In the News: Geopolitics, Canada’s Carbon Tax and Clean Energy Stocks
This week, Peter and Jackie discuss recent news headlines, including some scary topics on this Halloween podcast recording. Here are some of the topics they discussed:
- Rising geopolitical risks. Why are the oil markets calm in the face of the Israel-Hamas conflict and the potential for an oil outage?
- ExxonMobil and Chevron announce significant acquisitions. In contrast to the news headlines, Peter and Jackie argue that these acquisitions could make sense, even in the scenario that oil and gas demand declines.
- Clean energy stocks tumble. Clean energy indexes like the WilderHill Clean Energy ETF (PBW) are down about 35 percent since the summer. Why are stocks down, and what are the likely implications?
- Canada announces a three-year pause in the carbon tax for heating oil to help with affordability. Yet, other sources of heating in the country do not get a break. Jackie and Peter discuss the outrage in areas of the country that do not depend on heating oil for heat, as well as other possible implications.
Other content referenced in this podcast:
- Thunder Said Energy: War and commodities: how do conflicts impact prices? October 12, 2023
- The Clean Investment Monitor: Tracking Decarbonization Technology in the United States, Rhodium Group, MIT, CEEPR, September, 2023
- Prime Minister of Canada Office (PMO) announcement “Delivering support for Canadians on energy bills,” October 26, 2023
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Episode 217 transcript.
Speaker 1:
The information and opinions presented in this ARC Energy Ideas Podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Speaker 2:
This is the Arc Energy Ideas Podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas Podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian and welcome back. Well, Jackie, we don’t usually timestamp our podcasts, in other words indicate when we record, but today is Halloween. And I feel like we do need to timestamp it because there are so many things that are moving so quickly that could change between the time we record and the time that we release the podcast. That it’s incumbent upon us to sort of give our audience a sense of when we’re recording it. So happy Halloween. And you’re expecting some kids tonight. You’re getting dressed up.
Jackie Forrest:
For sure. I’ve got my monkey onesie that I’m going to be wearing. Those are the easiest costumes ever. I’m glad they got invented. Way better than the old costumes.
Peter Tertzakian:
Well, I’m going to get dressed up as the world.
Jackie Forrest:
The world.
Peter Tertzakian:
Because the world is becoming a very scary place, and I don’t say that lightly nor with any sense of satisfaction. But those are some of the topics that we’re going to discuss today. It’s just you and me. We don’t have a guest, so we’re going to talk about all sorts of things, including clearly the geopolitics in the Middle East and the situation there.
We’re going to talk about carbon taxes in this country. What else are we going to talk about? We’re going to talk about the state of the equity markets for green energy.
Jackie Forrest:
And we also wanted to talk about these big acquisitions by Exxon and Chevron and some implications from that. So, lots to cover. Lots has been going on in the world of energy. And you’re right, there’s definitely some scary stuff, especially this Israel-Hamas conflict but it does also have some implications potentially for oil markets.
Now so far, oil markets have been blasé and not moving very much, but there is the potential that this conflict could spread beyond the borders of Israel. We’ve already seen some attacks in Syria that could be related to conflict with the US and Iran. And of course, this is a major choke point for world oil flows. The Strait of Hormuz averages something like 21 million barrels a day of crude transiting through it, or 21% of global supply.
And for a reminder, the Persian Gulf, it goes through and then it goes through this little choke point between Iran and the UAE. A lot of the countries involved and potentially in the situation here are bordering along that either the Persian Gulf or that Strait of Hormuz.
Peter Tertzakian:
The situation escalates, and I think we’re all sitting on edge watching the situation very carefully because it certainly has the potential to spiral and expand. And I think there’s a couple of dynamics. One is an outright expansion of the military theater and the conflict to include countries like Saudi Arabia, Iran, then of course going north into Lebanon and into Syria and so on. There’s that part of it.
