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Looking Back on 2022: What Were the Big Surprises?
On this week’s podcast we look back on the key themes that shaped the past year. First, we review our predictions from early January. How well did we predict the issues that would dominate the discussion in 2022? We also review some of the big stories of the year that we did not foresee twelve months ago.
Content referenced in this podcast:
- Jackie’s commentary: Learnings from building Canada’s Railway for Today’s Megaprojects
- The Wall Street Journal article on how Germany accelerated the construction of an LNG import terminal: The Five-Year Engineering Feat Germany Pulled Off in Months
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Episode 182 transcript
Disclosure:
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.
Announcer:
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, welcome back. Well, I was reading the many publications that I read over the past week and noticed there was a few, including one in the Wall Street Journal, about how the Germans built an LNG import terminal in less than 200 days in what would normally have taken five years. Now, of course, there’s an energy crisis over in Europe, but it does tell us that you can get things built. You just wrote an article in the Globe and Mail, about a week ago I think it was published or a couple weeks ago, which talked about the same thing or questioned, why is it that it takes so long to build things in this country?
Jackie Forrest:
Right. So my article was titled, “We Built the Railway in Five Years, So Why Are So Many Mega Projects Now Stalled?”. I’ll put a link in the show notes to it, but I argue that to meet net zero we need to do things faster and different, and that includes things like less political risk, there’s a lot of political uncertainty in terms of getting these approvals, and a less uncertain process. And I use the railway to remind us that when there’s a national imperative, entrepreneurial drive, and support from the highest levels, big, challenging projects can be built.
Peter Tertzakian:
Well, we know building energy mega projects is a hugely contentious subject in this country, and that contention was really emphasized by some of the reactions you got.
Jackie Forrest:
Yeah, I definitely had a lot of reactions. People either really liked it because there’s some anger that we just can’t get things done in this country, and they liked it a lot. Others really didn’t like it. And they didn’t like it, some of them got the wrong message, I’m not saying the railway was done correctly. I noted it in the article, it killed thousands of people. We brought in people from China, didn’t treat them well. The Indigenous People, their lives changed completely because of the railway. So it wasn’t done right and it shows why we do need regulatory reviews. But some people are thinking I was advocating that we go back to that to get the job done, and I certainly wasn’t doing that. I want to come back to that German example: they did a five-year project in less than five months, and they did it the right way. They talked about, if you read the article and I’ll put a link to this Wall Street Journal article, did things like …
Peter Tertzakian:
Protect the frogs.
Jackie Forrest:
Protect frogs, protect bats. They were dealing with contaminated soil, they did it the right way. And that’s what I’m saying. We still have to do it the right way, but we’ve got to accelerate how fast we do this. And actually, interestingly enough, the Parliament in Germany passed an LNG Acceleration Act speeding up the procedures for reviewing, approving, and awarding contracts specific to LNG projects. So that’s what we need to do. It’s just totally unrealistic that we’re going to make the types of reductions we’re talking about in 2030 or even 2050 when it takes over 10 years between starting a project and ultimately finishing it. And five of that is all paperwork and a review process.
Peter Tertzakian:
Yeah. Well, it tells us that energy transition can happen quickly, but that the barriers of energy transition, as I’ve always said, it’s not necessarily technology, it’s not necessarily engineering, but it’s actually just all the social, bureaucratic kind of issues that stand in the way. Entrenched policies, new policies that are excessively onerous in terms of regulatory. But again, the Germans showed that you can actually accelerate these things if you have a will to want to get things done. So read through the article, well worth it, and the many articles that are coming out on this subject as we seek to transition. But let’s go backwards a year, Jackie, given that the end of the year is nigh, and talk about what we said at the beginning of this year and see how well our scorecard turned out.
Jackie Forrest:
Yeah, it’s that time of year where we have to revisit our predictions from 12 months ago. Last year we actually talked about seven themes to watch in 2022. And I have to say, looking back at our track record we did pretty good this year. I think we got most of them directionally right. Yeah, maybe the magnitude of the issue was a little different than what we predicted, but let’s go through them and talk about the different seven themes.
