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Breaking the Pipes: The Global Fight for Energy Sovereignty · Kvetch & Release

0:04
Speaker 1: Welcome back to Cavetch and release. I am your host,
0:07
Speaker 1: John Lidkey. Sometimes on this show we deconstruct the pressure
0:11
Speaker 1: cooker of regional politics, or track the latest shifts in
0:15
Speaker 1: the North American industrial heartland that is my home here
0:18
Speaker 1: in Windsor, Ontario. But today we are looking at a
0:22
Speaker 1: line on a chart that has the entire global market
0:26
Speaker 1: holding its.
0:27
Speaker 2: Breath, or does it.
0:28
Speaker 1: Earlier this week, JP Morgan published a projection of global
0:32
Speaker 1: oil inventories that looks less like a market forecast and
0:35
Speaker 1: more like a countdown clock. With the conflict in Iran
0:39
Speaker 1: continuing to choke supply, the data suggests that we could
0:42
Speaker 1: be months away from hitting an operational floor, a six
0:46
Speaker 1: point eight billion barrel red line where the physical infrastructure
0:50
Speaker 1: of the global energy system doesn't just get expensive, it
0:54
Speaker 1: potentially breaks. Joining me today to inject some much needed
0:58
Speaker 1: analytical rigor into the this apocalyptic narrative is someone who
1:02
Speaker 1: has spent his career arguing that our energy conversation is
1:06
Speaker 1: often stuck in the pipes in the wrong century. Markham
1:09
Speaker 1: Hisslop is the founder and publisher of Energy Media. He
1:12
Speaker 1: is a veteran journalist, host of the Energy Talks podcast,
1:16
Speaker 1: and perhaps Canada's most prominent voice on the S curve
1:19
Speaker 1: of energy transition. Markham recently took a blowtorch to these
1:23
Speaker 1: fatalism surrounding this chart, calling it a fusion of prophetic
1:27
Speaker 1: certainty and technical jargon. Let's dive in right now with
1:31
Speaker 1: Markham to break it down. Markham, are things as doom
1:35
Speaker 1: and gloom? And hello to you as well?
1:38
Speaker 3: Well, hello to you, John. It's been a while. It's
1:40
Speaker 3: always good to see you. Who knows, I mean, things
1:48
Speaker 3: are in the Middle East are so chaotic right now
1:51
Speaker 3: that guessing what's going to happen tomorrow or next week
1:55
Speaker 3: is is you may as well play the lottery. So
2:00
Speaker 3: but the scenario that we're talking about here is one
2:03
Speaker 3: that's making the rounds on social media. You saw it
2:05
Speaker 3: on x you know where, and it's a number of
2:10
Speaker 3: analysts who are doing this and they they project out
2:14
Speaker 3: into the future the absolute worst case scenario. It's like
2:17
Speaker 3: this apocalyptic you know, the pipes run dry, the pumps
2:21
Speaker 3: run dry, there's no gas, there's no nothing not on nowhere,
2:25
Speaker 3: and the whole industrial machine comes crumbling down around us,
2:30
Speaker 3: and civilization then follows, you know, down the down the
2:35
Speaker 3: toilet and we're all, you know, a year from now
2:38
Speaker 3: where we're living and we're wearing animal skins and huddled
2:42
Speaker 3: around the fire at max. Yeah, well that's x right.
2:47
Speaker 3: But you know, I'm seeing it on LinkedIn, and I'm
2:49
Speaker 3: seeing it in other places. I haven't seen much of
2:51
Speaker 3: it in the mainstream media, which you know probably tells
2:54
Speaker 3: you a lot. But the point here, I think is
2:58
Speaker 3: that humans are amazingly adaptable and the systems that they
3:03
Speaker 3: build are for the most part, pretty adaptable. And it's
3:08
Speaker 3: it would have to get really, really bad for that
3:13
Speaker 3: apocalyptic narrative to come true. And if you think about
3:17
Speaker 3: the portapho or the story of the straight of hormones,
3:20
Speaker 3: twenty percent of LNG, twenty percent of oil, and then
3:26
Speaker 3: I forget the percentage of the world's fertilizer that goes
3:29
Speaker 3: through there and other products. But if you even if
3:33
Speaker 3: you took that out, you'd still have eighty to eighty
3:36
Speaker 3: five million or maybe ninety million barrels of oil, and
3:40
Speaker 3: you'd still have a lot of natural gas, and the
3:43
Speaker 3: LNG would you know, get to market that eighty percent
3:46
Speaker 3: of the LERG would get to market elsewhere. So can
3:50
Speaker 3: we run civilization the way we have it now on
3:54
Speaker 3: eighty percent, not at these prices. But I would bet
4:00
Speaker 3: that if people really had to roll up their sleeves
4:03
Speaker 3: and sacrifice and ration, and you know, all the Indias
4:07
Speaker 3: already Prime Minister Modi is saying, you know, don't go
4:12
Speaker 3: to work, don't drive to work, conserve gas, that sort
4:16
Speaker 3: of thing, and if we had more of that, we
4:18
Speaker 3: would get through it. But I think I think we're
4:22
Speaker 3: in for some unpleasantness, to be honest, I even if
4:25
Speaker 3: it doesn't turn out to be apocalyptic that was gonna be.
