Thursday, January 29, 2015

The terrorist in you

Oh yea, this is great. Great great great. Look at Canada now eh?
The bill is expected to include provisions to allow "preventative arrests" and criminalize the "promotion of terror" -- measures law enforcement has indicated would help detain potential terrorists before a crime is actually committed.

Asked to explain how the government will criminalize the promotion of terrorism, Blaney said the Criminal Code already contains provisions on "supporting hatred or violence."

"It is really criminal to incite terror, to support terrorism or to encourage to use violence to achieve your means," Blaney said.
I hope you people see what's going on here because this is downright scary shit. Before a crime is commited. Pre-crime. Thought crime. Speech crime. Notice the double language here, it's before a crime is committed but allegedly you're committing a crime. Who defines what is terrorism? Is "eco-terrorism" terrorism? Hmm, who are the terrorists exactly? If I post The Offspring's 'Kill the president', am I now a terrorist? Is my blog a terrorist blog because I believe in extreme circumstances violence does have to be used to get out from under tyrannical rule? A belief I'm pretty sure the government shares does it not?


Oh here's another one.
Existing law requires a fear that someone “will commit” a terrorism offence before a peace bond may be granted — a standard the government is looking to lower in the legislation.
Like what in the great white fucking fuck people? I just.. ugh..




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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Wednesday, January 28, 2015

Greece, central banks, and the real life idiocracy

I love the movie Idiocracy it was simply brilliant. If you haven't seen it you really should. One aspect of the movie really marks a parallel to the events happening in Greece now though. *Spoiler Alert*.

In the movie the protagonist ultimately has to complete the mission of getting the plants to grow. The entire world has been suffering from a great dust storm and no plants will grow anywhere no matter what they try. He discovers the problem is that two hundred years or so ago the corporation Brawndo took over the FDA and was basically then able to say anything they liked about the product that they wanted. They proceeded to tell the public that Brawndo is what plants crave and eventually convinced them to "water" their plants with Brawndo because "it's got electrolytes".


The protagonist manages to convince them to try using water instead and assures them if they use water "like from the toilet" and not Brawndo the plants will grow. But something unexpected happened, what was clearly a very needed and necessary action had a very negative effect on the stock market.

It turns out that as Brawndo grew larger and larger it consumed more and more companies and at current employs like half the US. Demand for Brawndo crashes, their stock tanks, and everyone is out of work as the "auto fire thingie" in their company's computer executes.

I think you get the idea, everyone gets mad, etc. What does this have to do with Greece you may be wondering? Well...
ATHENS, Jan 28 (Reuters) - Leftist Greek Prime Minister Alexis Tsipras threw down an open challenge to international creditors on Wednesday by halting privatisation plans agreed under the country's bailout deal, prompting a third day of heavy losses on financial markets.
A swift series of announcements signalled the newly installed government would stand by its anti-austerity pledges, setting it on a collision course with European partners, led by Germany, which has said it will not renegotiate the aid package needed to help Greece pay its huge debts.
Tsipras, who was congratulated by U.S. President Barack Obama in a phone call for his decisive election victory on Sunday, told the first meeting of his cabinet members that they could not afford to disappoint voters battered by a plunge in living standards under austerity.
After announcing a halt to the privatisation of the port of Piraeus on Tuesday, for which China's Cosco Group and four others had been short-listed, the government indicated it would put the whole programme on hold.

It said it would stop the sale of stakes in the Public Power Corporation of Greece, Greece's biggest utility, and refiner Hellenic Petroleum, and put other planned asset sales of motorways, airports and the power grid on ice.

The government also plans to reinstate public sector employees judged to have been laid off unfairly, including a group of finance ministry cleaners whose case attracted publicity last year, and announced rises in pensions for retired people on low incomes.

Uncertainty over the new government's relations with the European Union went beyond economic policy. A day before the EU is expected to extend sanctions against Russia for six months, Greece's energy minister said the country was against sanctions. Athens had already dissented over a joint statement from the bloc on Ukraine on Tuesday.

Tsipras, who met Russia's ambassador to Athens on Monday and the Chinese envoy the next day, told ministers that the government would not seek "a mutually destructive clash" with creditors. But he warned that Greece would not back down from demanding a renegotiation of debt.

"We are coming in to radically change the way that policies and administration are conducted in this country," he said.

Financial markets have taken fright. Greek bank stocks plummeted more than 26 percent on Wednesday, taking their cumulative losses since the election to over 40 percent.

The overall Athens stock market fell over 9 percent, while Greek five-year government bond yields hit around 13.5 percent. This marked their highest level since a 2012 restructuring which wrote off a large proportion of Greek debt held by private investors.


Reflecting the concern, Standard and Poor's cut its outlook on Greek sovereign debt to negative from stable.

Deputy Prime Minister Yannis Dragasakis sought to reassure markets, saying private investors would be taken into account when the administration implements actions, but the business world remained sceptical.

"You've got a government that's anti-privatisations, so I think all privatisations will be put on hold," said one industry banker, who spoke on condition of anonymity. "The reality is, if you're a new owner, do you want to have a government who doesn't like you? Best to move on to the next thing."
Greece embodies the modern feudalism I talk about often on here. Every western nation will one day be like Greece as their ponzi-conomies, infinite growth, the demands of the people, the greed of the elite, the limits of the earth, collide in an epic frenzy of revolutionary awesomeness. The media is emphasizing the label of "leftist" despite the fact that SYRZIA formed a coalition government with a right-wing party. I'm neither left or right, but the media's insistence to label this party as "leftist" rather than what they truly are: anti-feudalism, and anti-usury, is telling in the need for division. Usury and feudalism, eternal debt servitude, is what the Greeks were facing and they've had enough and this coalition government for once reflects the wills of the Greek people as a government should. The Greeks are united in their desires so division must be inserted into the situation and kept within the false left/right paradigm of party politics.

This is a great development, but don't be fooled for this is not a victory but merely the start of the war. Greece still exists within the ponzi-conomy of Europe and it's debts still exist. Like the characters in Idiocracy there are likely to be some very unexpected developments as the house of cards their economy depends on comes crashing down. Already their stocks are dropping, and there are serious questions how the country will fund itself. They're being downgraded by credit rating agencies. If the debt that the European Union and the IMF have put upon them can't be paid in Euro's (which they have to borrow from the ECB), and the EU and the bondholders are not willing to swallow the debt in a jubilee, then the Greeks will have no choice but to default, leave the Euro, and return to their own currency.

