In response to Wall Street Survivor’s Blog
Source: http://www.alternet.org/environment/oil
As the global oil prices continue to drop, companies are having trouble making a large enough profit to continue in some mines.
Source: http://www.livetradingnews.com/royal-dutch-shell-to-cut-6500-jobs-on-oil-price-slump-113629.htm
In September, Royal Dutch Shell (Shell), pulled out of a billion dollar exploration near Alaska in search of new oil deposits. This was a major sunk cost that Shell realized they could not get back. Recently, they just announced that they will cease construction of the new Carmon Creek thermal oil sands in Alberta. The global oil price has fallen from around $100 to $46 per barrel (as of November 2, 2015) in approximately a year. This is due to the approximate 1.5 million barrels of excess oil produced daily. This has hit all of the major energy companies severely as they have had to postpone $200 billion worth of spending on new projects in total.
Source: http://www.vwsoilandgas.com/resourcecenter/pressreleases/2014-03-04,veolia-carmon-creek-heavy-oil.htm
Shell’s reason for pulling out comes as environmental concerns loom and as there is a shift in political parties in Canada. The 80,000 barrel a day project would have needed a large pipeline to transport this oil but with the Keystone XL project still being discussed in Washington D.C., the future of this proposal is in question. This is the first time that a company has publicly canceled a project due to the uncertainty of the pipeline. In addition, with the Liberal Party coming into Canada, this marks a change in leadership that has been Conservative for the past 9 years. Although the Liberals have been in favour of the pipeline because it will create more jobs in Canada, there still will be a transition period between these two parties and it will take corporations time to adjust to the new power.
Source: http://inhabitat.com/us-state-department-approves-the-keystone-xl-pipeline/
It will be interesting to see how this negative economic impact will affect Canada’s dollar in the future.
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