4:28
Speaker 1: My question is where does the human response step in?
4:31
Speaker 1: But you got ahead of me right there, so thank
4:33
Speaker 1: you with that one. The next question, though, is you know,
4:34
Speaker 1: analysts say the system breaks at this operational floor for
4:38
Speaker 1: those who are outside of your sphere and from me
4:41
Speaker 1: having to learn a little bit more about this sphere
4:43
Speaker 1: as well, that's the when the physical flow stops because
4:46
Speaker 1: the inputs aren't there to keep the other gears going,
4:49
Speaker 1: if you will, to dumb it down, you've argued that
4:52
Speaker 1: modern systems are very adaptive. Of course, is there a
4:55
Speaker 1: historical precedent for an energy system bending rather than break?
5:00
Speaker 1: Looking under this kind of extreme stress that you've seen before.
5:04
Speaker 3: Boy, that's a really good question. And the analogy for
5:08
Speaker 3: me would be nineteen seventy three and nineteen seventy nine,
5:12
Speaker 3: you know, the two big oil shocks from the seventies.
5:15
Speaker 3: I mean, I'm old enough to remember. Not in nineteen
5:19
Speaker 3: seventy three, I was a little young to be driving
5:22
Speaker 3: down to the gas pump, But in seventy nine I
5:24
Speaker 3: certainly had a car, and I remember what it was like.
5:28
Speaker 3: And yeah, it was really was really tough on the end,
5:33
Speaker 3: but I think they lasted maybe six weeks if I
5:36
Speaker 3: remember correctly. We're going back a while, John So. But
5:40
Speaker 3: my point here is, yes, it was difficult, Yes there
5:44
Speaker 3: was some pain. Did we adapt, Yeah, we walked instead
5:48
Speaker 3: of drove or rode a bike or whatever. And the
5:53
Speaker 3: I'm suspect that that is probably not perfectly analogous because
6:00
Speaker 3: today's systems are much more complex, and they're bigger, and
6:04
Speaker 3: they require a lot more energy. And so those of us,
6:10
Speaker 3: those countries that are still reliant primarily on fossil fuels,
6:14
Speaker 3: mostly oil and gas, we're going to be in trouble.
6:17
Speaker 3: Now here's the thing. Here's what one of that isn't
6:23
Speaker 3: I think, Well, it gets ignored by these kinds of arguments.
6:27
Speaker 3: Is that Asia is the one that is the region
6:30
Speaker 3: that's hurt most by the closing of the Strait of
6:33
Speaker 3: horm moves, it's also the region that is the furthest
6:37
Speaker 3: down the road to electrification. Like China gets thirty percent
6:41
Speaker 3: of its total energy from electricity, whereas Canada only gets
6:44
Speaker 3: twenty percent, and it's and that's increasing all the time.
6:49
Speaker 3: So if you're China or your India or your Pakistan
6:53
Speaker 3: or your Thailand or whatever, you actually haven't have options.
6:58
Speaker 3: You don't have to have a car to get to
7:02
Speaker 3: a or at least a combustion car. You know, maybe
7:06
Speaker 3: you buy an electric vehicle, or you buy an electric
7:09
Speaker 3: motorcycle or a what do they call those in the
7:15
Speaker 3: Philippines tictics. I can't remember. I remember riding in one
7:19
Speaker 3: when I was there thirty years ago. But yeah, but
7:23
Speaker 3: I mean, there are alternatives to combustion technologies that weren't
7:27
Speaker 3: there fifty years ago in the seventies, you know what
7:30
Speaker 3: you I mean, if you didn't have a gasoline, no
7:33
Speaker 3: gasoline or diesel in the pumps, then you didn't drive
7:36
Speaker 3: your vehicle. Well now you can see, you know, people
7:39
Speaker 3: are going, oh, maybe it's time. You know, we took
7:43
Speaker 3: a hard look at an electric vehicle or at least
7:45
Speaker 3: a hybrids, so and you know, kind of the same
7:49
Speaker 3: thing on the gas side a little tougher because it's
7:53
Speaker 3: you know, you can't just say, oh, yeah, you know what,
7:55
Speaker 3: We're going to toss out the gas furnace and bring
7:57
Speaker 3: in a heat pump. We went through that process about
8:01
Speaker 3: three years ago. And it does not happen overnight, and
8:04
Speaker 3: there's some changes that have to be made, but still
8:07
Speaker 3: my point here is that we have the technology that
8:12
Speaker 3: is an alternative to oil and gas to combustion technology,
8:17
Speaker 3: and we're already seeing countries like China speed up their transition.
