COVID-19 has now torpedoed the world economy so badly that they will now pay you to take oil off their hands.
It’s this kind of thing that frightens me about the virus. It’s not people getting sick; that’s bad enough, but it won’t kill everyone. World War Three, on the other hand, totally could, and this kind of economic disruption is how wars can start.
Is Canada a petrostate?
I wouldn’t call it that but oil is a major part of the economy. Why do you ask?
Eta: also, I just cleaned out my garage. How much they paying per barrel?
Trying to figure out if we’re going to look like Venezuela in six months.
GQ thread here.
Wait, you live in Canada and you’re asking if we’re a petrostate?
They have the third largest proven reserves and are the fourth largest exporter in the world. (wiki cite) Mining, quarrying, and oil and gas extraction is the third largest sector of the economy but only provides 7.8% of GDP. (cite)
I wouldn’t exactly call them a petro state. They are a major player in global oil and gas markets and the sector is pretty important for the overall Canadian economy. The precipitous drop in oil prices is going to hurt.
I know plenty of things, but my understanding of the criticality of oil revenue to the Canadian economy isn’t great. I don’t think it’s ridiculous or anything.
Uh, no, it’s not. You surely know this.
If the gas station tries to pay me for filling up my tank, can I ask for Doritos instead?
I just filled up at a gas station and it looked like the cashier was handing out Doritos to the guy in front of me, so I thought maybe that’s what was happening. Sadly, I still had to pay for my fill-up, but I cannot remember when prices were this low. It’s certainly been many years.
I’m not sure I understand the economics of negative crude prices, but I believe it’s only certain types that have gone negative. I think Brent crude is still about $25 a barrel.
But from a Canadian perspective – and someone please correct me if I’m wrong – oil sands crude, which is the major source of Canadian crude – was essentially worthless recently even before this latest price drop, because it’s more expensive to extract, transport, and refine than other types. This hit on the economy, together with the countless billions being handed out by the government in emergency aid, is going to lead to spectacular deficits and potential long-term impacts.
Oil makes up a significant percentage of the Canadian economy and a high percentage of the Alberta economy (directly) and the Newfoundland economy (directly and indirectly).
However, Canada is not a top-level player since many of the companies are owned by the Americans and Chinese, it is expensive to extract and refine, and there have been major issues transporting product.
Covid didn’t start the bickering between Russians and the Saudis but did cause the huge decrease in demand which cannot really be salvaged in the short term by more recent agreement.
In the long term, most spacious and cold countries will return to high levels of use since alternatives are not yet practical enough outside of certain small, homogenous countries.
Alaska is a petro state but in the past a lot of that oil went outside the US. Don’t know if that is still the case.
Petroleum is a special case. It is not just a traded commodity, it has significant political inputs into production and pricing. Ever since the Saudi’s deliberately killed the price (for a range of reasons that have never been understood - all involving various conspiracy theories*) it has been very volatile. Saudi can produce oil so cheaply that they can undercut every other producer in the world. This gives them serious leverage, and an ability to hurt other economies for political reasons if they desire. However they can’t produce enough oil to satisfy the entire world, so there is scope for other jockeying for position.
The current negative price is based upon futures contracts, which will always lead to pain when there is a sudden drop in demand. You have already contracted for something you can’t on-sell all of, and in this case, possibly cannot even store for the future. So the futures trading market breaks. That isn’t the same as the world economy for oil breaking. Covid-19 hasn’t caused demand to plummet to some small fraction. But the nature of the futures market means that relatively small glitches can have amplified knock on effects in pricing.
Wow – just think, all I have to do to get rich is:
I’m not going to be impressed until the price of gas is a complex number (x+iy, y ain’t 0).
I wonder if you could consider a futures contract as a complex valued instrument.
I just signed a one-year contract with a Very Large Oil Company. I bet your they fire me before the year is up.
What really upsets me about that is I still cannot complain. That is the thing about this crisis. It puts everything into perspective. Our everyday problems are pretty petty compared to those who are actually ill.
The year? I bet you don’t even get in the front door. Sadly this seems to be the way of it.
I’m am so glad to be out of the industry. I was on the exploration side. We did consulting work for exploration. The moment there was a downturn we were the first to go. I still haven’t recovered financially from the first crash. 
It was fun when the money was better. Got to see interesting bits of the world. Wouldn’t go back.
Best of luck.