way of contrast, the purest electric car play in the stock market - Tesla Motors (TSLA) - has seen its
stock price rise from US$34.65 to US$97.76 (282%) in the past 3 months (March 1st to May 31st), reaching as high as US$110.33.
July 6, 2013 brought tragedy to Lac Mégantic, Quebec in the form of a small train pulling 72 cars of North Dakota
Bakken shale oil rolling unattended into the town. Five of the oil tanker cars caught fire and two exploded. That was
enough explosive power to level much of the downtown, kill at least 47 people, and injure uncounted others. A month later,
the clean-up and recovery effort continues. The idea of moving even more crude oil by train across the continent
likely blew up with Lac Mégantic. For certain, it's going to get more expensive as the rail companies will have to
revamp procedures, likely start upstaffing the trains for safety reasons, and start replacing ancient, unsafe tanker
cars with newer, safer units or retrofit existing rolling stock as inquests, investigations and various commissions
study the incident and start making recommendations.
July also brought news that there are at least 4 major leaks of bitumen from a Canadian Natural Resources Limited
(CNRL) from their project near Beaver Lake (Cold Lake Alberta area), that they are uncontrolled, have been leaking for weeks,
and the company does not know how to stop them. Of course, there is no spill response plan for this, and reports to
date indicate that response efforts are cloaked in secrecy, limited and largely ineffective.
Recognizing that the routes for dilbit to the west (Kinder Morgan and Northern Gateway) are effectively dead, and
with President Obama hinting hard that the Keystone XL pipeline is not going to be approved by his administration,
the folks that used to say 'let the eastern bastards freeze in the dark' now see eastern Canada as their salvation
to sell the glut of dilbit they are producing. However, in the aftermath of Kalamazoo (2010) and Mayflower (2013)
dilbit pipeline ruptures, residents along the path of the antique natural gas pipeline that TransCanada Pipeline
proposes to repurpose to carry high-pressure, high-temperature dilbit are already forming groups to oppose the
proposal - and it's not even a formal proposal yet.
Oh, and Tesla Motor Company stock rose above $130 per share in July. The WCS discount is about $22.
End of September update. More railway oil spills in August and September. More seeps discovered above
ground near Beaver Creek. The Canadian federal government is now sending cabinet ministers to B.C. to
arm-twist provincial politicians to back away from their pre-election stance on safeguarding the environment,
and First Nations elders to withdraw their opposition to the pipeline proposals. This has not been well
received, and the increasing level of desperation by the bitumen industry and their lackeys in the PMO is
pretty transparent. Prime Minister Harper has stated publicly that Canada will ship bitumen out of the country
(to the U.S. and overseas) no matter what, by tanker truck if necessary. The Energy East pipeline proposal is
doing a full-court advertising press, pretending this oil is for eastern Canada (which has its own off-shore
production already) and not primarily for export, while
remaining evasive on the environmental impacts and over-stating likely employment benefits (sound familiar?)
Meanwhile, Tesla Motors stock price is over $190, and the WCS spread is about $32 for November futures, or
about a 31% discount from West Texas Intermediate (WTI). In other words, bitumen-based oil is now selling for
$70, barely above the break even point (estimated at $60-65/barrel), but the industry and CPC government are
hell-bent on expanding the extraction rate (which will force the price down).
The spread is growing in both dollar and percentage values.
February 2014 brings more bad news for the bitumen patch. A
has ruled against the Governor's
illegal actions in favour of TransCanada Pipelines and the Keystone XL pipeline. While it seems likely that
money will eventually overcome a minor inconvenience like rights and laws in the United States of Exxon-Mobil, it will
certainly delay approval of the pipeline.
Or perhaps the blow is more devastating than that for the KXL pipeline. Enbridge has been spending money like water in B.C. to try to sway opinion in favour of their
Northern Gateway pipeline and tankers proposal, but it doesn't seem to be having the desired effect. A
poll shows about 2/3's of British Columbians remain opposed to the scheme; essentially no change in 2 years.
A train carrying dilbit has derailed and spilled in Pennsylvania,
and in Montreal,
keeping the unsafe oil trains story on the front pages.
