"this is straight economics... the price of oil will not support bituman extraction. period... same thing has happened to coal... next processes to be priced out of existence will be fracking and deep sea production... the article discusses supply and demand... these are laws not subject to nationalism... and Teck made a bad investment."
A couple of quibbles:
First: "the [free market] price of oil will not support"... is a whole lot closer. Of course, the market price of oil in the last four decades hasn't BEEN a free market price. OPEC established a cartel pricing regime that dominates the market... which imposes monopoly pricing rather than free market pricing as the market reality. The issue, in result, is that sustaining an excess in monopoly pricing... will necessarily enable development of higher cost market based alternatives that will compete with the plan for monopoly control over resources at the price levels where they're enabled in competing.
Second: "same thing has happened to coal... next processes to be priced out of existence will be fracking and deep sea production". I'd first add to that list: all the other higher priced conventional oil alternatives, like solar, and wind... while noting that coal HAS NOT been "priced" out of the market... rather, it is being FORCED out of the market by apparently non-market based drivers in political choices... again, that's NOT a function of the operation of free markets... which, if they were enabled, might instead see coal forcing oil out of the market based on price. Nuclear, in Germany and Japan... similar issues...
Third: "the article discusses supply and demand... these are laws not subject to nationalism"... is simply incorrect.
OPEC's monopoly... is in large part a function of resource nationalism... which has been the dominant force in determining prices in the market for a long time, now. Supply and demand matter, but they are ARE NOT the dominant force, and they are easily made subject to all sorts of other factors that foster, limit, or control them... for which, see, again, the above re coal... which is being forced out of the market, not priced out of the market ? Of course, you could also look at the market reality that German and Japanese demand for oil, in WWII... didn't make a supply magically appear ? Etc. Nationalistic political forces might also result in banning the use of oil, just as it is banning the use of coal now... with the expectation (correct or not) that we'd all be better off using ONLY the currently still much higher priced alternative technologies, and not using any of the fossil-based carbon sources as fuels. I suspect the value of engaging the argument has a fairly short half life, in any case, as the alternative technologies will become increasingly competitive over time, on a time line that has essentially nothing to do with price, or price based incentives driving market functions... which is not saying its a good idea, or that implementing stupid changes like that, by force, won't destroy the world economy and put us back into the dark ages...
The reason the left wants to impose dramatic changes in our choices... has nothing to do with anything other than the transfers in political power they intend to enable in the effort, as a function of applying force in the implementation plan... but, those choices they intend to impose WILL NOT be economic, until they are... and there is no net benefit at all from trying to FORCE that choice being made, when it isn't economic to make it.
What is likely to result from the effort... is a vastly LESS economic outcome. The application of force, rather than free market choices, in determining market structures and the winners and losers in market competition... is a plan to require replacing one monopoly, in oil, with another... that will operate to prevent the benefit of lower costs delivered by technological advancements over time... from being reflected in the market prices.
The market distortions enabled by disrupting free market pricing... only impose inefficiencies. You see that now in the impacts of lower prices on higher cost tar sand, deep offshore, and fracked well oil producers... and you'll see the same effects in markets dominated by tech based alternatives... as long as it is also not free market pricing that is dominating the functions in those other markets.
That choices ARE uneconomic... doesn't mean they won't be the choice made. Coal, again, obviously. Also, its clear that OPEC's monopoly pricing schemes have imposed vast inefficiencies... but, the cost of the inefficiencies is broadly born, while the benefits of the inefficiencies imposed is narrowly targeted in ways that benefit some (OPEC) at all others expense.
The impacts of OPEC sustaining higher than free market prices for oil... are, first, inflationary... as the prices of everything else quickly adapts to the higher costs of necessary consumables that are employed in making everything else. That it is inefficient... doesn't mean OPEC doesn't extract a narrowly focused benefit for themselves at the shared expense of the rest of the entire economic system ? And, then, the inefficiencies that imposes begins catching up to them... when higher priced alternatives begin to compete and take market share... at a point when the "higher price" has already been re-normalized to the altered market, thus providing little unique benefit... and greater competition. Raising prices again wouldn't solve that problem... or would only temporarily, until higher prices begin to enable accelerating loss of market share to alternatives.
So, now OPEC (or, the Saudi's) are instead LOWERING prices back toward the free market price. The impacts, in the short term... will be deflationary... and, they'll put the recently developed crop of higher cost alternatives out of business, again... as has happened before, already, at a pace of once per decade, or more.
"and Teck made a bad investment"...
Yep. I think that's because Teck doesn't understand energy markets... at all. They should never have bet the company on coal... and they should never have bet it again, on the tar sands... |