Peter Tertzakian:
Actually, why did we pick seven?
Jackie Forrest:
I don’t know. You’re responsible for that.
Peter Tertzakian:
Is that all we could think of?
Jackie Forrest:
I think it was seven big themes, and people can get lost after that.
Peter Tertzakian:
Well, people like lists, so anyway, yeah, seven themes. Okay. First one, oil price.
Jackie Forrest:
Oil price. So 12 months ago the oil demand was still weak because of the COVID. We actually had lockdowns, if you forgot, this time last year here in Canada in many places. So there was a consensus that things would improve, but we’d have a well-supplied oil market. And we talked about the fact there’s a lot of potential for the market to be tighter than people think and prices to be higher. Well, certainly that was the case. The oil market certainly was tight. And after the Russian invasion people really had bullish outlooks, they were talking about $120 oil. But that certainly wasn’t the case back in January.
Peter Tertzakian:
Right. Well, I think I saw $200+ at some point.
Jackie Forrest:
In that March timeframe.
Peter Tertzakian:
In the March timeframe, in the early wake of the Ukraine invasion, but that didn’t happen. I think we got over $120 momentarily and then it started to pare back over the course of the year.
Jackie Forrest:
That’s right. And why was that? Well, first of all, demand didn’t turn out to be as big as people thought. China was a big part of that, but so was the fact that the economy was a bit slower and so demand wasn’t as strong, and then there was more supply than expected. Back in March people thought all those Russian barrels were coming out of the market. Would it be two, three? People didn’t really know. But it turns out that those Russian barrels were very resilient. They continue to find their way into the market. Now, December 5th has come and gone, and that was supposed to be a big day to see less Russian supply in the market. And with the price actually being quite soft since then, it’s no sign that Russian supply is coming out even now, but that was a big part of it. And another one was the US and Europe with their strategic petroleum releases added more supply. So we directionally got it right, in that we did have a much tighter market than people were thinking about a year ago.
Peter Tertzakian:
Right. A year ago the Russians were amassing their Ukrainian border with tanks mobilizing and there was a lot of speculation about whether or not they were going to actually invade. Well, they did. We did alert people, I think, at the time that this is something definitely to watch.
Jackie Forrest:
Yeah. In fact, you had said maybe that this supply, because people were already talking about sanctions if Russia were to go ahead, that this supply would be too large to hold back with sanctions because the world needed that energy. And you were right in some respects, Peter. The sanctions came on, but they haven’t worked yet because that is just such a large void to fill when it comes to Russia for both gas and oil. So we have seen more of that supply continue to hit the market.
Peter Tertzakian:
Yeah. Nevertheless, we didn’t predict, and I don’t think anybody really did other than speculate what could happen if the Russians invaded, that there would be an energy shock that has not really been seen since the 1970s, and that we would actually descend into effectively a Cold War type environment.
Jackie Forrest:
Yeah, no, for sure. We didn’t foresee that or the prices we saw, especially on natural gas at times this year in Europe, just crazy. Like 10 times what normal prices would be and all these different things that have unfolded, like the price caps, people talking about windfall taxes on energy producers, governments having to subsidize people just to help pay their utility bills. And a big one: the sabotage of critical infrastructure, blowing up the Nord Stream 2 and Nord Stream 1 pipeline, billions of dollars of infrastructure. Which when you think about it, nobody really wins by doing that.
Peter Tertzakian:
No.
Jackie Forrest:
That I can see. So we are definitely in a different era than we were thinking about 12 months ago when it comes to the energy shock.
Peter Tertzakian:
Yeah. Now, one thing we did talk about after the energy shock, which was the idea that when you have an energy shock you actually regress in terms of your energy use. In other words, you start burning wood, burning coal, burning whatever just to keep the place warm, just to keep the lights on. And so that was, I think, a very early podcast after the invasion, we talked about that. Before you get into actually a substitution of oil and gas type mentality, you actually go backwards first.