While world oil prices have risen, the WCS/WTI spread is still over 23%, and the imploding oil exports have driven
the Canadian dollar down 10% since the start of the year, driving WCS below US$80 per barrel. The Cdn dollar is
expected to continue to decline further against the U.S.
dollar in months to come (per Bank of Canada governor, Canadian Prime Minister, and Canadian Minister of Finance).
When Canadian oil stocks are paying about 10% annual returns, taking a 10% haircut on the currency exchange (so far)
has to hurt. By comparison, Tesla Motors stock is trading at over US$200 per share and continuing to rise (a nice
return if you were smart enough to invest at $35 less than a year ago).
2014-05-28 - Update
If you have financial interests in the Alberta bitumen play, I recommend selling now. Things are getting worse.
Multiple rail derailments and explosions, mostly related to Bakken shale oil and not bitumen, have increased
public awareness and concern to the point that even the Canadian federal government has found it necessary to do
damage control on the file,
requiring all rail companies to take all DOT-111 tanker cars out of service completely -
no matter what they are carrying - by 2017. That will increase the cost of dilbit carriage by rail. The various
pipeline proposals to all points of the compass from Fort McMurray are now effectively stalled by a combination of
public opposition, First Nations opposition, court cases launched and in the works and political paralysis at
provincial and municipal levels. However, the biggest threat to the bitumen patch right now is a little-known
investigative panel under the North American Free Trade Agreement (NAFTA), the Commission for Environmental
Co-operation (CEC), which is investigating the extent of
leakage from bitumen extraction operations of toxic chemicals into local waterways that contain fish
(presumably leakage from tailings 'ponds' into the Athabasca River). If they find the operations breach the
Fisheries Act (before or after the Act was gutted by the current Canadian federal government), the implications
for the bitumen extraction industry in the area could be severe.
Clearly, this has the industry's biggest supporter - the current federal government - scared. So much so,
started efforts to undermine the CEC investigation.
legal grounds cited by the federal government appear weak, if not hypocritical, and the government has no
jurisdiction over NAFTA bodies. Ironically, it has to do this via Environment Canada,
a federal government department so eviscerated by targeted budget cuts it is no longer considered functional
Further, the main Steam Assisted Gravity
Drainage (SAGD) operator still has not resolved its issues with eruptions of bitumen at the surface.
And here's a paper that explains that
the current discount on bitumen-derived 'crude' oil is not because of surplus oil
in the North American market, but because the product is inferior. So, building pipelines west, south, east and
north is not going to improve the quality of the product or raise it's price. Putting all this
inferior product on the market by increasing transportation channels for it (which can also carry higher
quality, real crude oil) could actually create a supply glut of the garbage 'oil', forcing the actual price down.
If you are looking for a better place to park your money, look at renewables and cleantech - the real emerging
markets today. For example, Tesla Motors (electric car maker) is trading at over US$200 today.
As expected, the Canadian federal government announced its approval of the Enbridge Northern Gateway Pipeline
project on June 17th - the last possible day for it to announce its decision. The Prime Minister and Natural
Resources Minister then ran for cover and refused to answer questions on the announcement. All 209 conditions set
by the NEB remain in effect per the federal announcement. Response from residents of BC, the BC Environment Minister,
First Nations representatives and others were immediate and in opposition to the announcement. This approval is
indeed a hollow victory for Enbridge and its pipeline that will never be built.
On June 18th, in an interview, Chief Na'Moks, the Beaver Clan hereditary chief of the Wet'suwet'en First Nations,
said of the Harper-Oliver (formerly known as Northern Gateway) Pipeline:
"When they have an investment decision to make, they must realize, when we go to court, that their money will
sit there and it will rot. The last time the Wet'suwet'en went to court with the federal government, we were there
for 20 years, and we came out of there successful. And we have no doubt that we will be successful in this as well."
(Stephen Harper is the current Prime Minister of Canada and cheerleader for all things bitumen. Joe Oliver
is the former Canadian Minister of Natural Resources and current Minister of Finance, who is also an unabashed
fan of subsidies and government support of all kinds for the Canadian oil industry.)