But associated with that is also the pressures that are starting to build on some of the Middle Eastern countries. The Arab world, who are sympathetic to the Palestinians, and the sympathy creates almost like a populist force for the leaders of their countries to do something. And already the boil over is starting to show itself in countries like Iran where the president over the past weekend basically said a red line has been crossed. Meaning that it’s getting close to the time of action. And I think that if the situation continues to escalate, that other countries are going to have to act in the Middle East.
And this whole situation, and I’m going to show my age here because I’ve long said on our podcast that I’m a child of the Cold War, and certainly remember the 1970s, the Arab-Israeli conflicts, the Arab oil embargo, October 1973. That embargo was in response to the Arab-Israeli War. And the Arab nations effectively sanctioning the export of oil to Western countries, including Europe, Canada, the United States. So, the potential for choking off oil one way or another, either physically in the Strait of Hormuz or by virtue of some kind of embargo against the Western countries that support Israel is almost like a movie from the past to me. And I think that this is a very dangerous situation. And I read an article even a couple of days ago that if the Strait of Hormuz is blocked, you could see potentially the price of oil going to $150, which I wouldn’t disagree with.
Jackie Forrest:
Right. Well, so a lot of people are very focused on the conflict going beyond the borders and having an unplanned outage. Maybe because of this conflict, there’s some military actions that are taken that take out oil supply. I don’t think anyone’s really talking about voluntarily curtailing production, but you’re right, we saw that movie before. It is an obvious potential scenario that really isn’t being talked about.
Peter Tertzakian:
I mean, the world is a complex web of relationships and geopolitics, and we know even before this conflict, those relationships were shifting and changing as a consequence of the war in Ukraine, the tensions between China and the United States, the whole geopolitical map of the world has been changing.
And so, it leads to a situation of instability and uncertainty in terms of whose friends with whom and how this all manifests itself. So, we will watch the situation carefully, hope it deescalates and see where it goes.
Jackie Forrest:
I wanted to point out, we had Rob West on the podcast from Thunder Said Energy several weeks ago, but I wanted to point out for those that are signed up to his newsletters because of the podcast and by the way…
Peter Tertzakian:
I hope you are.
Jackie Forrest:
We did hear a lot of feedback that people enjoyed the podcast and were signing up for the newsletter. He did put out a newsletter on October 12th called War and Commodities: How Do Conflicts Impact Prices? And he had studied going back to something like 1800, all the major conflicts in the world, and then looked at what were the implications on commodity prices, not just oil and gas, but he looked at things like cotton and other commodities.
But what he found is during major conflicts, 95% of commodities saw higher prices, and the average commodity doubled. So, in the next while these sorts of events do lead to higher commodity prices, if you look at history. Now, hey, we could have a recession in the next 12 to 18 months, and if that happens, it may dampen that impact.
But over the long term, if we’re entering potentially a longer period here where we’re going to have more geopolitical conflict in the world, this probably also means an era of higher commodity prices as well.
Peter Tertzakian:
Well, it does. And for the moment, the Russia-Ukraine situation has taken a back burner in the news, but it’s still very much concerning in terms of its impact on all sorts of commodities including oil and gas. There’s no question that military conflict manifests itself in a number of ways as it relates to commodities all the way from countries that will hoard it because they need it.
The commodities is particularly energy and also related to that, the constraint of supply chains or the shifting of supply chains around the world. And that is what’s happening now. So, although the price of oil has softened a little bit, I would say that watching the trading, it looks very, I’ll call it volatile and sensitive to the upside.
Jackie Forrest:
I would agree. But at the same time, news of recession and that can push it the other way for a time.
Let’s talk about the big acquisitions that happened by Exxon and Chevron. So, ExxonMobil announced a merger with Pioneer Natural Resources. All stock transaction. That was on October 11th valued at almost $60 billion US. And the stock price went up. This will double ExxonMobil’s Permian footprint and probably create some cost efficiencies because they already had an operation there.