8:23
Speaker 3: So my guess in this is that yes, it's going
8:27
Speaker 3: to hurt, and yes we're also going to see people
8:30
Speaker 3: with adapt by adopting new technologies.
8:35
Speaker 1: You're always just one ahead of me right now, just
8:37
Speaker 1: scratching off questions that I was.
8:39
Speaker 3: For usual, John, That's great, I love it.
8:41
Speaker 2: It's okay, Then I've got other ones. So this chart
8:43
Speaker 2: assumes that we must have this oil to survive. You
8:47
Speaker 2: obviously pass it a different outlook.
8:50
Speaker 1: We're not suggesting to eliminate this oil specifically, but there
8:54
Speaker 1: are alternatives based on your work studying and analyzing renewables
8:58
Speaker 1: in your sector. More broadly, how much of that missing
9:02
Speaker 1: twenty percent of global supply could realistically be offset by
9:06
Speaker 1: existing alternative capacity in a four month window.
9:12
Speaker 3: Almost none of it. This is part of the problem
9:15
Speaker 3: is whether, yeah, whether we're talking about oil and gas
9:21
Speaker 3: or we're talking about electrification. Electric technologies both the generation
9:25
Speaker 3: you know, wind solar batteries or on the demand side,
9:29
Speaker 3: you know, electric vehicles and heat pumps would be the
9:32
Speaker 3: two big ones. They take time, they have to be
9:36
Speaker 3: in manufactured, they have to be installed, they have to
9:38
Speaker 3: I mean, you've got to get the inventory, you know,
9:40
Speaker 3: from usually from China. So we have a problem and
9:46
Speaker 3: it plagues us in a in Canada because we're talking about,
9:51
Speaker 3: you know, building a pipeline to take Alberta crude oil
9:55
Speaker 3: over to China. Well, it takes us five years to
9:58
Speaker 3: build a pipeline. That's an optimistic schedule. So we have
10:02
Speaker 3: a we have a short term problem, short term pain,
10:06
Speaker 3: I mean, and some severe pain coming. And all the
10:09
Speaker 3: solutions we have are medium to long term. And it
10:12
Speaker 3: doesn't matter whether you're by building a new pipeline, you know,
10:15
Speaker 3: get a new supply of oil to someplace, or you're
10:19
Speaker 3: you're having to manufacture electric vehicles and solar panels. It's
10:23
Speaker 3: still the same problem. So we I guess what I'm
10:29
Speaker 3: saying here is that yes we'll adapt, Yes we'll eventually recover,
10:34
Speaker 3: depending on how severe this all turns out to be,
10:38
Speaker 3: but it's going to take time, and it's it's not
10:42
Speaker 3: going to be easy, I would guess.
10:44
Speaker 1: Or, as Donald Trump would say, short term pain for
10:47
Speaker 1: long term gain.
10:50
Speaker 3: Well, you know, when you're when you're you live in
10:53
Speaker 3: your you live in a in a in an apartment.
10:56
Speaker 3: I don't know if you've seen the pictures of you know,
10:58
Speaker 3: Donald Trump in his New York apartment, but everything is gold,
11:02
Speaker 3: Everything is gilded. And so I would imagine that if
11:06
Speaker 3: your toilet seed is gilded, that you probably have a
11:10
Speaker 3: little different perspective on what short term pain for long
11:13
Speaker 3: term gain actually means.
11:15
Speaker 1: I'm writing a piece right now that's trying to compare
11:17
Speaker 1: Donald Trump to being the love child of Lucille Bluth.
11:22
Speaker 1: It's a banana, Michael, How much could it cost? Ten dollars?
11:26
Speaker 1: With Grandpa Simpson yelling at the clouds in the sky somewhere.
11:30
Speaker 2: Is what Donald trump Is. You mentioned that.
11:32
Speaker 1: The fusion of prophetic certainty and technical jargon can be dangerous.
11:36
Speaker 1: I mean, I think you and I have spoken about
11:37
Speaker 1: that before on air as well. How should energy journalists, specifically,
11:42
Speaker 1: I mean, like yourself cover a chart that comes from
11:44
Speaker 1: a very reputable source like JP Morgan. You can't dispute
11:48
Speaker 1: the numbers here, but you don't want to fall into
11:51
Speaker 1: the trap, of course, of this apocalyptic dumerism determinism.
11:56
Speaker 2: This is not written in stone.
11:58
Speaker 1: These are not decomposed dinosaurs that we're using for a
12:02
Speaker 1: fewel million millennia from now.
12:06
Speaker 3: Well, that's a very good question, and I'm not sure
12:08
Speaker 3: that I have an easy answer for you, because we're
12:11
Speaker 3: kind of grappling with that ourselves here at Energy Media.