Jackie Forrest:
Right. And you actually had a commentary on this as well. On March 8th, you talked about the fact people have to do what they need to do in the near term, and that will probably mean burning coal or wood to stay warm.
Peter Tertzakian:
And they’re doing that. I’ve even heard of reports within Eastern Europe people are burning plastic, if you can believe it. It’s pretty dire in some parts of Europe as a consequence of the cold weather and the invasion of Ukraine.
Jackie Forrest:
Yeah. And so it’s difficult that way. It’s better than it could have been, thanks to the Germans and the Europeans filling up those natural gas storage tanks to the very highest level. But you also talked about in the longer term, today’s high energy prices and stresses can accelerate the energy transition. But this is more like three-to-four years from now. And we definitely saw signposts of that, with all the new policy that has come out that supports clean energy. I think three-to-four years from now, it will be much bigger than it would have been if we didn’t have this energy shock.
Peter Tertzakian:
Right. And the rationale for that argument goes back to the 1970s oil price shocks where initially, again, things were regressive, but then the policies came in to substitute oil with nuclear power and centralized power generation, and actually even burning more coal at the time. But this idea that you are going to develop technology that is ready and waiting, as I said back in the 1970s, that was nuclear power, as a substitute for the challenged fuel that is undergoing an energy price shock, is a script that we’re seeing today. So there’s initially a regressive phase, you go backwards in the shock and awe of the energy crisis, and then the policies come in as you just said, and then you start moving forward to try and figure out how to rebalance and get off the systems that are causing the problems in the first place.
Jackie Forrest:
Right. And these new systems don’t get built overnight.
Peter Tertzakian:
No, they don’t.
Jackie Forrest:
As you said at the beginning of the podcast, they take too long.
Peter Tertzakian:
Right.
Jackie Forrest:
But Germany’s showing that you can do things quickly when there’s an emergency.
Peter Tertzakian:
Well, when there’s a crisis, unfortunately you need a crisis to get things done, which does not really speak to a smooth energy transition.
Jackie Forrest:
No, it doesn’t. It speaks to the fact we may continue to have a shortage of energy supply.
Peter Tertzakian:
Yeah.
Jackie Forrest:
Let’s talk about the third topic, which was the elections. And what we were saying this time last year is there’s a number of elections coming up in 2022 that we are going to watch as sign posts. Will people choose to re-elect the existing governments or will they look for change because they’re unhappy about the affordability issues? But at that time we also talked about the Covid, how Covid was handled. That was a bigger issue 12 months ago in terms of people’s unhappiness with their governments.
Peter Tertzakian:
Yeah. Well, there was already supply chain issues in the post-pandemic fallout leading to inflation. And then all of a sudden, on top of that came the energy price shocks. And so the two together created substantial amount of fiscal pain for consumers. And when consumers feel fiscal pain, then they tend to elect new governments.
Jackie Forrest:
That’s right. But interestingly enough, we didn’t really see that this year. So we saw the US by-election in November. Well, for sure the Republicans got control of the House and made some inroads. The Democrats did quite well, better than people expected. In France we had Macron, who was the former president, get re-elected. Now, it was by a narrow margin and there was a very far right candidate there, but he was able to continue to stay in power. In Canada, Doug Ford was re-elected. In Quebec, we re-elected Francois Legault. So I would say we haven’t seen a big change.
Peter Tertzakian:
Well, we haven’t seen a big change, but I think what’s fair to say is that there has been a shift to the right, generally speaking, in sentiment across the political spectrum. Macron nearly lost because it was narrow, and in Australia, there was a shift to the right. In Italy, there was a change and a shift to the right. So I think it’s fair to say that in the first few months following the Ukraine invasion and the inflation really running 10%-ish, that there was dissatisfaction. And I don’t think it’s over, but we’re going to talk about that when we talk about what we think of 2023.
