Vancouver Secrets

Casualties of Peak Oil

Just a few months ago, we were told the world was running out of oil.

We had to change our lifestyle and get rid if our gas-guzzling SUV’s now. Anyone not doing so was evil. Smart Cars for all.

Now it seems there’s too much oil, and our good friends at OPEC are scrambling to cut production for the first time in years.

The market has greeted the news of this reduced oil supply by pushing prices down further. Crude has fallen to almost $60.

Now we learn the truth behind “peak oil”.

It wasn’t that the peak oil story wasn’t true. It was the moon shot to $147 that took on a life of its own.

The environmental groups and media told us (with a straight face) that the doubling in oil prices from 2007 to 2008 was a result of our demand - and the shortage of oil - not market speculators.

We’ve been told that Saudi Arabia, the world’s largest producer, is at peak sustainable volume. And they will run out of oil in the not so distant future. ACT NOW!

It’s now safe to say that oil has peaked and the bubble has burst.

With oil prices are falling despite OPEC’s production cuts suggests that demand is falling even faster than OPEC can reduce the supply.

I filled up my SUV yesterday and it cost only $65 at the new inflated gas price (we should only be paying around 75 cents/litre, not 99 cents - saving me another $20).

Now the causality is domestic automobile manufacturers…

The Big Three auto manufacturers are faced with a certain death caused by the run-up in the price of oil and having their products deemed evil. They could have reacted long ago by building cars that matched the market - and they should have stopped building the vehicles no one wants. But that would have meant massive layoffs.

They now need billions just to fill their cash burn needs - combined it is around $15 billion each month.

Throwing money at them won’t solve their problems - they have become socialized institutions.

The only way to fix their problem is to let them go - or have all three merge into one. We don’t need three companies all building crap on our dime. One would do just fine.

It would force them adjust to the market realities, and make the painful transition now so they compete with the rest of the industry.

It may even force to make a product almost as good as Hyundai.

Bailing them out now just means we are extending the inevitable, and making their collapse even larger than it is now.

photo credit: Here in Van Nuys

We Just Got A Little Poorer Today

photo credit: Nick McCarthy

In case you’ve been under a rock today - U.S. stocks suffered their worst day in seven years as the Dow lost more than 500 points, the steepest point drop since the day the stock market reopened after the Sept. 11 terror attacks.

The Toronto stock market also lost more than 515 points today. It now has lost 18.7% from its most recent high June 18. The selloff since June has wiped more than $350 billion of market value from the stocks listed on the TSX, affecting your pension plans, RRSPs, mutual funds and other equities investments.

Oil prices also lost more than $5 a barrel to $95.71 extending a two-month slide from the record $147 a barrel.

The upheaval in the financial sector could trigger another round of commodities liquidation. Investors may unload commodities, fearing that the deepening economic crisis will further reduce demand for energy and raw materials futures.

As much as some will try to pin this on current governments, this mess isn’t caused by a political party. It’s caused by house prices falling in the US.

Simple as that.

Once house prices started to fall, investors walked out on real estate. Prices fell further.

Consumers tightened their wallets, credit tightened and home equity loans evaporated. This is the root cause of the US mortgage mess - sub-prime mortgages being the first to crash.

The symptons are starting to show here… Canada’s hot housing markets cooled as home sales fell 3.4% in August, bringing the year’s retreat to 19.3%, the worst since 1998. National house prices are down 5.1 per cent for the year, according to the Canadian Real Estate Association.

Hang on for a bit of a ride over the next few months. The market is adjusting and there will be more casualties. And we’ll feel each one in Canada. Cash is now king.

My big worry is derivatives. An “impossible to explain” investment tool that I’m sure is about to cause a lot of pain. They keep being mentioned each time a financial institution fails - and the liability of these investments is in the trillions.

This could be ultimately where we get hit the hardest.

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The Oil Companies Profit From Gustav

photo credit: TopTechWriter.US

Not to miss an opportunity to take advantage of Vancouver drivers, the oil companies have jacked our gas prices again - and will continue to do so throughout the week- in anticipation of Gustav’s arrival into the Gulf of Mexico.

New Orleans is the likely target, and it almost looks like a repeat of Katrina.

Vancouver wins the prize for most expensive Canadian gas, despite oil prices being lower by almost $20/barrel since the peak.

As I wrote last week, they forgot to lower the price when oil dropped to $115/barrel from $145 - but were quick off the line to raise them when it went up to $120. In fact, they raised prices before trading was over yesterday.

We now face prices above 1.44/litre - when they should be around $1.25-1.30/litre.

How high can they go?

Only greed will dictate.

In hurricane prone areas they have laws against this - it’s called price gouging. Raising prices to take profit from disasters is frowned upon.

Here in Vancouver it’s a fact of life - no matter how distant the disaster is.

Petro Canada Is Ripping Us Off

photo credit: JoshMcConnell

You’ve heard it before…

When oil prices rise, the price at the pump goes up within a day.

When oil prices drop, it takes weeks for the adjustment.

It’s a way the oil companies gouge us both ways - up and down.

Why hasn’t there been a government inquiry into this?

Oil peaked at around $140/barrel and gas went to $1.45/litre in Vancouver.

Now that oil has dropped to $115/barrel, you’d think that gas would be in the $1.14-$1.20 range.

It’s stuck at $1.40 - meaning they are ripping off consumers by 75 cents per gallon.

This would cause an uproar anywhere else.. out here, nobody seems to notice.

Between the oil prices being artificially raised each morning and the overcharging, the oil companies should be getting a lot of heat.

Instead, we pay whatever they demand and become poorer through our silence.