And then not long after October 23rd, Chevron announced an agreement to acquire Hess. Again, all stock transactions. So, you don’t need to raise a bunch of equity here from new investors or get a bunch of debt. This was valued at $53 billion. Chevron now has a higher share in Guyana project. They have some Bakken assets, DG and Permian Basin, so a lot of US tight oil and tight gas assets there.
And the stock price just went down slightly after the news. I just wanted to look at the market cap because this may surprise you. But these American companies are now very big compared to the supermajors in Europe, which we think are such large companies. So, Chevron’s market cap is, when I last looked was, $270 billion. Exxon’s was almost $420 billion. Compare that to Shell, which was only $180 billion. Here we have those two American companies, both bigger than Shell in terms of market cap.
Peter Tertzakian:
Yeah, they’re getting big. And it’s interesting to think back to the history of the oil and gas industry. There’s two camps in the world. There’s the camp, which was the dominant camp, which is national oil companies. These are big oil companies that are owned by the state. Aramco is the biggest classic example. There are many in other countries all the way from Russia to Norway and beyond.
Then there are the independent oil companies. These are the free market oil companies dominantly in the United States and Canada, but also a few in the European area. The IOCs, well, if you wind way back to Standard Oil, which was a giant monopoly and was then broken up into various sisters. And over the years, over the century, the mergers have slowly consolidated the industry back into bigger and bigger entities. For example, ExxonMobil, right? Exxon and Mobil coming together. Now we have more consolidations happening of the independent oil world. Some people say that that is a consequence of, well, these companies are validating that there’s going to be oil demand for a long period of time.
But actually I would argue the reverse. You consolidate to get your cost structure down to become more efficient when things like there’s potential price weakness on the horizon.
Jackie Forrest:
Well, and I’d add to that. I would say that in many of these new assets they’ve acquired are low-cost barrels. US onshore is some of the lowest costs supply out there. And this Guyana, these offshore projects, they’re quite low on a per barrel price in terms of the CapEx and even the OpEx costs. I would argue that in a declining scenario, these are the types of assets that would make sense to hold because they’re lower costs. So it doesn’t necessarily mean that you’re denying that there’s potentially a decline in oil demand because you’re buying these assets.
Peter Tertzakian:
Yeah, yeah. We’re definitely going, I think through another phase of consolidation in the industry. The last major phase, I am not good at recalling exact timeframes, but of course we had Exxon, Mobil, BP, Amoco, and other types of consolidations. And then even here in Canada, we have had the major oil sands companies buy out the interests of some of the multinationals to consolidate and grow. And some of those companies have become quite large, even on a global scale. I expect to see more, actually. I think that you’re going to see more as the global realities start to set in.
Jackie Forrest:
And I think another dynamic you said to consolidate and grow, but you can’t grow anymore. You can just consolidate. The fact that investors aren’t rewarding you for growing, they want the money back all in dividends, to me makes this the more likely way. It looks like they’re rewarding companies for acquiring other companies because the stock prices were pretty resilient with these big transactions. So, if you want to grow, become more efficient, have a lower cost structure, this is the only way to do it, so I think you’re going to see more of this.
Peter Tertzakian:
Yeah. You put two companies together, and at the start, it’s maybe 1+1=2 in terms of the dividends and so there’s no real gain. But if you can get economies of scale, then all of a sudden 1+1 becomes 2.1, 2.2, and that’s the way you grow your profitability. So I think that this is just a natural extension of not only market dynamics in the Western independent oil company world, but it’s potentially even a response to a future where the demand for oil may soften, the rollover expected, say 2030-ish, and then being prepared for that eventuality.
Jackie Forrest:
Having the right assets.
Peter Tertzakian:
Having the right assets and having scale.
Jackie Forrest:
Okay, well, let’s talk about clean energy stocks. They’re a bit of a different story. They have been falling quite a bit. We did talk about this briefly in one of our podcast intros, but we wanted to dive into it in more detail and it’s kind of gotten more dire since then.