12:15
Speaker 3: And one of the points I think is to well,
12:20
Speaker 3: you know, we're pointing out that that there are alternatives,
12:24
Speaker 3: and so you know what we're seeing. You know, China
12:28
Speaker 3: exported fifty more evs last month than it did the
12:32
Speaker 3: month before, so clearly you know EV's not in China. Now,
12:37
Speaker 3: this is an interesting point. I was just reading, I
12:40
Speaker 3: think it was a Bloomberg story today that the the
12:42
Speaker 3: April numbers for China EV sales in China fell by
12:47
Speaker 3: seventeen percent. Why would that be? That seems crazy, But
12:51
Speaker 3: keeping bear in mind that China had been basically supporting
12:55
Speaker 3: much of the global oil market for the past year
12:58
Speaker 3: before the Iran conflict by building up its reserves. It
13:02
Speaker 3: was buying you know, cheaper oil and stock, you know,
13:06
Speaker 3: sort of stalking it away million you know, I don't forget.
13:10
Speaker 3: Nobody really knows how big China's strategic reserve a patroleum
13:16
Speaker 3: reserve is probably hundreds of millions of barrel I have
13:20
Speaker 3: no idea, but anyway, quite a lot. And so China
13:24
Speaker 3: had It's almost like China had planned for this, you know,
13:27
Speaker 3: they got together with Iran and said, hmm, you know,
13:30
Speaker 3: if this happens, maybe we should you know, what do
13:33
Speaker 3: you think? So the and by the way, you know,
13:36
Speaker 3: China is a big customer of Iran, buys a lot
13:39
Speaker 3: of its oil. So this is part of the rejoinder
13:46
Speaker 3: to to JP Morgan is okay, But hang on a second,
13:50
Speaker 3: where is their adaptability within the system? Well, okay, So
13:53
Speaker 3: the Americans have a strategic petroleum reserve, China's got one,
13:59
Speaker 3: Europe has got one. I think I'm pretty sure they have.
14:02
Speaker 3: And and there's you know, we've been releasing some, but
14:06
Speaker 3: still there is more UH and Canada doesn't doesn't need
14:12
Speaker 3: one because we export way more than I think we can.
14:16
Speaker 3: We produce a little over five million barrels and we
14:19
Speaker 3: consume about a million and a half and then the
14:21
Speaker 3: rest goes down mostly to the US, but in increasing
14:24
Speaker 3: we're sending some over to Asia. So there's kind of
14:30
Speaker 3: some some cushion built into the system, as it were,
14:34
Speaker 3: so that you know, we probably have more time than
14:39
Speaker 3: the JP Morgan. You know, the graph indicates and how
14:45
Speaker 3: much of that do we have because we don't really
14:48
Speaker 3: know in the cases of you know, countries like China,
14:51
Speaker 3: So you know, that adds some uncertainty. But I think
14:56
Speaker 3: there's enough of that and enough adaptability within societies, whether
15:03
Speaker 3: it be you know, market societies or market economies, or
15:06
Speaker 3: whether it be more command state capitalism kind of economies.
15:10
Speaker 3: You know, people will adapt. Now if we had the
15:14
Speaker 3: exact same situation today, Yeah, a year from now and
15:20
Speaker 3: all of the cushion is driven out of the system
15:22
Speaker 3: and people, you know, there's a limit how much you
15:26
Speaker 3: can adapt for how long is it theoretically possible? I
15:30
Speaker 3: suppose I just think it's unlikely that it would be
15:34
Speaker 3: as bad as maybe that chart suggests.
15:38
Speaker 1: Well, it's not a good chart, that is for sure, though.
15:41
Speaker 1: So you're following the sector, of course, the energy sector
15:44
Speaker 1: very closely. It's your day job. How does a global
15:46
Speaker 1: inventory free fall affect your view on the long term
15:50
Speaker 1: infrastructure projects like pipelines? Is the fear of a system break?
15:55
Speaker 1: Does that make assets like these more valuable? Or does
15:58
Speaker 1: it prove that they're actually part of a fragile, outdated model.
16:02
Speaker 1: This is where I'm having a really hard time wrapping
16:04
Speaker 1: my head around. I don't know if we should be
16:07
Speaker 1: double downing on what worked before but in a different capacity,
16:11
Speaker 1: or if we should be shedding it and jettisoning it
16:14
Speaker 1: and going at No, we got to be doubling down
16:15
Speaker 1: on the future.
16:16
Speaker 2: Or is it a mix of both? Is it a
16:18
Speaker 2: hybrid model?
