Crude Observations

Fairy Tale Time

Since I’m continuing on my vacation and shorter blog theme from last week, I am going to keep this week light and frivolous. Fortunately I am able to spend a few days at home before heading out on a family road trip which means what? Well if you are in my house it means a little tidy up activity (remember this is a blog – not all things presented occur as described – artistic license).


At any rate, I decided a fun thing to do would be to clean up a bookshelf or two. Unfortunately when I do this I get easily distracted and look back wistfully at the bygone days when my children were much younger and they read simple things like fairy tales, popup books and The Phantom Toll Tollbooth.


So here I am stacking away and what should I find tucked away amongst the Archie Comics, Harry Potter and Captain Underpants than a compendium of my favourite fairy tales including this seminal allegory which I republish for you confident I am not in violation of any copyright laws…


Justin and the Three Oil Producers


Once upon a time there were three oil producers who lived in an office trailer on an oil lease somewhere in Northern Alberta. There was a great big rich dude named Salman, a middle-sized covfefe sometime billionaire and politician named Trump and a tiny landlocked producer named Rachel.

One morning, the wells around them were leaking too much methane, so they decided to run away into the forest, locking the fence behind them. While they were out, a little boy called Justin came through the trees and found their well-pad. Ignoring the warning signs, he climbed the fence and started looking around.

He soon discovered three pumpjacks and in front of each pumpjack were barrels and ladders to allow a person to climb up and check what was inside.


One barrel was green and filled with dark sour-smelling oil, one red white and blue barrel filled with much lighter and less murky oil and one red barrel with a maple leaf on it filled with a goopy back substance.

Justin’s Electric vehicle had stalled a long time ago and the quad he was currently riding needed fuel and all the oil looked good, so he climbed onto the first great big pumpjack, grabbed a ladle and tried some of the oil from the green barrel. But the pumpjack was very tall and very tippy, the ladle was heavy and the oil too sour.

Justin jumped off quickly and went over to the medium sized pump. But this one was again quite tall and pumping very quickly, and when he tried the oil from the red white and blue barrel it was far too light. So finally he went over to the smallest pump and picked up a small ladle and tried some of the sludge from the maple leaf barrel.

This time it was neither too sour nor too light. It was almost just right and so he mixed it with the oil from the middle bowl to make it flow better and poured it into a gas can to take to his quad. Unfortunately as he was doing this he hung too long on the pump and it snapped under his weight.

Next Justin went into the office trailer, where he found economic and market studies as well as maps showing three energy regions and pipelines. There was a great big pipeline coming from the Middle East to a big tanker that then sailed across the ocean before unloading its cargo in New Brunswick, a bunch of middle-sized pipelines that went back and forth between Alberta to the United States and a tiny little pipeline that went from Alberta to the Pacific Ocean.


Intrigued by all this and mindful that one day he wanted to be Prime Minister of Canada he tried to figure out what each of the scenarios meant for his country.


First he followed the oil to the tanker and across the vast ocean and realized that all the money from that oil was going back to the owners of the tankers. While not fundamentally opposed to this he realized that he would have no control of any messaging related to this oil.


Then he looked at the second pipeline map and realized that half that pipeline was filled with oil coming up the pipeline before being shipped back to where it came from with some of his own oil and sold that at price much lower than everyone else was getting – for example what the first project was getting for its oil. Upon further study he realized that the prices for the oil were all over the place in this scenario. Some of it even came into the eastern part of Canada.


By this time he was pretty confused so he looked at the last pipeline. This one took Canadian oil, mixed it with some other liquids that were largely produced locally (although some came from the United States) and shipped it to a different coast where it could go anywhere and, in fact, get a better price. The price was neither too high nor too low. In fact, it felt just right, all cosy and warm. Mentally exhausted, in no time at all Justin fell fast asleep.


In a little while, the three oil producers came back from their walk in the forest. They saw at once that someone had broken onto the lease and messed with all their stuff. Salman looked around, then roared with a growly voice “Somebody has been climbing my pump!”


Trump said in a bombastic bigly voice.


“Somebody has been standing on my pump – it’s a tremendous pump by the way, yuge, many fine rhymes, but I know pumps and this is a incredible pump.”


Then Rachel said in small squeaky baby voice.


“Somebody has been climbing on my pump and has broken it!”


Then Salman looked at his barrel of oil and saw the ladle in it and he said in his great big growly voice,




Then Trump saw that his barrel was missing a bigly amount of oil, and said:


“Somebody has taken my oil as well!”


Rachel looked at her barrel and said in her small squeaky baby voice,


“Somebody has been using my oil and mixed it with yours and has emptied my barrel!”


Then the three oil producers ran to their trailer and went in. Salman saw at once that his pipeline map was untidy, and he said in his great big growly voice,




Trump saw that his master plan for energy domination had been flipped through and messed up, and said in his distinct voice,


“Somebody has colluded to mess up my stuff!”