Well, if the bitumen boys want to keep expanding extraction capacity without a credible plan for how to move
the gunk to market in the next 2 decades, seems to me that makes for the whole bitumen patch being a bad
investment for the next few decades. Your money, your call. But before you make that call, take 2 minutes
and read this article on
how razor-thin the margins apparently are in the bitumen patch. Is that still where you want to invest?
(Tesla Motors now trading over US$230/share.)
As September 2014 draws to a close, the Canadian dollar petrocurrency is crumbling in value relative to
currencies of countries with real, diversified economies, and
Statoil announces it is fleeing the impending
financial disaster that is the Canadian Tar Sands. WCS can only fetch US$78 a barrel on the spot
market, while real oil (WTI) is still getting about $20 more. Major biofuels refineries are opening in the U.S.
to supply the U.S. military, and apparently at delivered costs already competitive with refined
conventional oil. Growing production from oil shales are going to ensure there is no market left
for Tar Sands bitumen by the time, if ever, the product finds its way to market. China continues to
be a leading market for renewables, to reduce their dependence on unreliable international oil supplies.
Omnitrax withdrew its support for a dilbit by rail transportation route across the
Canadian north to the Hudson Bay coast. The bitumen sector countered by proving dilbit demential is real, proposing the
idea of taking the dilbit north from Tar Sands territory to the Arctic coast (ice bound most of the year) along the
Mackenzie River valley. If we're going to ship fossil energy out of Tuktoyaktuk, why not just liquify the natural
gas in the area and ship it overseas, instead of sending it to the Tar Sands to make a substandard product and
trying to export that?
While the Canadian federal government reached a questionable
decision to not charge Suncor for multiple offences putting contaminated tar sands process water into
the Athabasca River, the announcement included the
revelations that Suncor failed at least 39 consecutive tests,
and neither the company nor regulators could provide any credible estimate of how much contaminated water
was actually released into the river which is a drinking water source for downstream communities.
Expect civil lawsuits against the federal government, provincial government and the company for this breach.
Eventually, even the bitumen boys are going to realize nobody wants their goop; just ask folks around
Mayflower AK or Kalamazoo MI who have real-life experience with it.
(Tesla Motors stock has pulled back in recent days, but is still trading at over U$S245/share.)
As world oil prices start their collapse due to another global economic slump due to incompetent
management by the world's major economic nations and their inability to effectively regulate rogue
multinational financial and energy corporations and continuing increases in supply due to shale oil
and fracking in the continental U.S., price pressures forced WCS to roughly US$70. (The Canadian
currency - now effectively a petro-currency due to federal government single-mindedness about favouring
the tar sands over all other sectors of the Canadian economy - has fallen roughly 10% in the past few
months as demand for the sub-standard crude oil product is also diminishing.) The $70 mark is important
as it is generally believed that many of the tar sands extraction projects are uneconomic if the market
price remains at $70 or below for a significant period of time (e.g., a month). Recent reports show
that wind generation is now lower cost than oil or coal-fired generation. Natural gas remains competitive
due to oversupply in that sector in North America.
On the pipelines front, the Keystone XL and Northern Gateway pipelines projects now both appear to be
effectively dead. The pipe & rail connection to Churchill (Omnitrax) is officially dead. This leaves the
Energy East pipeline as the last, faint hope for getting dilbit to international markets in a cost-effective
manner. Ironically, as Energy East is primarily the repurposing of an ancient natural gas pipeline, their
project schedule (2017 or 2018 for first flow to eastern terminus) may show up just as the world decides
to turn its back on dilbit and have much higher demand for LNG to serve the European market (which can
expect longer, colder winters as the Gulf Stream flow is diminished by climate change. Demand for
heating fuel (natural gas) will likely rise as demand for transportation fuel (gasoline and diesel
from oil) will likely start to fall signficantly as electric and hybrid vehicles become more common.