Well, let’s just talk about what’s happened since the summer. We’ve got clean energy indexes, so things like the WilderHill Clean Energy or Canadian Clean Energy S&P Index. Those are both down in the range of 40% since the summer. Compare that to Canadian oil and gas, which is up a bit, or the overall market, which is just down a little bit over that time. They’ve definitely underperformed the overall market and oil and gas.
And if you go back and look at where the stocks are pricing today, you’re back to the index values of six years ago in terms of where these stocks are. Remember that Biden bump in 2021 when all these stocks, clean energy ones, ran up, your valuations today or the price that these equities are trading at isn’t that much different than six years ago. In some cases, it’s even a little bit lower than back then. These companies are really reversed the clock in terms of what their equities are worth, and therefore how much money they could raise if they wanted to grow or issue more shares to finance their business plans.
Peter Tertzakian:
Right. So, there are a number of ETFs or baskets of companies that represent the clean energy segment of the energy economy. One of those is, as you mentioned, the WilderHill Clean Energy Index. The symbol is PBW, and you can go back and take a look at it. Maybe we’ll post the chart for our listeners. This would include a basket of companies ranging all the way from solar panel manufacturers to clean energy utilities, hydrogen companies, batteries, and so on. So, it’s pretty indicative.
And as you say, it’s made a round trip since 2019. It had a big surge in 2020, 2021. It’s not really good news for the clean energy transition because many of these companies rely on equity financing to be able to fund their operations. We’ll come to that, but let’s talk about the reasons for why these companies are under such pressure in the stock market.
Jackie Forrest:
Yeah, I mean, I think the biggest is these high interest rates. They’re increasing the costs. And many of these clean energy projects used a lot of debt, so they’re increasing the cost. You see it even, we saw in the UK, they put out a bid for offshore wind, and the price that people were willing to deliver these projects at was higher than what the government was willing to pay. And a lot of that is to do with interest rates, but also supply chain issues.
Over the last several years, even going back to COVID, the cost of everything has gone up. And that’s meant that the cost for the equipment associated with these projects has gone up, and that’s increased the cost. And now we’re finding with this fall in the equity prices that even the equity portion that you might’ve been financing is going to be more expensive for you because your cost of capital, the amount of shares you have to issue to raise the same amount of capital is gone up.
This is, to me, impacting everything, whether it be residential solar to slower demand for EVs, to some of these big utility scale projects. I think we’re going to see a slowdown. It may not have been showing up in the numbers right now actually, in terms of a lot of projects still have momentum because they maybe were agreed to 18 months ago, two years ago.
Peter Tertzakian:
Well, and that’s when they raised their money.
Jackie Forrest:
Yeah. That’s true.
Peter Tertzakian:
There was an incredible amount of equity capital that was raised circa 2021, early 2022, at the very lofty valuations that we saw in the market. Definitely interest rates is one factor, but the other factor I would suggest is unfulfilled expectations. This is, again, another replay of a movie that we saw 20 years ago when there was a lot of exuberance about a clean energy revolution, and we saw a lot of investors piling into stocks, including tech stocks. And then the realization sets it a combination of macroeconomic factors and just far too aggressive expectations for adoption have led to disappointment in the quarterly earnings over the course of the last year and a half. So we see the big slide and reset.
And this is consequential because the ability of these high growth potential companies that don’t have a lot of revenue yet, to raise more capital after their bank account runs dry, is now quite limited. And I think we’re going to see that manifest itself probably within the next 12 to 18 months.
Jackie Forrest:
Right. Well, and it’s interesting. We were just at the Electricity Transformation Canada conference.
Peter Tertzakian:
Yeah.
Jackie Forrest:
And I asked the question in one of the panels I was in, I also talked to people, and people seem to be quite busy right now, but I think the slowdown is coming. The markets are always forward-looking. And if you go look, in fact, there was a very interesting study, which we we’ll put a link to from the Rhodium Group, which looked at the increasing spending in the US in different clean energy areas. And the takeaway, and it was up to Q2 of 2023. The takeaway is that all the areas are growing, and actually you saw quite an acceleration once the IRA was introduced in terms of the amount of spending in many of these categories.