Then Rachel looked at her study and said in her small squeaky baby voice,


“Somebody has taken my map and has fallen asleep on my cot!”


Rachel squeaked so loudly that Justin woke up with a start. He jumped out of the cot, through the studies, maps, stolen oil and a handful of dollar bills at the startled oil producers and away he ran, out of the trailer, over the fence, clear past his quad and away he went. And the three oil producers never saw him again.


Strange ending right? Where is the ambiguity? Over there in a box apparently. Is there even a moral to the story? How about that home invasions are dangerous? Or don’t drive an EV in the woods if you don’t have a ready supply of diluted bitumen at hand?


I actually don’t know that there is a moral.


In truth, I was only reminded of this classic story because I was talking to someone the other day about how oil prices seemed neither too hot nor too cold and were in a bit of a Goldilocks spot and wondered who the three bears were.


Maybe the moral of the story is in Justin realizing that Canadian oil was the way to go and that he picked the right pipeline and the right product but when the oil producers showed up he disappeared not to be seen again, leaving behind little but some cash. Perhaps the disappearing is the actual point?


Kind of like we’d all like to see with government regulation. Understand the benefits, set the rules and go away and let the private sector do what it needs to do to generate wealth and economic growth?


The best thing about a fairy tale is that we can ascribe whatever meaning we want to it because they are so simple – projection is awesome. And sometimes they contain a modicum of truth


So, Goldilocks and the Three Bears as a crypto-fascist metaphor for the fossil fuel industry and government regulation. Was that the intent of the story? I really don’t know. But I’ll stick with that because it sounds cool.


Before I close…


A public service announcement to all the politicians and wannabe critics who are raging about TransMountain and trying to score points because there is as yet “no pipe in the ground” on the expansion. Stop. Please. Just… Stop. You look and sound foolish. An 1,100 km large diameter pipeline project through the BC Interior is a massively complex melding of engineering and brute force. Many permits and timelines come into play. Weather is a major factor. The route has to be cleared and surveyed repeatedly in order to stay right. Environmental commitments and migratory/seasonal issues need to be respected. A master schedule is set and followed because the mobilization of labour, equipment and supplies is massive and complex. Work is currently being done in Burnaby and Westridge as per the plan. The field work is progressing according to the plan. If you are trying to make the point that it should be rushed through because the Federal Government now owns it, you are the reason no one trusts government approvals or pipeline companies and why pipelines are so damn hard to build in the first place. Any pipe “in the ground” at this early stage in project execution is purely window dressing.


Sorry, had to be said. Find a different issue to whack the government with. I hear no one likes carbon taxes and that our corporate tax rates are uncompetitive. Try that.


Prices as at July 27th, 2018 (July 20, 2018)

  • The price of oil fell early and rallied to the end of the week on inventories and theoretically positive trade news
    • Storage posted a big decrease
    • Production was flat
    • The rig count in the US was up marginally
  • After a larger than expected injection, natural gas gave up some ground then rallied thru the end of the week…


  • WTI Crude: $68.69 ($70.46)
  • Nymex Gas: $2.822 ($2.758)
  • US/Canadian Dollar: $0.7659 ($ 0.76270)



  • As at July 20, 2018, US crude oil supplies were at 404.9 million barrels, a decrease of 6.2 million barrels from the previous week and 78.5 million barrels below last year.
    • The number of days oil supply in storage was 23.2 behind last year’s 28.1.
    • Production stayed constant for the week at 11.000 million barrels per day. Production last year at the same time was 8.044 million barrels per day. The constant production this week came from constant production in Alaska and the Lower 48.
    • Imports fell from 9.066 million barrels a day to 7.770 compared to 8.044 million barrels per day last year.
    • Exports from the US rose to 2.683 million barrels a day from 1.461 last week and 1.030 a year ago
    • Canadian exports to the US were 3.245 million barrels a day, down from 3.408.
    • Refinery inputs were up during the week at 17.285 million barrels a day
  • As at July 20, 2018, US natural gas in storage was 2.273 billion cubic feet (Bcf), which is 20% lower than the 5-year average and about 24% less than last year’s level, following an implied net injection of 24 Bcf during the report week
    • Overall U.S. natural gas consumption was down 2% during the report week
    • Production for the week was up 1%. Imports from Canada were down 5% compared to the week before. Exports to Mexico stayed constant from the week before.
    • LNG exports totalled 22.4 Bcf.
  • As of July 27 the Canadian rig count was 223. Rig count for the same period last year was actually lower.
  • US Onshore Oil rig count at July 27, 2018 was at 861, up 3 from the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States was down 1 at 186.
    • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
  • Offshore rig count was down 1 at 16.
  • Offshore rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 62%/38


  • CNRL purchased Laricina
  • Trump Watch: Ivanka shut down her clothing line. Cohen rolled. The EU proposed a free trade deal that was already being negotiated (since 2013) and Trump claimed a win.
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