This is the correct path forward for the Greeks to have any future, just as in Idiocracy the correct path forward was to give the plants water, but an entire system of man-made bullshit was built up upon the lie of Brawndo, or in the Greek's case that they're "lazy", which supported an infinite growth debt ponzi-scheme. As the people worked in their own best interest this ponzi-scheme which may have been vital to the "operation" of day to day life but was ultimately killing them collapsed and the short term pain was shocking. In Idiocracy the people blame the protagonist for causing the destruction unable to comprehend that the destruction of the flawed corrupted system designed to benefit the few at the expense of the many had to collapse before something new could be built to replace it. The hardships were endured, they created new jobs for themselves, and life went on. Facing reality became more important than faking prosperity.

Electrolytes are that fake prosperity in this analogy. 2% inflation targets. An ECB that is engaging in "QE" of it's own to supposedly battle deflation while at the same time demanding Greece essentially deflate it's own economy and sell everything it has that the people paid for and built. The long overused promises of growth and prosperity from asset bubbles.

Absolutely if the new Greek government goes ahead with it's planned reforms with no alternative plan for financing (though it does look like they're eyeing 'team Eurasia' for that) their economy will collapse. But it needs to collapse, they need to default. The government needs to introduce a sound money policy which will help to realize their real wealth and rebuild with reality at the forefront. With little in the way of resources this won't be easy for Greece and they may very likely turn on the government working in their favour as the short term effects cloud the long term vision though with what the Greek people have been through in the last 7 years I feel like they're ready to face it head on, they know the stakes, and they've got nothing left to lose.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Silly citizens, NAFTAs are for corporations

NAFTA probe of Alberta's tailings ponds blocked
Representatives of the Canadian government, along with Mexico and the United States, on Tuesday passed a resolution behind closed doors to stop the Commission for Environmental Cooperation from looking into whether the federal government is failing to enforce the Fisheries Act. 
Two environmental groups and three private citizens had asked the commission to investigate whether tailings ponds were leaking into nearby rivers and creeks in northern Alberta. 
Allowing toxic material to get into water is against the federal Fisheries Act. The commission secretariat agreed last year there was a case, and told all three countries it wanted to go ahead with an investigation, called a factual record.

"It's disappointing," said Dale Marshall of Environmental Defence, one of the groups that asked for the investigation.

"It shows that the Canadian government is willing to circumvent institutions that make sure Canada upholds environmental laws."

It's the third time in a year Canada has successfully stopped NAFTA's scrutiny of its environmental behaviour. In 2014, with Mexico's support, it stopped investigations into polar bear protection and B.C. salmon farms.

The Commission for Environmental Cooperation was set up under the North American Free Trade Agreement to make countries follow their own environmental laws.

But this time, its reasons for not looking into tailings ponds are legal not environmental.

Canada originally tried to stop the investigation by saying there was an ongoing legal case into the tailings ponds by a private citizen in Alberta. The rules say if that's happening, the NAFTA watchdog can't conduct its own case.

However, the Fort McMurray, Alta. man behind that legal action told The Canadian Press he considered the matter closed, and the appeal period on the suit ended last fall.

Despite assurances from their own secretariat staff that the Alberta case had been dropped, Mexico and the United States sided with Canada and agreed a lawsuit could potentially still go ahead.

"Accordingly, the secretariat should have proceeded no further in its analysis and terminated the submission," said the written decision by the council instructing its staff "not to prepare a factual record with respect to this submission."
NAFTA was never meant to ensure countries follow their own environmental laws, quite the contrary, NAFTA was setup to ensure corporations and their operations are protected from the country making laws in favour of it's own citizens that may negatively affect the profit or operations of the corporation such as environmental laws. Of course all 3 "committee members" voted against it: silly citizens, NAFTAs are for corporations.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Wednesday, January 21, 2015

Update-1: Sorry folks, "the recovery has been delayed until the end of next year"

Another year of non-recovery now 7 years on from the "great recession" which it seems few remember was caused by a combination of Wall-Street and financial elite exuberance and hubris, derivative trading, and most importantly $147 / barrel oil which quickly ate through the middle class's credit as bank breaking high gas prices made scooters an appealing mode of transportation.

Today the Bank of Canada lowered it's overnight lending rate "unexpectedly" (for some people it seems, not for anyone who is well aware that Canada's one trick pony of extreme energy production known as the oilsands has now become completely reliant on these low rates just as U.S. energy production has) and also declared "the recovery has been delayed until the end of next year". Yup, delayed again, fancy that eh?
The Group of Seven’s biggest crude exporter is already feeling the effects of crude oil dropping below $50 a barrel, as companies such as Calgary-based Suncor Energy Inc. reduce staffing and investment. The central bank said today said the economic recovery will be delayed until the end of next year and the needed rotation from indebted consumers to growth fueled by business spending is less certain. 
Of course everyone is pointing to the decline in oil prices as the culprit for why the "recovery" has been delayed (this time) completely ignoring the fact that no recovery can happen with expensive energy prices either. But here is the best part: "needed rotation from indebted consumers to growth fueled by business spending is less certain". This has been a central theme on this blog, for all the talk of how "strong" the Canadian economy is and how well we "weathered the storm of the recession" very little attention is being paid to the fact that the way in which Canada decided to "weather the storm" was by pumping up it's own housing bubble to extents beyond even where America's debt-to-income ratio was in 2007 which has provided the illusion of a "growing middle class".

Of course try and tell Canadians that their housing is in a bubble and you're quite likely to get an earful of the talking points they've heard on TV. "It hasn't happened yet" or "something, something something, stable banks and regulations and Jim Flaherty". Most Canadians still believe our banks don't engage in the same sort of derivative trading that has destabilized the financial world and prevented true wealth and price discovery to take hold as in the U.S. where as in reality there is no difference in terms of their operations.

Canada's ability to weather the storm can be chalked up to nothing more than circumstantial chance and the fact that our housing bubble has been buoyed by abnormally expensive energy, and the velocity of the increase in the price of oil (not the price itself, see: When it comes to #oilsands a stable price is a low price no matter how high it is), as well as an accommodative interest rate policy meant to encourage more lending to supposedly "boost inflation" (in reality to prevent a collapse of the credit market as old debt requires new currency to pay off as there is always more principal + interest owing than there is currency to pay it in our "growth" oriented ponziconomy).


