feelgood

This question has been lindering around in my head for awhile now.

Awhile back, I remember reading in several different newspaper relating to the oil and gas industry and how if it wasn't for Sandi Arabia, Canada's oil would've been one of the biggest in the world. Now, if the oil price is regulated by OPEC which Canada isn't a member of. If I recall correctly, the lower the output of oil, the higher the price of oil and via versa.

So, if Canadians are bitching about the fact that the oil price are too high, why don't the government increase our own production to lower the oil price just for all of Canada? After all, what kind of backlash is there gonna be? Other than other countries bitching about us hogging our own oil.

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BigBen

We signed NAFTA, an international trade agreement that does not allow us to do that.

And, if we WERE to do that, it would not make sense:

1. We could have sold the oil on the world market at a higher price.
2. We could have taken that profit and invested it somewhere else.
3. Instead, one of our citizens feels good about having consumed "subsidized oil".

I would rather increase production (like you said) and sell it at the world price. Note that the production of oil, and especially tar sand oil like we have in Canada, is not like turning on a faucet. The infrastructure, labour and time required to increase this production is significant. If it were easy, we would be doing it already I assure you.

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metalgeek

As well, unlike most other oil producing countries, Canada's is produced by the free market, so unless the government wants to get into drilling/extracting, and refining oil, they can't do a thing.
All they can really do is lower royalties/taxes, which isn't going to be happening.

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streak_56

Canada is second in the world for Oil Production. I know around Grande Prairie (North Alberta) has 46 rigs that are closed because of a shortage of labour. I for one will be working in specifically Grande Prairie as a medic and medics are in such a high demand that an EMT working one year would be able to make enough to afford a house. Anyways.... I don't think that Canadas reserves right now could make up for Saudi Arabia. I would prefer that the projects that are planned right now would be more in Saudi Arabia so that Canada can stock up on oil. Plus most of the oil and gas that Canada produces is not used in Canada, more for the US, China and foreign investors. Plus there is also the problem of refineries. There is not enough right now in Canada that would allow Canada to profit ecomonically even more from oil and gas.

james t kirk

OPEC doesn't regulate the price of oil.

OPEC regulates the supply.

The price is set in the "market" by the old supply and demand thing. People buy oil futures on the mercantile exchange, then sell them at a later date, hopefully at a profit.

Oil speculators are currently driving the prices up and it feeds on itself in a way. It's the herd mentality of the stock market. People see money being made and they flock to that sector to get in on the action and drive the price even higher.

Is the price of oil artificially high right now???

I dunno. Normally, I would say yes, but with China's economy growing in leaps and bounds, they will only demand more and more oil as time goes on. Imagine if China burned up oil like North Americans.

60 bucks a barrel may be cheap in the future.

feelgood

OPEC's regulation of oil supply flow affects the world market more than any other countries in the world and yet, larger G8 countries like Canada and Russia with considerable oil supply can't even put a dent in the global pricing descision?

Time to put together OAOPEC (Organization against Organization of Petroleum Exporting Countries) with Canada and Russia as key members

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Yakk

Canada, as a whole, wants higher oil prices. Because Canada exports more oil than it imports, every dollar oil increases in price results in more money for Canada.

Parts and people in Canada may disagree. Ontario, as a whole, wants lower oil prices while Alberta wants higher oil prices.

Artificially lowering the price of oil below world market prices would encourage oil to be wasted. There are more valuable things we could do with the oil (like sell it to other people and import finished goods) than burn it for local use.

Canada's oil reserves are mostly expensive to extract. Canada may have more oil than Saudi Arabia, but a massive massive chunk of it is in the form of "oil sands", which require far more expensive and tricky techniques to extract and turn into useable oil.

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

kulrblind

Both true statements, while being redundant. If you don't think supply restrictions affect price, you're not looking close enough. The idea of futures is still a supply/demand game.