The continuing litany of train derailments carrying oil and petroleum distillate products has become
so numerous, North American mainstream media doesn't even report them unless there is loss of life or the event
occurs close to a populated area. Two major rail carriers have decided to fight the State of
California in the courts rather than even develop a PLAN on how to prevent or respond to oil spills
from derailments. As the State can shut down the ability to operate trains within its borders, that has
the makings of a bad move. It also appears the railways are behind the curve on replacing or upgrading their
old DOT111 tankers, which are now slated to be removed from service by law in Canada and the U.S.,
which will reduce their oil carrying capacity still further.
Suncor (the purest tar sands equity play) stock has fallen 23% from $47 in June 2014 to $36 now
(just over 3 months). In the same period, the purest electric car play - Tesla Motors - rose 12%
from US$204 to roughly $230.
The price of West Texas Intermediate (WTI) crude oil dripped below US$80 per barrel in recent days,
and analysts predict the price will continue to fall - even in the face of Saudi production cuts - due
to weaker international demand. With it, the price of WCS fell below US$65 a barrel, which definitely
renders some bitumen projects uneconomic. Watch for more news of projects being delayed or cancelled
in the Alberta bitumen patch. Suncor stock (as a proxy for tar sands bitumen) continues to be volatile
but trend downward. Tesla stock has finally pulled back a bit (US$222), but still roughly double its
price a year ago.
When Canada's national (business) newspaper runs an
article about problems with the economics nd politics of the tar sands, you know the troubles run deep.
The U.S. White House does not appreciate PM Harper's attempt to dictate U.S. foreign policy (we won't take no
for an answer on Keystone XL statement during a public engagement in the U.S.). With the U.S. mid-terms out of
the way, expect Obama to nix the Keystone XL pipeline from Canada in days to come. With U.S. domestic oil
production continuing to increase, the U.S. demand for Canadian oil will continue to diminish, especially
'dirty tar sands oil'. To further erode the value of the Alberta bitumen megaprojects, the Saudis have decided
to start dictating world oil prices again by increasing supply, with an apparent target price of US$70 a barrel.
That's a blunt challenge to tar sands and shale oil production which is generally considered to be unprofitable
at that price. The reason the Saudis are willing to play this game is becasue worldwide demand for oil is
weakening as economic stimulus is being remmoved, and developing nations are adopting renewable energy - especially
in China - at a rate double or more of that in the industrialized world. Everyone in the world - other than
the Canadian federal government - realizes the tar sands 'carbon bomb' is a liability, not an asset.
Unfortunately, as the Canadian government bet the national economy on the tar sands, and doubled down by
continuing to subsidize it with taxpayers money, now the value of the Canadian currency is slipping in lockstep
with the price of crude oil. In other times, the drop in the dollar against other currencies would allow
Canadian manufacturers to be more competitive in international trade. Unfortunately, most of those businesses
have gone under as a result of the 1-2 combination of global recession and national economic policy sacrificing
manufacturing businesses to the government-staked bitumen boom. A business which has ceased operations cannot
staff up when economic times improve. Investments in the tar sands will suffer double losses in the next few
months and years: share prices will drop with the price of oil and bitumen; and the value of the currency
the shares are traded in will also fall. Oil prices have fallen about 25% in the past year; bitumen oil
play stocks have fallen about 40%, and the currency about 10%, for a combined loss of value of about 45%.
Expect both sides of that slide to continue.
One month to Christmas, and if demand for coal keeps dropping world wide (Germany just announced plans
to shut down 8 more coal-fired generating stations, and Russia is halting coal deliveries to Ukraine,
China has announced a GHG emissions reduction agreement with the U.S., and India is trying to switch
to biofuels in a major way in the next few years), Santa Claus may be the last market coal.
WCS (Alberta's bitumen-based crude oil) is trading at US$58, which is an unprofitable level according to
industry analysts ($70 to $80 is posed as the break-even range). OPEC is meeting shortly, and unless they
volunteer to take a smaller piece of the world oil market 'pie' in order to make the oil industry in
other countries more profitable, that price could fall further.