16:19
Speaker 3: If you will, I would argue for the hybrid model
16:22
Speaker 3: and let me let me explain why. So there was
16:27
Speaker 3: just a story out I think it was today. I
16:30
Speaker 3: was just on a radio interview talking about it, where
16:32
Speaker 3: you know the Alberta and Premier Daniel Smith. They've been
16:36
Speaker 3: negotiating with Prime mister Mark Carney in the federal government
16:40
Speaker 3: over this memorandum of understanding they signed last November that
16:44
Speaker 3: included a pipeline in return for emissions reductions and some
16:49
Speaker 3: other things. And so the Smith was in the media saying, oh, yeah, yeah,
16:54
Speaker 3: things are going really well. We think we're going to
16:56
Speaker 3: have an agreement in a couple of days now. I
16:58
Speaker 3: pointed out to the to the host Mike Smith, that
17:02
Speaker 3: you know, Smith talks like that all the time, right,
17:05
Speaker 3: I mean, that's just that's just her. She's a very
17:08
Speaker 3: good communicator, as she spent nine years as a talk
17:13
Speaker 3: show host, so she knows how to communicate. So I
17:17
Speaker 3: discount a lot of what she says and experience, you know,
17:21
Speaker 3: history shows that that's the proper way to approach her.
17:26
Speaker 3: But it's entirely possible that the federal government and the
17:30
Speaker 3: Alberta government come together on an agreement. But then they've
17:34
Speaker 3: got to go get the BC government and First Nations
17:37
Speaker 3: on board in some way, and that hard, really hard.
17:43
Speaker 3: And the only way that I can see is everybody's
17:46
Speaker 3: got a benefit. So if the Prime Minister came to
17:51
Speaker 3: Premier David Eby and said, hey, you know what, I
17:55
Speaker 3: think that we could build you a whole bunch more
17:57
Speaker 3: LNG plans on the west coast, then that would be
18:01
Speaker 3: like I did the math one time, it's like three
18:02
Speaker 3: hundred billion dollars. You know, by the time you build
18:05
Speaker 3: the pipelines and the plants and increase gas production in
18:09
Speaker 3: the northeast of BC. You know, if you want, if
18:13
Speaker 3: you'd support this pipeline, we could probably do that. And
18:16
Speaker 3: then you go to the First Nations and you say, well,
18:19
Speaker 3: you know, I understand your concerns, but how about if
18:22
Speaker 3: we let you own half the pipeline or a quarter
18:24
Speaker 3: of the pipeline or whatever it is. So if everybody
18:27
Speaker 3: gets a pretty good taste out of all of this,
18:30
Speaker 3: I could see the parameters of a deal for a pipeline.
18:35
Speaker 3: But a private sector proponent still has to step up
18:39
Speaker 3: to build it and operate it. And you still have
18:42
Speaker 3: to have markets somewhere like presumably in Asia, where the
18:47
Speaker 3: oil sands companies will step forward and say, okay, we're
18:50
Speaker 3: going to invest tens of billions of dollars in increasing
18:53
Speaker 3: our output in order to fill up that pipeline, and
18:58
Speaker 3: those the never mind the logic of it, what the
19:01
Speaker 3: numbers say, or what's going on in Asia. But I've
19:04
Speaker 3: been talking to an interviewing some of some folks inside
19:08
Speaker 3: the industry, you know, like Richard Messan, who's an energy economist,
19:13
Speaker 3: and he's very skeptical that the pipeline will ever be built.
19:17
Speaker 3: And one of the reasons is the oil sands industry
19:19
Speaker 3: really doesn't want to go out in a limb like that.
19:22
Speaker 3: And you know, because think of it, in order to
19:27
Speaker 3: fill up a one million barrel a day pipeline, you
19:30
Speaker 3: need seven hundred thousand barrels a day of new bitchumen
19:35
Speaker 3: because what it's so thick, it's like peanut butter, right,
19:38
Speaker 3: So it's not going to flow in a pipeline, and
19:40
Speaker 3: you dilute it with a light hydrocarbon like something like gasoline, right,
19:45
Speaker 3: it just like whatever, it is a diluent, which means
19:49
Speaker 3: that thirty percent of your pipeline is filled with a
19:54
Speaker 3: product that has no value that you're not selling to
19:57
Speaker 3: the refinery at the end of the day. In fact,
19:59
Speaker 3: they turn around and they ship it back often to Canada.
20:03
Speaker 3: So it's cost to you. So if you're going to
20:07
Speaker 3: increase the oil sands supply by seven hundred thousand barrels
20:11
Speaker 3: a day, goodness gracious, that's a lot of money, and
20:14
Speaker 3: you probably have to do what's called green field, which
20:18
Speaker 3: is where you build new plant and infrastructure, and then
20:22
Speaker 3: your break even costs are like sixty seventy dollars and
20:25
Speaker 3: by the time you tack on the cost of the
20:27
Speaker 3: getting it over to your market, you're probably not competitive.