It's very simple to understand why whether with high oil prices, or "low" oil prices, the "economic recovery" just isn't going to happen and that is because what we now refer to today as a low price of oil was extremely high just 10 years ago in 2005, the year that conventional peak oil occurred and thus the world faces a growth conundrum in that consumption requires a cheap price (not an expensive price which is relatively cheap) and that production requires a relatively more expensive price far beyond the sustainable price of consumption. Looking at historical economic situations won't provide any answers for growth today. Today things are different.

It's almost hilarious, if it weren't so sad, that even though North America is screaming about how this "cheap price" is too cheap to support extreme oil production on one hand, then on the other the same people are saying "peak oil doesn't exist, that it was a hoax". T. Boone Pickens the U.S. oil tycoon certainly believes and understands peak oil, and the media talking heads certainly don't.

It is not a coincidence that since 2005 the price of oil skyrocketed. It is not a coincidence that since the price of oil triggered the beginning of the collapse of the U.S. (and western) economies (yes this is only the beginning still) growth has been at a standstill despite the historically lowest and prolonged emergency interest rates ever. These facts are just glossed over in your daily media as the tiring mantra of "recovery" is front and center. For everyone but the richest 0.1% there isn't ever going to be a recovery as your wealth is based on a return on your work, and their wealth is created by being close to the source of inflation.

Anyone can be a "job creator" when practically free currency is "loaned" to them. The magic and entitlement to free currency the "job creators" proclaim is based on the absurd idea that nobody but them can create jobs. I could hire numerous graphic artists and bloggers to write these posts I make and do a much better job of it then I do and maybe even a few people would see value in that but overall none of the jobs I created would be generating new wealth. They'd be paid by loans, I'd pay the loans by taking out new loans so I could roll over the old loans, and so on. Job creation? Yes. wealth creation? no. So when you see "job creation" being touted as a sign of economic health remember that those jobs are simply existing on the fumes of wealth generated prior to 2005, the year of conventional peak oil, and on borrowing from the future with no chance it can ever be repaid robbing our children and grand children of their inherited wealth. They will be left with nothing, and nobody really seems to care.

The only peak oil hoax is the hoax that relying more and more on extreme low quality, low EROEI energy production can ever hope to reproduce the wealth and prosperity experienced in the lead up to 2005. Instead what we're getting are empty promises, year after year, "the recovery will take hold for main street next year". Next year the recovery will be delayed again, the year after it will be delayed again, and each and every year the real economy on the ground, the one that feeds you and me, will continue to deteriorate. You don't have to be an economist to know that, in fact it's probably better that you're not, all you have to do is realize the return we're getting on energy today pales in comparison to the returns of yesterday and that prosperity is not growth and growth is not prosperity; they are mutually exclusive. It is only the excess energy bounty which has allowed for both growth and prosperity to occur simultaneously.

We have entered the great deflation of the biggest bubble ever blown by central bankers in history. The banks themselves are out of ammo and Canada will soon join them as we don't have very far to fall now to 0% interest rates, and then negative interest rates. Worrying about what the financial landscape is going to look like when interest rates finally do rise is pointless as by the time banks are forced to raise them bigger economic stability troubles will be on our doorstep. Low rates have now become normal, and required, for the continued stability of the western poonziconomies and so long as some form of illusion of financial stability is maintained they will remain low for that reason. For the last few years economists and the Bank of Canada have been continuously warning about the "imminent" rate hikes and I've called bullshit on them every time. Not a hard call to make when you understand the fundamentals of a market adverse to the reality of fundamentals.

Those in charge of course are not as stupid as they appear, they're well aware of all of this and it's again no coincidence that despite the public reasons proclaimed for their policy choices all of the policy choices from monetary to security reflect this deterioration.

The explosion of "terrorism" is also a part of this. Frankly if you believe that the operation carried out with military precision and ice-cold-blooded murder at the Charlie Hebdo office was done by some early twenties kids who went for a few months of Jihadist training (and not western intelligence lead mercenaries as many foreign politicians are claiming) and you're now calling for more security, more surveillance, and denouncing the Muslims then you're playing right into the system's hands and you're so far gone I doubt I can help you. Everywhere I turn now I see "suspected homegrown terrorists arrested". charged with.. traveling, or "sympathizing with terrorism". Free speech be damned I guess as we all rally around supposed free speech. No it's only free speech, protected speech, when you're saying what the system likes to hear. I was reading some letters to the editor yesterday on the subject in the National Post and the opinions of the "tolerant Canadians" are downright scary. If you want to understand how the German people could allow the rise of Hitler look no further than the kneejerk fear oriented reactions of your fellow citizens.

Here are a few excerpts but pretty well every single letter is equally disturbing in their blind faith that terrorism is what we're being told it is on TV, notice how all of the talking points are just regurgitation of the junk heard on TV:
Canada has done a very good job to date of intercepting and stopping terrorist attacks at home. Our military has done yeoman’s service overseas and continues to make a very solid contribution. It is time, however, to take the kid gloves off and start arresting and rounding up all those known to be planning domestic or overseas terror attacks, as well as those who mentor, encourage and finance such attacks.John Moodie, Bobcaygeon, Ont.
The Harper government has already taken a step in the right direction by strengthening the powers of CSIS to closely monitor the activities of militant Islamists. CSIS should be in close liaison with border security and the RCMP to prevent known terrorists or their supporters from entering Canada in the first
place. If they leave Canada, every effort should be made to prevent radicalized potential terrorists from returning. Canadians must also report any suspicious behaviour or activity to the authorities. Educate the public, including school children, on how not to fall into the terrorist trap.
Fred Perry, Surrey, B.C.
Canada should rearm to both defend ourselves and project power to confront the likes of ISIS. We are a shadow of our former selves. Our RCAF contribution to the ISIS war is laudable but almost invisible. Long forgotten are the days when the RCN was the world’s third-largest fleet, and one in every five soldiers landing in Normandy was Canadian. Canada is uniquely qualified to field highly trained, bilingual specialty forces to confront militant Islam’s barbarians. We only need public willingness to man up for this decades-long task.Francis Patrick Jordan, White Rock, B.C.
There are many, many, many, more just like these calling for roundups, praising the surveillance state which it seems few remember that intelligence agencies have far more power than they were ever letting on thanks to the Edward Snowden leaks, yet apparently they need even more. The insanity has reached all new extremes. We're now going back and charging regular criminals as terrorists (now that it's popular to do so) because they supposedly were trying to aid a terrorist group or some other fucking bullshit none of which will ever be proven and could easily be fabricated in our kangaroo terrorist courts.