Keystone XL was voted down in the U.S. Senate last week, and if President Obama wants his legacy to
include helping defuse the climate change carbon bomb - as he helped along with the recent GHG
emissions agreement with China - approving KXL is presumably not high on his To Do list. Oil stock
prices continue to slide as inventories grow and general economic mismanagement in the
industrialized world prevents a recovery from taking hold. Canada is now on the cusp of falling
back into recession.
Tesla Motors stock is trading over $248, up 12% in the past month. About 280,000 highway-capable
plug-in hybrid and electric cars have been sold in the U.S. as of October 2014, and Canada is expected
to pass the 10,000 mark in the next few weeks. Each of these vehicles represents about a 10 to 11 barrel reduction
in oil demand per year. So, for the U.S., with its current plug-in fleet, that's about 3 million barrels
per year. Five years ago, that number was effectively zero. Plug-in car sales continue to accelerate.
New CAFE rules will mean new gasoline and diesel vehicles will also use less oil than their predecessors.
Normally I wouldn't post another update so soon after the last, but a couple of items prompt me to
return to this topic early.
Kinder Morgan got smacked down in the B.C. Supreme Court on Thursday, and the reasoning for the decision
highlights the company's incompetence and arrogance so harshly, it has probably cost them the social
license to build the pipeline. If you
can't figure out where your worksite is (which can be done with a
simple smart-phone app), you probably can't be trusted to drill a giant hole through a mountain or build
a leak-proof pipeline. Kinder Morgan also lost on their request to extend the end date on their previously
granted injunction, which implies the company also can't estimate work very well. In addition, the
Mayor of Burnaby (where the work is happening), is unhappy and looking to protect his constituents and local
jobs, which is not aligning with the Kinder Morgan plan. So, getting dilbit out of Alberta in the future
just got harder for the bitumen industry.
The Ontario and Quebec provincial governments announced they have agreed that a real environmental
assessment is necessary for the Energy East pipeline, and given the National Energy Board abdicated its
responsibility to do so, the provinces will step up and do it themselves. Not good news for TCP.
World crude oil prices continue to slide, pushing WCS to roughly US$55 a barrel.
a plan for seriously reducing demand for fossil fuels which could work.
It appears the long-awaited oil price bubble correction which began mid-year is now well under way.
Rest assured, it is not over yet, as the Saudi oil minister stated this week that OPEC will continue to
defend its market share until oil hits US$20 per barrel. With relaxed oil products export rules in the
U.S. taking effect tomorrow, there will be more oil and refined products on the world market, which
should further depress prices. However, price volatility is anathema to big investors, so we won't see
any significant economic recovery world-wide for at least six months, and probably more than a year.
My long-term bullishness on Tesla Motors and lithium battery production now as to be tempered as the
shift to electric cars and renewable energy development and production will suffer some collateral
damage from plunging oil prices. However, climate change concerns will continue to drive these markets,
but at a reduced pace.
The bottom is going to fall out of the Canadian economy over the course of 2015. The Harper government
bet the the Canadian economy on black (bitumen black) a few years ago, and now the roulette ball - in the
form of the world economy - has landed on red (gushing red ink). In past cycles, the central Canadian
manufacturing sector would benefit from a lower Canadian currency and start to bounce back to balance
the impacts on the Canadian economy. Unfortunately, Canadian manufacturing is now largely a memory.
Businesses were pummelled during the worst of the 2008-2013 recession, and closed Canadian factories.
Actual manufacturing was off-shored to China, so there are a lot less domestic manufacturing facilities left
to ramp up and create jobs to off-set the ones being sloughed off in the bitumen patch. The Canadian
textile, pulp and paper, and forestry sectors have largely been sacrificed to the resource extraction
sector via Dutch Disease. So this time, those historic core sectors for the Canadian economy likely are
not going to bounce back as in the past. We also destroyed most of our advanced technology sector, and
the banking sector - which has also been off-shoring jobs as fast as they can - can only do so much if
the rest of the economy tanks. Incidentally, this is why the Canadian housing sector remains strong;
Canadians don't have anywhere else to put their savings with any hope of them holding their value
(let alone earning a real, safe return).
As of the market close today - WCS was trading well below US$38 per barrel to finish out the year.
Tesla Motors was trading at US$224 (up slightly over the past few days).