20:31
Speaker 3: So you know, everybody's talking a good game until you
20:34
Speaker 3: get the pencil out and start doing the math, and
20:37
Speaker 3: he goes, well, you know, you got a squint to
20:39
Speaker 3: make it, to make it work. So that's why there's
20:43
Speaker 3: not a stampede of industry support for this is because
20:46
Speaker 3: there's a lot of moving parts that have to fall
20:49
Speaker 3: just right in order for the pipeline to get built
20:53
Speaker 3: and for the oil sands to expand and produce enough
20:56
Speaker 3: supply to fill that pipe. Now there is a, I
21:01
Speaker 3: think a better way to do this. So the Transmountain
21:07
Speaker 3: Expansion Pipeline added another five hundred and ninety thousand barrels
21:11
Speaker 3: of capacity, and it's mostly mostly dilbit. But by increasing
21:19
Speaker 3: the power of the pumps along the root of the
21:23
Speaker 3: pipeline and using friction reducing agents to make it slicker
21:29
Speaker 3: inside less friction, they think that they can increase that
21:33
Speaker 3: capacity by another three hundred thousand barrels. Now you've got
21:38
Speaker 3: eight hundred and ninety thousand barrels and the government of
21:41
Speaker 3: candidate has already paid for this. We paid thirty five
21:43
Speaker 3: billion dollars right, So this is this is a reason
21:48
Speaker 3: the cost of optimizing that pipeline to get more is
21:52
Speaker 3: a lot less than building a new pipeline. Sure, there's
21:56
Speaker 3: three hundred thousand barrels. Now there's another technology that was
22:00
Speaker 3: just getting off the ground under NDP Premier Rachel Notley
22:04
Speaker 3: and Alberta in twenty twenty eighteen called partial upgrading, and
22:11
Speaker 3: they had a program and there was already you know,
22:14
Speaker 3: a couple of companies come forward. And then in twenty
22:16
Speaker 3: nineteen Conservative Premier Jason Kenny had won the election and
22:21
Speaker 3: he canceled it. But the idea behind partial upgrading is
22:25
Speaker 3: you take that peanut buttery bitumen and instead of diluting it,
22:29
Speaker 3: you partially upgrade it and you turn it into either
22:33
Speaker 3: a medium grade or a heavy grade that will flow
22:36
Speaker 3: in the pipeline. So not only do you add ten
22:38
Speaker 3: or fifteen dollars to the value of your barrel, but
22:42
Speaker 3: now you don't need any dillion so you can get
22:45
Speaker 3: the you get if you don't get the full hundred
22:48
Speaker 3: percent of the pipe, you get much more than you
22:51
Speaker 3: than seventy percent. But let's assume for sake of argument
22:54
Speaker 3: that it is one hundred percent. So now instead of
22:57
Speaker 3: getting seventy percent of eight hundred and ninety thousand, and
23:00
Speaker 3: you get one hundred percent of eight hundred and and
23:05
Speaker 3: it really you know, you haven't got out on the limit.
23:08
Speaker 3: Spent fifty billion dollars to get that capacity. So there's
23:13
Speaker 3: there's another I don't know, I'm off the top of
23:16
Speaker 3: my head, maybe three hundred thousand barrels, four hundred thousand barrels.
23:20
Speaker 3: On top of that, N Bridge, which has the main
23:22
Speaker 3: line down to the US, has said that it wants
23:26
Speaker 3: to optimize its pipelines which is over two million barrels
23:31
Speaker 3: a day currently and add four hundred thousand barrels a
23:34
Speaker 3: day of capacity. So now you've got seven or eight
23:38
Speaker 3: hundred thousand barrels, which is essentially what you'd get if
23:42
Speaker 3: you built a new pipeline and the private sector has
23:46
Speaker 3: built it. Well, I guess Transmounted Expansion is to is
23:50
Speaker 3: actually a Crown corporation, but be that as an a
23:54
Speaker 3: it's at much lower cost than building a brand new pipeline.
23:58
Speaker 3: So my point here, John is we can be clever
24:01
Speaker 3: and we can do more with what we have and
24:05
Speaker 3: we can add that capacity incrementally and a lot quicker
24:11
Speaker 3: than building a new pipeline. Or we can just throw
24:14
Speaker 3: caution to the wind and you know, the taxpayer comes
24:17
Speaker 3: in and de risks it and puts up tens of
24:19
Speaker 3: billions of dollars to you know, so the private sector
24:22
Speaker 3: will go ahead and do it, which is why we
24:24
Speaker 3: always do things. So we can be we can be clever,
24:28
Speaker 3: or we can just you know, do what we always
24:30
Speaker 3: do now, which you think would be the the more
24:33
Speaker 3: prudent approach to this.
24:35
Speaker 1: Yeah, well, what does my opinion have to do with
24:38
Speaker 1: any of this? But now I hear you, and that's
24:40
Speaker 1: the frustrating thing. I got one last question for you.