Stephen Harper just recently said that "the terrorists have declared war on Canada" but Canada has been at war with "the terrorists" for 14 years. Nobody even bats an eye at the fact you can only declare war once and then guess what? YOU'RE AT FUCKING WAR! We're so propagandized that we believe we should be able to kill them, but they shouldn't be able to kill us. If we kill them it's freedom and democracy, if they kill us it's terrorism, not unlike the Israeli/Palestinian conflict. This is just an extension of that mentality.

You may not believe me today, and with the level of highly advanced propaganda bombarding Canadians everyday on every matter you may never believe me even being an actor in exactly what I describe but you ARE ALL the home grown terrorists. One day in the near future as the economic situation deteriorates further and you're no longer willing to believe in the fairy tale of a delayed recovery and realize that a massive robbery and wealth transfer has taken place right under your nose and that you're a victim and that the government was never looking out for your best interests in their pursuit of "jobs and growth", you might just decide you need to fight back.

You might realize one day that the sham of democracy we cling on to for dear life as some form of mental ground of stability and sanity doesn't exist either in any way shape or form and that the only way to provide a country reminiscent of the freedom we've all enjoyed prior to the "war on terror" (whose propaganda an entire generation of children have now grown up under) to our children will be to fight for it. On the streets if necessary, and when that day comes if our mental state hasn't been warped to the point of no return what you will find waiting for you is an advanced security apparatus, paid for with your hard earned currency, that will label you the terrorist for fighting the system that has been rigged and stacked against you in an effort to return to feudalism. Maybe "being anti-government", etc. That day is coming, will you realize when it's here?

Update-1

It's really too bad I didn't see this link before I wrote this post as it really fits right in but I couldn't resist adding it now as it really illustrates the situation the entire world is dealing with. It's delicate description of the modern feudalism the people in the formerly known as middle class class are to find themselves in is just exquisite. The last two paragraphs summarize it nicely:
"With two thirds of the world's wealthiest being first generation wealth creators, the coming years will be the first time they have been involved in wealth succession planning," the report said.

"Those in the second or third generation of wealth will have had greater experience with wealth transfers, and will have most likely had the opportunity to learn about wealth succession planning from their parents."
Meet the new royalty, with more assets than governments and all the citizen plebs in their lands. The "first generation".




Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Thursday, January 8, 2015

Update-1: Trends and forecasts for 2015

I've been really unmotivated to write any posts as of late. The barrage of lies coming from the establishment media is just overwhelming, where to even begin? The most dangerous lie of all being that a new era of "cheap energy" is here. It's actually just a temporary period of expensive energy being sold at an unsustainably cheaper price.

Since my last post on geopolitics and oil price my theory about what's going on here has evolved a little bit. One of my Twitter followers which I believe has ties to the Russian and Arab oil markets claims that Saudi Arabia is working with Russia, and the Chinese, to artificially lower the price of oil beyond the margins of profitability for the majority of North American oil production. With the way things are shaping up I'm inclined to believe her.

The most common cover story being played by the media is that this really is just a simple matter of demand and supply, that demand is low and America's "fracking boom" has contributed greatly to oversupply. This analysis refuses to take into account a number of factors namely that the perception of future oversupply is being driven by the words and promises of Saudi Arabia and ignores the dropping rig counts across North America. As I described in my last post there isn't going to be an oversupply for long, but there is very likely going to be an undersupply and resulting oil price shock.

Oddly as a culture North Americans would be much better off if we were just told the truth about our situation but instead those in power are opting to lie likely in some hope of keeping this corrupt house of cards together. These lies are in the way the situation is framed particularly in the sense that the economic impacts of these oil prices in the east, and the west, are on par or in some cases worse in the east than what the west is likely to experience.

Something I've noticed reading the dozens of articles on "breakeven" costs and whatnot is that western media when comparing these breakeven costs are comparing the cost to produce a rig (like the literal breakeven cost of the rig and company) Vs. the breakeven cost to operate an entire country. We are comparing the breakeven cost of western oil production itself against the breakeven cost of using oil to finance roads, healthcare, the entire system! These countries are producing oil much cheaper than we are, they maybe can't afford their social services, but we can't even afford our rigs! (Or oil sands here in Canada). That's a big discrepancy when you consider that in this condition these high risk or insolvent companies will barely be contributing to the operation of the state, or jobs to provide taxes. Alberta and the U.S. are comparing themselves to Saudi Arabia now but Alberta has been running a deficit from oil revenue for awhile. Alberta has been borrowing from the future to pay for it's "capital expenditure" and it's "operational budget" while technically "balanced" is woefully inadequate to cover the overhead and  "growth" the oilsands booms created.

As we delve deeper into the situation it's useful to keep this fact in mind that not only are the energy companies leveraged on the promise of returns that will never materialize, so too are the provincial and state governments that have taken out loans to provide the massive infrastructure expansions these projects require; again on the promise of returns that will never materialize. This is how the peak oil story will play out.

Once I realized the Saudi's, Russia, and China were working together on this a bunch of other dots fell into place for me. I no longer believe this oil price war is about oil at all. As I mentioned in my last post the market share story just doesn't make sense (I then theorized that perhaps the Saudi's felt their oil trade with the U.S. was in danger, this is incorrect). I now believe that this move is directed not at oil production, but rather using oil production to weaken and destabilize the western banking system ahead of the launch of the BRIC international currency and development bank expected this year (whatever form that takes shape in) and their replacement to the SWIFT transaction system that they've also claimed will be ready this year. 2015 is also the year it is projected that the amount of GDP generated by $1 of new debt in the U.S. falls below $1. The "fiscal cliff" hasn't gone anywhere.

Bankers See $1 Trillion of Zombie Investments Stranded in the Oil Fields
There are zombies in the oil fields.

After crude prices dropped 49 percent in six months, oil projects planned for next year are the undead -- still standing upright, but with little hope of a productive future. These zombie projects proliferate in expensive Arctic oil, deepwater-drilling regions and tar sands from Canada to Venezuela.
In a stunning analysis this week, Goldman Sachs found almost $1 trillion in investments in future oil projects at risk. They looked at 400 of the world’s largest new oil and gas fields -- excluding U.S. shale -- and found projects representing $930 billion of future investment that are no longer profitable with Brent crude at $70. In the U.S., the shale-oil party isn’t over yet, but zombies are beginning to crash it.