Things like ZED purchases, battery manufacturing, sustainable aviation fuel, how much money’s been spent on that. But I think the slowdown is still coming, because there was that momentum in the system. And what the stock market is showing is that when I look out 12 months, I don’t think that same rate of growth is going to be there.
Peter Tertzakian:
Yeah, I definitely think so. It’s important to point out that not all segments of the clean energy landscape, and it’s a very vast landscape, have been hit equally. Again, it’s the more speculative portions of the landscape that have taken a big hit.
For example, the hydrogen stocks have really come off hard as the lofty expectations have not been fulfilled. Yet, solar for example, has not come off as much.
Jackie Forrest:
Although it has come off, but you’re right, it wasn’t as high. In fact, if there’s any silver lining to this, it may be that these companies are valued in a much more reasonable way.
I’ll just give you some examples. So if you look at the multiples, the enterprise value to EBITDA. So basically, how many years of profit are these companies being valued at? Hydrogen companies, in February of 2021, we’ve created our own index of hydrogen-based companies based in North America that are public. And they were trading at a 300 multiple.
Today they’re at a 26 multiple, which even now seems quite high to me. But that’s much more reasonable than paying 300-times their profit, their annual profit for equity.
Peter Tertzakian:
Yeah, the more attractive values suggests that we may actually see investors that sat out the exuberance of 2021, 2022, come back into the market.
Jackie Forrest:
Right. Because they were saying, “I’m not going to pay that much.”
Peter Tertzakian:
“I’m paying way too much”, and now the expectations have moderated and may come in. We shall see. It’s imperative that private capital and private investors come into the market at some point to finance the clean energy transition, because we know that mere public financing and subsidies is an insufficient pool of capital to fund the entire transition. In fact, I’ve long argued that government money should just be considered seed capital to get things kick-started and then the private capital has to follow.
Right now, it’s not following, the market kind of shows it. But we shall see going forward as the macro-situation of the world, and a whole bunch of other dynamics, interest rates and so on, how this will shape up. But if there’s any silver lining as you say, it’s that at least the price you have to pay to get into the clean energy funding has become much more moderate.
Jackie Forrest:
So, let’s just wrap up with, last year we had 1.1 trillion, according to Bloomberg, new energy finance spent on clean energy in the year in terms of CapEx spending. I think 2023, we’re going to see an increase in that, because there’s a lot of momentum in the system. But I think it’s 2024 we may actually see spending stay flat, or maybe even go down a bit versus 2023.
I still believe when you look at those IEA scenarios about how CapEx spending is going to go up, I mean, they say in their different scenarios for example, their steps one, which is current policy that by 2030 spending would be 1.5 times higher on clean energy projects annually. With their announced pledges, it would be two times higher.
I think we’re still going in that trajectory, but it’s not going to be a linear path. I think this is a dip down. It’s going to be up and down, but overall, it should be trending up. Because there’s still a lot of demand for clean energy, there’s all these policies. I think the capital will come, and it will be spent, but it may not be in a nice linear path that exactly meets those goals.
Peter Tertzakian:
As I said the world is a scary place, so investors are not at the moment inclined to take excessive risks with their capital. And with interest rates high, the choices between putting your money in more fixed income paying instruments rather than risky equities. And so, the world has to calm down a bit too, before investors are likely to increase their allocations to the riskier spectrum of tech companies, whether they’re clean energy or otherwise.
Jackie Forrest:
Yeah, I mean, it’s a good point, right? The central bank, so the US government, the Congress, has put in these policies like the Inflation Reduction Act aimed at accelerating clean energy. But the central bank here has kind of done something that kind of has worked against that in a couple of ways. The interest rates are increasing the cost for these projects.
But you bring up a good point. Investors are saying, hey, I can get a guaranteed return here, fairly good return, without having any risk. And so that’s another thing that’s I think going to keep capital on the sidelines from going into some of these more risk areas.