24:43
Speaker 1: I know you've got to go to prep for that
24:45
Speaker 1: next segment you got coming up, but it would be
24:47
Speaker 1: remiss also if I didn't mention I really really do
24:50
Speaker 1: like the tin.
24:51
Speaker 2: Lizzie you got behind you there with the model T.
24:53
Speaker 2: That's that's gorgeous on the shelf.
24:55
Speaker 3: Oh well, let me tell you the story about that.
24:57
Speaker 3: So my grandfather was an interesting thing character he grew
25:01
Speaker 3: up as a farm boy in Ontario, early twentieth century,
25:07
Speaker 3: and when he was a teenager he lost his leg
25:12
Speaker 3: I think from what the knee down, and he lost
25:15
Speaker 3: it in a hay mowing accident back in the day
25:19
Speaker 3: when they had hay mowmers. And so he was still
25:23
Speaker 3: farmed as an adult, and he was a blacksmith, and
25:26
Speaker 3: he had an implement agency, which is a big deal
25:28
Speaker 3: back in you know, the twenties and thirties, and and
25:32
Speaker 3: so that that that little model is something that he
25:37
Speaker 3: would have got as a promotional you know, toy to
25:40
Speaker 3: give away back in the day. It's kind of like
25:42
Speaker 3: the you know McDonald's kids meals. Yea, we got a toy.
25:48
Speaker 3: So that's what that's what they would give away. And
25:50
Speaker 3: when he died, I forget how many maybe in the seventies. Anyway,
25:56
Speaker 3: it kicked around the family and I got it, and
25:59
Speaker 3: I think it's just the coolest darn thing, you know,
26:02
Speaker 3: cast metal of some kind, and yeah, it's one of
26:06
Speaker 3: my most cherished possessions.
26:08
Speaker 1: I've got my grandfather's they're just five feet out of
26:12
Speaker 1: my reach right now as well. But Henry Ford wagon
26:15
Speaker 1: Works that was about ten blocks away from where I
26:18
Speaker 1: am right now, where those wheels were put on, and
26:20
Speaker 1: that's how they brought a tariffs.
26:22
Speaker 3: Again.
26:23
Speaker 2: The only way that Henry.
26:24
Speaker 1: Ford was able to bring the cars into the country
26:27
Speaker 1: was to assemble the cars in the country. So he
26:30
Speaker 1: created the wagon works in Canada, imported the full vehicle
26:33
Speaker 1: except for the wheels, put the wheels on in Canada.
26:37
Speaker 1: Welcome to the Commonwealth.
26:38
Speaker 2: Okay, last question for you, this is the killer one
26:41
Speaker 2: for you. Okay.
26:42
Speaker 1: If the supply side is a line that's crashing towards
26:46
Speaker 1: zero right now, and the demand side is the story
26:49
Speaker 1: of rapid adaptation, where do these two meet. Is there
26:54
Speaker 1: a version of the next six months Markham where we
26:58
Speaker 1: experience potentially a deep recession but the physical failure never materializes.
27:07
Speaker 3: Boy, that is that's a that's a tough one. And
27:11
Speaker 3: I'm if I were an economists instead of a journalist,
27:13
Speaker 3: I might have a better answer for you. I would say,
27:17
Speaker 3: and this is just my guess based on you know,
27:20
Speaker 3: talking to real experts, I would say probably no. And
27:24
Speaker 3: remember that a lot of what goes on and the
27:26
Speaker 3: one hand, on the one hand, were connected in this
27:30
Speaker 3: global economy in a way we've never have been before.
27:33
Speaker 3: You know, the global globalization of the world of coomy.
27:36
Speaker 3: On the other hand, the energy transition is very asymmetrical
27:40
Speaker 3: in that you know, Europe was leading for a while
27:44
Speaker 3: and then you know, ten years ago, fifteen years ago,
27:47
Speaker 3: China caught up. And then China invested, I mean hundreds
27:51
Speaker 3: of billions of dollars in developing ev industry, in a
27:55
Speaker 3: battery industry and solar panel manufacturing and so on. So
27:59
Speaker 3: it has it has built up its manufacturing capacity for
28:06
Speaker 3: those clean energy technologies way beyond current demand. And I
28:11
Speaker 3: don't know if you remember a year ago, a year
28:12
Speaker 3: and a half ago, there was a big debate going
28:15
Speaker 3: on about China's over capacity. You know how they were dumped.