The chart below shows the break-even points for the top 400 new fields and how much future oil production they represent. Less than a third of projects are still profitable with oil at $70. If the unprofitable projects were scuttled, it would mean a loss of 7.5 million barrels per day of production in 2025, equivalent to 8 percent of current global demand.
How Profitable Is $70 Oil?



Making matters worse, Brent prices this week dipped further, below $60 a barrel for the first time in more than five years. Why? The U.S. shale-oil boom has flooded the market with new supply, global demand led by China has softened, and the Saudis have so far refused to curb production to prop up prices.

It’s not clear yet how far OPEC is willing to let prices slide. The U.A.E.’s energy minister said on Dec. 14 that OPEC wouldn’t trim production even if prices fall to
$40 a barrel. An all-out price war could take up to 18 months to play out, said Kevin Book, managing director at ClearView Energy Partners LLC, a financial research group in Washington.

If cheap oil continues, it could be a major setback for the U.S. oil boom. In the chart below, ClearView shows projected oil production at four major U.S. shale formations: Bakken, Eagle Ford, Permian and Niobrara. The dark blue line shows where oil production levels were headed before the price drop. The light blue line shows a new reality, with production growth dropping 40 percent.
Even $75 Oil Crashes the Shale-Oil Party



The Goldman tally takes the long view of project finance as it plays out over the next decade or more. But the initial impact of low prices may be swift. Next year alone, oil and gas companies will make final investment decisions on 800 projects worth $500 billion, said Lars Eirik Nicolaisen, a partner at Oslo-based Rystad Energy. If the price of oil averages $70 in 2015, he wrote in an email, $150 billion will be pulled from oil and gas exploration around the world.

An oil price of $65 dollars a barrel next year would trigger the biggest drop in project finance in decades, according to a Sanford C. Bernstein analysis last week.

A pause in exploration and development may sound like good news for investors concerned about climate change. A vocal minority
have been warning for years that potentially trillions of dollars of untapped assets may become stranded due to climate policies and improved energy efficiency. The challenges faced by oil developers today may provide a small sense of what's to come.

However, these glut-driven prices can’t stay low forever. Oil production hasn’t slowed yet, but as zombie projects go unfunded, it will. This is how the boom-bust-boom of the oil market goes: prices fall, then production follows, pushing prices higher again. The longer this standoff goes, the more zombies will languish and the sharper the rebounding price spike may be.
While Russia's production will be clearly affected I believe they are well prepared to weather the storm and that the Kremlin sees this as a necessary step in their war with the U.S. dollar and will take the losses on oil as I believe they fully expect a larger gain. The state of the Ruble I don't think is very relevant except in the short term in regards to the unexpected actions that can take place. I fully expect if this continues that there is going to be an implosion in the credit and derivative markets this year and it will likely be timed to coincide with the rising of BRIC international finance.

Perhaps what's most aggravating in this situation for me is that the North American people should have seen a situation like this coming from a mile away. The very idea that extreme energy production can remain viable and profitable in a highly volatile post peak oil world is simply crazy. The morale boosting bullshit of "energy independence" and other media fables combined with ultra low interest rates designed to encourage you to spend spend spend! Rather than prepare prepare prepare! I can't believe we fell for it, hook line and sinker.

Update-1

Nevermind, I guess Alberta's "operational surplus" doesn't exist anymore now either.


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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Saturday, November 15, 2014

Questions for Danielle Smith and the #WRP

The Wildrose party of Alberta wants to better define their image, so I have a few questions for Danielle Smith or any other representative of the Wildrose. I've posted this comment here and emailed them as well.



Hi Danielle,

I would definitely consider myself one of those who has no idea what the Wildrose stands for. I used to think you were an ultra-right wing extremist party masquerading as Libertarian, particularly during the media circus around Allan Hunsperger (which I wrote about here http://www.canadiantrendsblog.ca/2012/04/youre-welcome-to-your-conscious-but.html ) though your more recent views and policy announcements have me less convinced of that. I don't know what label to apply to the Wildrose currently, and I'm perfectly ok with that, maybe you're just a "people" party, lord knows it's about time. So instead of attempting to figure out what label you are I'm simply going to ask some direct questions and if you'll answer them and I like your answer you can consider me a supporter and voter in the next provincial election. First I need to provide some context for them so you can see where my concerns are deriving from.

I personally am a political atheist. I don't believe in taking partisan sides, or even the phony "left" and "right" wing labels. In fact I am one of a younger generation that's quickly losing faith in a political and economic system that routinely puts their children, grand children, and unborn children on the chopping block for supposed "prosperity" today. It's clear that while politicians talk a good game about the concerns of a disenfranchised youth and the world they will be inheriting, actions always seem geared to maintain the status-quo and ensure any unaffordable or unforeseen costs of this great prosperity the older generations have enjoyed is promptly shifted onto the backs of their children.

From low interest rates which prevent those with little in assets to be able to save, to massive cost inflation that's routinely just excluded from government CPI calculations so subsequent costs don't increase with it, to public services at all 3 levels of government being routinely cutback or simply not expanded at the proper rate to account for population growth ( http://www.canadiantrendsblog.ca/2014/01/mp-brian-jean-resigns-to-concentrate-on.html ), to the addition of numerous "fees" for everything and red tape, the cumulative effects are continually and increasingly squeezing everyone, but especially those who are attempting to build a life, pay off student debt, pay off a mortgage, a car loan, and also save for retirement. It's so unrealistic it's laughable and yet it continues. The fact that Canada's central banker Stephen Poloz just recently told those being squeezed to just "wait for the recovery to take hold and take a job for free in the meantime" I think highlights what I'm saying here ( http://www.canadiantrendsblog.ca/2014/11/poloz-advocates-adult-children-take.html ).

I find the skewed reality of what's really going on to be especially bad in Alberta where a relatively small number of high paying oil jobs unbalance the cost-of-living for everyone else, further drive up the cost of housing beyond the bubble already created by low-interest rates, and pigeon-hole Alberta into a one-industry economy. The fact that this is occurring is seemingly ignored by the PC government (and the Federal government for that matter) with an attitude of "well just go get an oil job" which is hardly going to encourage industry diversification and economically suppresses those who choose not to or can't work in the oil industry. Which brings me to my first question: What would you do to help mitigate and raise awareness of this discrepancy and loss of opportunity?