All right well let’s finish off here. I know that a lot of our listeners will be interested in the debate around the carbon tax here in Canada. So, Justin Trudeau announced a three-year carbon tax exemption on home-heating oil. So, if you’re burning heating oil to heat your home, you no longer have to pay the carbon tax. However, he didn’t make an exemption for other types of fuel to heat your home like natural gas.
Now, this is a policy that is aimed at helping people in Atlantic Canada, since that’s where most people use heating oil. Apparently about 40% of homes in Atlantic Canada use heating oil. And so this has created quite a stir across the country, because people are saying, “hey, this isn’t fair”. People across the country are struggling with affordability, so why are just people in Atlantic Canada getting a break? And so, a lot of the provinces have had a reaction to this.
Peter Tertzakian:
Yeah, they certainly have. This is a very politically challenging decision that has been made, but also reflects the underlying circumstance of the country where inflation all the way from the grocery store to your utility bill is really taking its toll on people, particularly in places like Atlantic Canada.
So in some ways it’s not surprising that the government had to take this action, but it just triggers a chain reaction. We had Premier Moe in Saskatchewan yesterday say that he is going to stop collecting the carbon tax on the natural gas utility.
Now, it’s easy for him to do that because the natural gas utility in Saskatchewan is state-owned. So that works, but it’s not necessarily going to work in other natural gas fired provinces like Alberta.
Jackie Forrest:
Yeah. I mean, he basically said, well, the feds have the choice to remove it from natural gas. But if they don’t by the 1st of January of 2024, SaskEnergy will stop collecting. But you’re right. And here in Alberta it’s private companies.
Peter Tertzakian:
Independents.
Jackie Forrest:
Yeah. I mean, I don’t know if that situation exists in others. I know Ontario, Doug Ford has spoken out that he thinks that the carbon tax is making life more expensive, and we should be giving people in Ontario a break if they heat their homes with natural gas.
So it’s definitely created a lack of fairness across the country. And I think we talk about this western alienation thing, but it definitely kind of stokes the fire of those feelings when people out in Eastern Canada are getting a treatment because the carbon tax is too much for them.
And by the way, I’ll just remind everyone, they were getting a rebate. So everyone across Canada, if you were a person that was below-average in your income, you were getting more money back from the government than you were paying in the carbon tax. So it’s not that they weren’t getting a rebate for that carbon tax.
And Justin Trudeau has always said that this is affordable because of that. So he’s also kind of like, you turned on that message to say, well, suddenly the rebate isn’t enough and we have to cut the carbon tax. So I think he’s opened a bit of a can of worms with that.
Peter Tertzakian:
Yeah, I think I said in a podcast a long time ago, on carbon taxes and the general populace, that generally speaking, people do not connect the dots between a rebate that they get and a tax that, they just see the tax, and the money just gets deposited into your bank account.
So this thought like, “oh, I paid the tax and now I’m getting a rebate”, I don’t think the psychology works that way. Which is why the populace presumably in Atlantic Canada has risen up and said, “I can’t afford this.”
And this is why politicians that say axe the carbon tax, certainly Jason Kenny used that line here in Alberta several years ago, to create success in winning it. It just resonates with people. Right?
Jackie Forrest:
Yeah. Well, and it’s funny you say that. I had to go, and I did check my bank account, Peter. And I in, in October of 13th, got a $337.75 rebate from the government. But you’re right, with all the transactions that go out in people’s lives, you maybe don’t say, “Oh, okay. Well, that offsets the fact that my utility bill-”
Peter Tertzakian:
That’s what I’m saying.
Jackie Forrest:
… is a bit higher”. But it is interesting, Justin Trudeau and the Liberals have always said that that is enough, that it is affordable. And he’s really broken that belief by saying, “Well, suddenly it isn’t affordable in one part of Canada, the rebate isn’t enough.” So, I think he’s going to have to deal with that for sure. The other interesting thing he said, and I believe this, the price signal we have today is not enough to motivate you to make a change because it’s not enough to create the economic incentive to move to something else, and we need a much higher carbon price. So, in which case it’s just a penalty, but he actually said, “The price signal on heating oil is not resulting in enough people being able to switch to electric heat pumps despite people wanting to move to these cleaner home heating options.”