28:19
Speaker 3: They were dumping cheap clean you know, like cheap solar
28:22
Speaker 3: panels on the market, which is prohibited under the World
28:26
Speaker 3: Trade Organization. So China's perspective on that was, well, we
28:34
Speaker 3: don't have over capacity. We just build in anticipation of demand,
28:39
Speaker 3: right because we're a state where you know, we're a
28:43
Speaker 3: state directed economy and will subsidize it, and so we
28:47
Speaker 3: can get away with that. So now here is China,
28:51
Speaker 3: which last year built thirty four million cars, which is
28:54
Speaker 3: like three times what the Americans built that they were
28:57
Speaker 3: came in number two. So China's already gobbled up the
29:00
Speaker 3: the global auto industry. It's so disrupted, it's it's it's
29:04
Speaker 3: it's it's hard to believe. But they actually could build
29:08
Speaker 3: fifty million cars, most of whom which would be electric vehicles.
29:12
Speaker 3: And they have capacity to build I think like two
29:16
Speaker 3: or three times as much battery as many batteries and
29:20
Speaker 3: solar panels. So I don't know if they're going to
29:23
Speaker 3: do this. Well, you know, it's just too early to tell.
29:27
Speaker 3: But if you're sitting there with all lifts, you know,
29:30
Speaker 3: manufacturing capacity, and you've got a global you know, the
29:34
Speaker 3: mother of all energy shocks going on, and all this
29:38
Speaker 3: stuff is you know, energy related, you might want to
29:43
Speaker 3: increase manufacturing and just export like a son of a
29:46
Speaker 3: gun and cash in if you can. So what does
29:51
Speaker 3: that do to you know, the two lines crossing. There's
29:55
Speaker 3: so many variables here that giving you a even a
30:00
Speaker 3: best gas at that well my best gas is I
30:02
Speaker 3: have a clue, but I see that. But here's another thing.
30:08
Speaker 3: Despite all the chaos, the basic fundamental trends in the
30:13
Speaker 3: global energy system have not changed. And that trend is
30:18
Speaker 3: that oil and gas is slowly sort of creaking to
30:24
Speaker 3: a halt. You know, demand growth is creaking to a halt.
30:28
Speaker 3: On the electric side, the adoption of solar and wind
30:34
Speaker 3: and batteries is just running rampant in Asia and Europe,
30:39
Speaker 3: as is on the demand side, what transportation those will
30:44
Speaker 3: So my guess is that those trends will continue, but
30:48
Speaker 3: they'll accelerate. And the and the the march to peak
30:55
Speaker 3: oil demand or peak gas demand that we thought was
30:58
Speaker 3: twenty thirty or twenty thirty five is going to It's
31:01
Speaker 3: going to come quicker because this and this is something
31:05
Speaker 3: Canadians have not got their heads wrap DNT. Energy security
31:09
Speaker 3: to you and I means being able to buy enough
31:12
Speaker 3: gasoline or diesel when we need it at a at
31:14
Speaker 3: a reasonable price. Energy security in China means I buy
31:22
Speaker 3: solar panels and we build a solar farm and buy
31:27
Speaker 3: I pay for it once and I never pay for
31:29
Speaker 3: it again for thirty years, maybe fifty years, who knows.
31:33
Speaker 3: And because it didn't have to be replaced every day,
31:36
Speaker 3: we don't have to import oil and energy all the time.
31:40
Speaker 3: And so the idea of energy sovereignty is a new one.
31:45
Speaker 3: And do you have control over the energy that powers
31:50
Speaker 3: your economy and increasingly because we're exporters of oil and gas.
31:56
Speaker 3: We've just we haven't even talked about the idea, but
32:00
Speaker 3: in Asia and Europe it's a big that's a big
32:03
Speaker 3: debate that's going on, and that's something that your viewers
32:07
Speaker 3: should keep an eye on, is the energy sovereignty and
32:10
Speaker 3: the extent to which that idea catches on in markets
32:14
Speaker 3: where Canada wants to export, and that's primarily Europe in.
32:18
Speaker 1: Asian Markham, thank you so much for the insight into
32:21
Speaker 1: all of this.
32:22
Speaker 2: I won't take up any much more of your time.
32:23
Speaker 2: I know you've got more interviews that you've got to
32:25
Speaker 2: do today.
32:26
Speaker 1: It's a really complex topic that's outside of the wheelwell
32:30
Speaker 1: of most people, but it affects absolutely everyone. And as
32:34
Speaker 1: much as Donald Trump likes to say everything's going fine,
32:37
Speaker 1: I don't care who you are. When you drive by
32:38
Speaker 1: the gas station and you see the price right now,
32:40
Speaker 1: and you know that it's been going up and up
32:43
Speaker 1: and up, and it doesn't seem like it's going to
32:44
Speaker 1: be stopping anytime soon. That's why we go to the
32:47
Speaker 1: experts to have it broken down for us. Markham, you
32:50
Speaker 1: are that expert Today, energy and climate journalist and commentator,
32:53
Speaker 1: CEO and publisher of Energy Media, markam Heslap, thank you
32:57
Speaker 1: so much.
32:59
Speaker 3: Well, thank you very much for having me. John. I
33:00
Speaker 3: always we always appreciate our conversations