QUESTION #1) What would you do to help mitigate and raise awareness of the skewed economic discrepancy and loss of opportunity Albertans not in the oil industry experience?

The problem, I fear, is that Alberta in general just doesn't have a very good grasp on what the future global economic situation looks like. We're constantly stuck in and trying to revive the past.

For instance, much of Alberta's current expectations on what economic growth and returns from oilsands development are supposed to look like are based on our experience from the run on oil prices leading up to 2007. The era of "The Alberta Advantage" and even though that time is long gone now in the rear view mirror of time it doesn't seem that Alberta's politicians are any closer to understanding why.

Even at $80, the price of oil compared to just 10 years ago is extremely high and yet now we talk as though this is a "low oil price". What I never see acknowledged though is the climate of the market at the time. Alberta's prosperity didn't come from the price of oil, it came from the fact the price of oil was always going up. If the price of oil hadn't continually gone up and levelled off for any significant amount of time (as it has done for the last 5 years) we would have hit these economic problems sooner. If you remember when oil was $40 the government went ahead and declared they needed a target of $70. When $70 was hit the target changed to $90. And so on. But the oil market has now reached the upper limit of affordability where a move from $80 to $110 causes a rash of frontpage articles about "pain at the pump". Given the rest of the economic environment and the stagnation of wealth natural market forces will not be pushing the price of oil beyond $110 barring the exception of some sort of supply disrupting geopolitical event - but if Alberta's future economic hopes are based on geopolitical destabilization (as the many news articles that come out around war declaring "such and such military action could be good for Alberta") then we're truly up s**t creek.

A few years ago "The minute" interviewed you and asked about Peak Oil ( http://itstheminute.wordpress.com/2011/01/04/the-minute%e2%80%94danielle-smith/ - Unfortunately it seems the video of the interview itself is gone, Jason Lamarche quit his 'The Minute' project awhile ago). However, suffice to say I wasn't very impressed with your answer.
But that said, it's nearly 4 years later and the effects of peak oil are becoming a lot more noticeable. There's been a lot of articles lately that declare the fracking boom in the U.S. and the oilsands are evidence against peak oil but in reality, with a proper understanding of peak oil, they are proof of it. Conventional, cheap oil is on the decline, and it's being increasingly replaced with expensive to produce oil such as fracking and the oilsands. Peak oil theory isn't about oil depletion, and it's only those who didn't take the time to understand the supply downside who were saying the price of oil will be going to $200 due to supply constraints. Few theorists considered that perhaps it would not be the oil supply that would be constrained but rather the ability for economic growth to truly ramp up.

The oilsands are encountering serious issues in financing, and these are only going to become progressively worse. Keep in mind that we are in an unprecedented low interest rate environment, credit has never been cheaper, and yet even still financing for these projects is a problem (and the U.S. fracking companies are experiencing the same issues - I've written more extensively about this here: http://www.canadiantrendsblog.ca/2014/11/oil-price-and-economic-recovery-pendulum.html ).

I very much appreciate your environmental outlook on oilsands development, and you're absolutely right in that something needs to be done before Alberta's image (which frankly has been rightfully earned due to the deception and propaganda the government has used to try to convince people otherwise instead of addressing the issue) deteriorates further and also, you know, the environmental situation there gets worse, but I think you're underestimating the challenges ahead.

With conventional 'cheap' energy declining (which inherently subsidizes aspects of more extreme energy extraction) projects like the oilsands are only going to become more difficult to maintain even at current environmental levels but what's more likely to happen to reduce costs is more and more corners will be cut as we continually lower the bar on what's acceptable to maintain profits. It's great that you believe that some "technology which doesn't exist yet" is going to save the day, but my second question is: what your contingency plan is if one doesn't materialize as I don't believe one is going to be forthcoming any time soon?

QUESTION #2) what's your contingency plan if "some new technology" doesn't materialize which can viably reduce the ever increasing environmental destruction of oilsand development if not eliminate it entirely?

QUESTION #3)  Likewise given what I've described above in terms of an accommodative financial sector which still barely keeps production's head above water and the understanding that peak oil doesn't necessarily describe diminishing supply but rather diminishing energy returned on energy investment (EROEI) what is your opinion on peak oil now and do you believe your policies are compatible with a future in which peak oil is a reality? If not, what gives you the confidence that the old normal in terms of growth can resume to the point the risk need not be considered?

On infrastructure and debt: You're definitely on to something here in regards to the ever-increasing overhead of Alberta's growth. This problem has been compounded by a government that has ridden on the illusion that they paid off the debt when in reality all they did was deter the costs and overhead of growth into the future where the investment now required to catch-up, let alone prepare for the future has risen multiple times over.

I've seen a few commenters on here mention that we shouldn't be afraid of taking on new debt to catch up our infrastructure because "interest rates are favourable". I believe this is an incorrect assessment, it's based on living in the past when the capacity to even have higher interest rates was possible. We've entered a new normal where low interest rates will likely be perpetual (the recovery is always right around the corner, right?) and as a result while the interest on new debt may be cheap such low rates of growth and rapidly growing costs will mean less resources available to pay it down in the future. The assumption that growth will resume is not a certainty and taking on large amounts of debt on the backs of the youth in hopes one day soon the economy will pick up is paramount to gambling, especially since most of Alberta's income is projected based on market moves. Not even day-traders would be so careless.

From my perspective Alberta has a serious problem on it's hands due to how far behind infrastructure already is. A more austere approach isn't going to provide what people need as Alberta pissed it's 30 years of decent oil profits down the drain rather than keeping up (Highway 63 is a perfect example: http://www.canadiantrendsblog.ca/2013/11/lack-of-foresight-dangerous-like.html ), but catching up with debt is also very risky and if the government's lofty hopes for growth and revenue don't pan out (which they likely won't as their projections and beliefs are still based on pre-2007 growth and I don't know if anyone has noticed this lately: always wrong - http://www.huffingtonpost.ca/2014/05/23/jim-prentice_n_5379875.html ) then we will simply once again be deferring the problem into the future where costs are once again sure to be a multiple of what they are now and available resources much less. I don't see an easy way out of this conundrum for us  so I'd like to hear a lot more from your party on how it can be addressed.