Peter Tertzakian:
Okay. Let me ask you a question. What does an electric heat pump cost? How many thousand dollars?
Jackie Forrest:
I’m not quite sure, but there was some other information, and I will put a link to the PMO announcement with this. They said that they’re increasing the incentives to help people switch to heat pumps, specifically for people who are on heating oil. This isn’t for everybody in the country, by the way, only if you’re on heating oil, another one of these biases. But they’re going to give something like 10,000 to $15,000 is the amount that the federal funding will make eligible for homeowners that can receive for installing a heat pump. And this will be adding up to an additional 5,000 in grant funding to match provincial and territorial contributions. So I don’t know, this is telling me that heat pumps could be over $15,000, maybe even more because there’s some other matching going on. But anyway, people in Atlantic Canada are going to have that option and get all these grants, and they actually say all of these incentives are going to make the average heat pump free for a lower income household.
Peter Tertzakian:
Well, again, I think there has to be sensitivity to understanding the psychology of a household. People who are struggling to put food on the table, send their kids to school and sports programs and what have you, just trying to get by, are not thinking about capital spending even if there’s subsidization. It is just not kitchen table conversation, I would argue. So we’ve got to think differently about how to address the situation, and what we’re seeing is a consequence of not being sensitive to, as I call it, the psychology of the situation or seeing the unraveling of this sort of carbon policy. And I don’t know how much it’s going to unravel or where it’s going, but I would suggest that it’s politically very damaging.
Jackie Forrest:
Yeah. Well, and we have put this in context of other things that are going on. So, we are expecting potentially to learn about this oil and gas cap on emissions later on, maybe even in the next month or so.We’ve got this clean electricity by 2035. These are policies that for western provinces are very costly and are going to hurt our economies. In the case of the oil and gas cap, it could mean a curtailment of production, which would have billions of dollars of lost revenue and royalties. Clean electricity standard is going to require us to put carbon capture storage on all our natural gas generation, which is going to be very expensive, and that’s all fine. That’s going to have an economic impact to western provinces, but here in the east, this heating oil thing, they can’t afford it. So definitely, when these other policies roll out, I think it’s just going to create even more resentment.
Peter Tertzakian:
Yeah, I tend to agree. And the clean electricity regulation emissions cap, these are the subjects of an entire podcast, which I’m sure we’ll get to. That psychology is around the boardroom table and the boardroom table decisions, and again, there has to be some sensitivity in terms of understanding how the decisions are made to spend money on things like upstream, decarbonization, behind the wall switch or behind the gas pump, the upstream stuff. Whereas the heating oil is a kitchen table conversation and a kitchen table decision making thing, so they’re quite different.
And as you know, the Greenhouse Gas Pollution Pricing Act, which was, I believe, enacted in 2019 or somewhere there that was the federal carbon tax had two parts. The one part was on consumer facing heating oil, and the other part was on big industrial emitters. So what we’re seeing now really is challenges to this whole federal carbon pricing. We’re seeing it on part one right now, but I think we’re going to probably start to see its impact even on part two as industries in Canada start to say, “Well, wait a minute, I am not being competitive with the United States or other jurisdictions that do not have a carbon tax.”
Jackie Forrest:
Yeah. No, I think it opens up questions about the whole thing for sure.
Peter Tertzakian:
Yeah. Well, Jackie, as I said at the outset, the world is a scary place, but we’ll remain optimistic. I’m a battery half full type of person.
Jackie Forrest:
Yeah. Well, we have to be.
Peter Tertzakian:
We have to be.
Jackie Forrest:
And it’s Halloween, so you can always get some chocolate to-
Peter Tertzakian:
Great.
Jackie Forrest:
… deal with your fears. Well, thank you for our listeners for joining this podcast. If you like this podcast, please rate us on the app that you listen to and tell someone else about us.
Speaker 1:
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