PeakOil is You
THE NAFTA Thread (merged)
by Zentric » Sun 24 Jul 2005, 05:27:16
$this->bbcode_second_pass_quote('oiless', 'A')lso, in times of shortage, Canada must continue to provide the U.S. with its historical share of available Canadian resources, regardless of the impact of such a measure on Canada's economy or society.
Your post does explain a lot. Still, the word "available" could mean many things. For example, what if Canada inks a new deal today to sell 20% of its total oil output to China? Would that then mean that the US gets its traditional cut from the remaining 80 percent?
This could effectively force Canada's chosen energy conversation targets to similarly be adopted in America. Or there could be other interesting implications, and winners and losers, depending on how the word is interpreted.
-
Zentric - Tar Sands
- Posts: 709
- Joined: Mon 14 Mar 2005, 04:00:00
by Denny » Sun 24 Jul 2005, 12:25:16
Zentric wrote: $this->bbcode_second_pass_quote('', 'F')or example, what if Canada inks a new deal today to sell 20% of its total oil output to China?
I don't think you get the nature of how oil or natural gas is sold. Public and private companies trade oil, not the government, and to a great extent on the futures market for hedging purposes. The ultimate buyer of futures is not known now to the seller, and in fact it may flip several times before delivery.
If there are long term deals signed with a nationalized oil industry country such as China by a firm, that may well be the case, but its all based on price, not preference, etc.
Market action ultimately dictates who gets the oil. The NAFTA deal just says that Canada or its provinces cannot enact favorable price tax treatments for oil domestically. I believe that this provision by the U.S. insistence was to cover more the spectre of artificially low input costs for Canadian industrial users of petroleum than a guaranteed supply of oil. But, it does cover both bases.
In another commodity market, wheat, the Canadian government does act like a monopoly seller, and "inks" deals with foreign governments. The Canadian Wheat Board goes back into the early 20th century. Funny that the NAFTA never dealt with this cusiosity. It is a government interference in the open market.
-
Denny - Heavy Crude
- Posts: 1738
- Joined: Sat 10 Jul 2004, 03:00:00
- Location: Canada
by Zentric » Sun 24 Jul 2005, 15:45:26
$this->bbcode_second_pass_quote('Denny', 'Z')entric wrote: $this->bbcode_second_pass_quote('', 'F')or example, what if Canada inks a new deal today to sell 20% of its total oil output to China?
I don't think you get the nature of how oil or natural gas is sold. Public and private companies trade oil, not the government, and to a great extent on the futures market for hedging purposes. The ultimate buyer of futures is not known now to the seller, and in fact it may flip several times before delivery.
If there are long term deals signed with a nationalized oil industry country such as China by a firm, that may well be the case, but its all based on price, not preference, etc.
Market action ultimately dictates who gets the oil. The NAFTA deal just says that Canada or its provinces cannot enact favorable price tax treatments for oil domestically. I believe that this provision by the U.S. insistence was to cover more the spectre of artificially low input costs for Canadian industrial users of petroleum than a guaranteed supply of oil. But, it does cover both bases.
In another commodity market, wheat, the Canadian government does act like a monopoly seller, and "inks" deals with foreign governments. The Canadian Wheat Board goes back into the early 20th century. Funny that the NAFTA never dealt with this cusiosity. It is a government interference in the open market.
Point taken, Denny. It seems it would have been better had I placed more emphasis on the phrase "in times of shortage" rather than the word "available."
Hypothetically speaking, of course, let's say tomorrow that the rest of the world comes to hate the US government and the US oil companies. They don't want to do business with us anymore and they don't like our coup attempts or petrodollars. And US interests are effectively expelled from, or marginalized inside, the oil-exporting countries - e.g. from Venezuela, and Russia, and the Middle East in general.
Would the NAFTA agreement, and our comparitively good relations with Mexico and Canada during this "time of shortage" serve to save our asses?
It appears the answer is "no". While the overall ability to explore for and produce oil outside of the North American continent would likely diminish, there would also be a recession-driven drop in world oil demand (which, on the other hand, could be counterbalanced with China's need to fill its strategic petroleum reserve, etc.) Amidst this, the share of the guaranteed Canadian/Mexican oil production that is US-bound would stay about the same, but the US would still hurt big time without the traditional oil inputs from, say, South America or the Middle East. Perhaps a draconian recession/depression would be thus assured.
If the oil markets are forced to become more regional and less global, how could Canada and Mexico play this in a way that would be most profitable to them, price-wise or taxation-wise, without causing the US to lash back at their neighbors to the north and south?
This has the makings of a huge clusterf*ck and could serve to trash any friendly agreements between the countries on the North American continent, just at a time when we need the support of our neighbors the most.
I look to the future and I see more and more tension everywhere. But, except for that Iraq thing, perhaps all is still going to plan.
-
Zentric - Tar Sands
- Posts: 709
- Joined: Mon 14 Mar 2005, 04:00:00