I really have a lot more concerns regarding Alberta's future and the path we're on but I've written a lot already and as is these aren't easy questions. I'm happy to see your party is embracing new media and directness as it's method of communication and perhaps you might consider incentives for citizen media as a policy initiative.

Thank you for your time.

Richard Fantin



I'll update should I get a response.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

Friday, November 14, 2014

Oil price and the economic recovery pendulum

Something I've been noticing ever since oil (WTI) entered it's rubber band like pattern with constant support at $80 (to support lower EROEI extreme energy development) and it's upper resistance of $110 (because once it hits $100 affordability and gas prices become an issue causing demand to decline and usually reaching a downward turning point at around $110) is that symbiotic economies such as the U.S. and Canada keep going through opposing boom/bust cycles. In the last 5 years, generally, when Canada's prospects have been looking up (which usually corresponds to when oil is relatively higher) the U.S. prospects have been looking down, and vice versa. We see this also today, with a very depressed oil price (which has breached the $80 extreme energy support level - more on this later), Canada's prospects are looking down and our hopes are resting on the (new) U.S. recovery (it seems hopes for higher oil prices have been dashed in the near-term).

Of course currency valuations, and a whole host of other factors come into play but on a very basic level there has been a recurring pattern of boom in one country and bust in the other and they tend to follow the swings in oil. The reasoning is simple:
  • In the case of the America's, which relies heavily on consumption and spending to boost economic growth, cheaper energy means more spending power. This has suddenly become cheered by mainstream economists everywhere (most of whom were also cheering for oil prices to continue to rise as a sign of economic health, oddly) which has lead to headlines such as "America's Consumers Are Basically Getting An $80 Billion Tax Cut". It's interesting that you rarely see articles on expensive oil calling it an $80 billion tax increase though, isn't it? But I digress...
  • Canada however, does better when asset prices are high (or at least Canadian businesses do, not necessarily Canadians) as much of Canada's industry is in the business of selling raw resources. Asset prices tend to rise and fall together and I'd say are largely dictated by the price of crude oil as any change in oil price will usually have a direct effect on the operating costs of other asset driven business.
$80 is a significant support level particularly when it comes to the investment aspect of extreme oil projects. Projects that are already operational and funded can still squeeze profit out of these relatively low oil prices however when it comes to the investment side, particularly regarding startups, the situation becomes quite a bit more bleak.
That’s not the case for many small oil sands producers. Sunshine Oilsands Ltd., for instance, suspended construction at its West Ells oil sands project and signalled its intention to raise U.S. $325-million through a debt offering.
Another part of the problem is that some smaller oil sands companies have not produced bitumen as advertised.

“There’s a chill that’s been put on the ability to raise capital because of the performance of some of the assets,” Mr. Bloomer said of the junior oil sands industry. “There’s a number of them that have not performed very well at all.”

As Ms. Dathorne said, junior oil sands companies need to demonstrate their ability to generate cash flow from their operations above their breakeven costs. Many haven’t been able to do so.

Mr. Bloomer said that Connacher intends to grow its production steadily, by adding new wells to its two existing steam-assisted oil sands projects – rather than raising large amounts of capital and trying to build new projects from scratch.
But something strange is happening in the oil markets; WTI recently breached that $80 support and breached $75 today. Largely the narrative around this phenomenon is that it's a fracking boom energy miracle, that there is a glut in supply and thus prices are low. This narrative is likely playing a large part in the (new) anticipated U.S. recovery everyone seems to think is right around the corner.

It's not exactly a false narrative, as it is misleading. The basic facts are true, yes there is an oil glut, yes the fracking "boom" contributed to it, but the way these facts are being presented omits some parts of the puzzle that just don't add up.

Both Brent and WTI have fallen roughly $20 in the last 2 months. This of course has been largely driven by Saudi Arabia which has, despite the oil glut, kept right on chugging and even lowered their prices which gave the final push needed to break the psychological barrier of $80. This action is largely being chalked up to Saudi Arabia "battling for market share" which I believe is incorrect. Or again, perhaps, rather misleading in terms of what "market share" really means.



However, simply battling for market share isn't really their style. Certainly not to this extreme. You're probably seeing a lot of comparisons to oil price in 2010 right about now as that is the last time the price of oil was at these levels but let me remind you that that was on an upswing after demand had been destroyed by the 2008 economic collapse and the IEA's own data shows that while production overall has increased, so has consumption, and OECD oil stocks have remained relatively flat certainly nothing to warrant such a rapid decrease in price. Yes there was a drop in global demand but that in the last 5 years has never been enough to break the $80 barrier on price as that barrier is a required support to keep production at pace. Which maybe explains why the IEA is warning that these lower oil prices are actually going to lead to a supply crunch, and price spikes.
The challenges lie across the energy spectrum but are particularly acute in the global oil market, where the recent plunge in prices will deter capital expenditures that are needed to offset declining production from aging fields, even as lower pump prices spur demand growth.
That decline in supply and increase in demand would drive prices higher in the coming years than they would be under a stable price scenario.

“The short-term picture of a well-supplied oil market should not disguise the challenges that lie ahead as reliance grows on a relatively small number of producers,” primarily in the Middle East, it said.

In an interview from Paris, IEA chief economist Fatih Birol said Canada’s oil sands are an important source of secure supply as other major producing regions – from Russia and the Middle East – face political upheaval.

“We expect Canadian production will be a very important cornerstone of the security of global oil markets,” Mr. Birol said. The IEA forecasts that Canadian production will grow from four million barrels a day currently to 7.4 million by 2030, with virtually all of that growth coming from the oil sands.
Unfortunately the IEA, as an economically-political institution that is itself vested in the continuation of infinite growth, has to put hope somewhere. I expect that "deterred capital expenditures" in oilsands development are going to damper their Canadian outlook.

So, given this information and the supposed supply glut, isn't it interesting that everyone all of a sudden is drilling unabated to the point where it nearly becomes unprofitable? The Saudi's with their vast reserves of conventional oil and established networks can produce oil much more cheaply than the U.S. and many competitors, the Saudi's need for oil revenue largely comes from how much they fund with it to quell their population. However, when it comes to the U.S. or Canada we need that revenue simply to cover the added overhead the industry depends on and even then it isn't enough. Yet despite all this the drilling continues unabated. It's to the point where the in the U.S. they are fielding risky, and largely untested technology just to "keep the boom going".
Companies experimenting with downspacing, including ConocoPhillips (COP), Continental Resources Inc. (CLR) and Anadarko Petroleum Corp. (APC), are still trying to figure out how quickly wells will become depleted when they’re so crowded together, said Leo Mariani, an analyst with RBC Capital Markets in Austin. If that happens too fast, those initial extra profits might eventually become losses.

It may take as long as five years before the industry has a solid understanding of how much oil they’re leaving in the ground by crowding wells so closely together, Mariani said.

“It definitely works, but you might end up with 80 percent of the recoverable oil,” he said. “The question is whether the economics will be as good. It’s certainly not without risk.”

In the short-term, most tightly spaced South Texas wells so far are yielding more oil, not less, the Drillinginfo analysis shows. Technological advances including spacing and higher per-well productivity have been “important to maintaining production” amid falling prices, the Paris-based International Energy Agency said in an Oct. 14 report.

In 2013, Marathon’s Eagle Ford wells that were tested at the closest spacing levels were 34 percent more prolific after six months compared to wells spaced further apart in 2011.

“What we see is that we are getting better over time,” Robertson said in an April interview. “We have a very small body of knowledge about this kind of spacing so far in the industry, but this is our single greatest opportunity to create greater value.”
Seems a little odd, ya? To chase lower prices and create an even larger glut? Also keep in mind that all of this financing that's being talked about here is financing under central banking emergency measures. Ultra-low interest rates. If it's difficult for these projects to show they can break even now, or that the depletion rates of the wells are largely unknown due to the experimental technology being fielded then what would financing be like once interest rates rise? What will profitability look like?

It's often said in Canada that Big Oil runs the Harper government, but what's often left out is that the Big Banks run Big Oil as they are the ones that finance it and as oil is largely what provides for the excessive consumption we've become accustomed to, hence the tight correlation between oil consumption and GDP, which happens to be a direct requirement needed for the banks to operate the monetary system Ponzi-conomy. Banks by far have the single largest stake in oil production as aside from the loans given directly to the energy sector, virtually every other loan's probability of repayment rests heavily on an uninterrupted, stable, and affordable oil supply. For this reason I find it unlikely central banks will ever be able to raise interest rates (they may try but will likely be forced to re-lower them once again) as a full uninterrupted supply of a core component of GDP growth pretty well demands emergency low interest rates just to remain viable.

What you are seeing here is not normal, it is an oil price war, and one which I believe is largely targeted at the United States. The week put out a good article on how Saudi Arabia hopes to reduce U.S. output however I don't think market share is the true answer as to why. Here is an interview with an analyst from October of 2013:
Q. How worried Is Saudi Arabia about the U.S. shale oil and gas revolution?

A. They are worried more about the politics than shale oil and gas. Saudi exports to the U.S. have continued at previous levels — in fact they have increased slightly. The primary reason for that is Saudi Arabia is in a joint-venture partnership with Royal Shell Dutch (Plc) in the Motiva refinery operation [in Port Arthur, Tex.], which has throughput capacity of just over a million barrels per day. They are exporting around 1.2 million barrels per day to the U.S.

As far as gas is concerned, Saudis don’t export natural gas, so they are not worried about the shale gas revolution.

What they are worried about is the rapport between the U.S. and Iran with new president Hassan Rouhani extending his hand in friendship, and the discussion that followed in Geneva looking for a way around Tehran’s nuclear-enrichment problem.

Q. Do you expect the Saudis to embark on a bold move to express their unhappiness — such as a production cut?

A. No, no, I don’t think they will go that far. But they are indicating their unhappiness with U.S. [Middle East] policy, and also its non-policy regarding Syria.

Q. What about shale oil and gas potential in Saudi Arabia — they have been drilling offshore and north of the country?

A. I think that’s marginal. Experimentally they probably want to find out what kind of reserves they might have. But they are not concerned with so much oil and gas.

Regarding U.S. shale, I have a quote by Ibrahim Al-Muhanna, [an adviser to Oil Minister Ali al-Naimi]. His direct quote is as follows:

“The shale oil and gas revolutions are adding greater depth to the petroleum market. Diversification of energy supplies in terms of type location and sources.”

And he added, later on, “it is creating a floor around oil prices of around $80 per barrel.”

So, he is reflecting the views of the royal family and the government, that they are not bothered too much.

Q. What’s CGES’s own view on the U.S. shale revolution?
A. The North Dakota experience is that that you have to drill a lot of wells to keep production going because the depletion rates are rapid. Once you drill the well, the pressures drops, and they have to drill and go further out into the field. So this is costly, around US$50 per barrel.

If the Saudis were to increase their output with the intention of dropping the price to US$60, quite a lot of shale drilling would stop in the U.S. I am not saying the Saudis would do it, but they have the ability to stop fracking.
 Over at Zero Hedge they believe Saudi Arabia is colluding with the U.S. to essentially do the same sort of economic attack but on Russia further damaging the Russian economy in exchange for finally bombing Syria but I find it hard to believe they would be so reckless when they've recently been so suave at manipulating the world populations into supporting what they want. Too many vital dependencies of U.S. hegemony are at risk in such a collusion and so I'm more inclined to believe that the manipulated downward price is aimed at the United States as a geopolitical weapon.

One possible reason may be that Saudi Arabia is worried that if the U.S.'s lofty predictions for output work out that the incentive to remain in the pact with Saudi Arabia forged after the 70's oil shocks which provide them military equipment and international protection of their brutal archaic regime may evaporate.

So what does this all mean for you? It means in the near term if Saudi Arabia is successful you can probably expect oil to reach $60 / barrel. The perceived plentifulness and cheapness of energy will likely contribute to a new consumption trend which may actually end up being the longest leg of supposed growth in the recovery as oil price will have a fair amount of runway before affordability becomes a major issue again.

But don't get too comfortable, this glut is artificial and unsustainable, even if demand did meet supply at these price levels as the longer this goes on the less incentive there will be to continue. Should the Saudi's fail at their goal I anticipate oil price will return to it's previous pattern it's been following for the last 5 years at least until other factors start to interfere with the perfect storm of low interest rates and junk debt. However, if the Saudi's succeed in their goal I'd expect then an oil price spike shortly after and some pretty big fireworks in western financial markets.

Click here to recommend this post on progressivebloggers.ca and help other people find this information.

Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.