Jackie Forrest:
Yeah, that’s right. If there’s recession, and a lot of people are calling for that, often government changes happen during recession years.
Peter Tertzakian:
Mm-hmm.
Jackie Forrest:
Well, talking about the inflation and the economy, that was our fourth topic. And last year we were talking about very high inflation. The US consumer price index was up 6.8% at the time, and the supply chain from the virus was part of the blame. And we were talking about possibly four interest rate hikes in 2022: full point increase by the end of the year. So we were right that it was increasing, but the magnitude turned out to be a lot larger.
Peter Tertzakian:
Yeah, I certainly didn’t expect the multi-point increase. I don’t know, like 1%, now we’re up to 4%, so it’s like 3% in many economies. That’s pretty substantial. In some economies it’s even higher. Just as a side note, when they measure inflation it’s month over month equivalent. So in January, it was 6.8% relative to January 2021. As we got into February, March, of course we had the price of oil rising dramatically, which then permeated into the broad economy all the way into things like transportation and groceries. And that combined with the supply chain issues, as I said, at the peak I think it was like 10%, 11% in many.
Jackie Forrest:
And the US was at 9% at the peak last summer.
Peter Tertzakian:
Yeah, yeah.
Jackie Forrest:
So compared to the previous summer, things were 9%. It has come down a little bit since then, but still quite elevated.
Peter Tertzakian:
Yeah. Whereas we talked about inflation and interest rates at the time, I certainly didn’t think we were going to hit that level. I was pretty bearish about the outlook for inflation, but I was certainly not thinking 10%, probably more like 5% or 6%. And I wasn’t thinking that the central banks would respond so aggressively. But in fact, this point feeds back into why we were not so aggressive in terms of thinking about oil prices and why oil prices actually fell over the course of the year. Because when you have such big interest rate hikes, when you have this kind of inflation, it does slow the economy down.
Jackie Forrest:
It does. Think about Canada, the key rate is now 4.25%. When we recorded that podcast last year it was only 0.25%. Money was almost for free.
Peter Tertzakian:
Right.
Jackie Forrest:
And so that is starting to slow the economy. I think you’ll see more of that into the new year, and that has affected oil demand.
Peter Tertzakian:
Okay. Well, let’s talk about financial regulation, sustainable finance. We spent some time talking about that.
Jackie Forrest:
Right. So sustainable finance was another theme. And we were saying that this GFANZ group that has committed a whole bunch of big banks and other investment groups to reducing their emissions. And we said, “well, they’d come out at the COP in November the previous year and made a lot of expectations about signing on to net zero 2050.” And we said, “well, what we’re going to watch for this year is, will the financial groups take action and require that companies they invest in reduce their greenhouse gas emissions, or are they just going to expect more reporting? Is it going to be hard or more soft?” And we also talked about, maybe we would see the universe split into two groups, investors that are interested in buying emitting companies and taking advantage of the fact that they’re valued cheaply because people are not interested in high greenhouse gas emission businesses, and then the non-emitters, ones that are very careful about ESG and don’t want to be associated with companies that have a lot of greenhouse gas emissions.
Peter Tertzakian:
Yeah. Well, certainly a year ago there was already momentum growing with financial regulation. As you said, the Glasgow Financial Alliance and the potential consequences of that. And so actually working backwards from your last statement, the bifurcation, I think we got that right: the bifurcation of investor groups, those that care about emissions and those that don’t. And we actually saw the whole polarization around ESG emerge, I would say just after summer.
Jackie Forrest:
Yeah, for sure. We had a podcast on that with Radha Curpen from Bennett Jones. We called it the growing anti-ESG movement. And we saw a number of US states say that they’re divesting or at least threatening to divest from funds that had made ESG commitments. And quite a few states, all the red states, have signed onto that. But at the same time we saw other groups commit to divesting of oil and gas. So there’s been announcements by university endowments and pension funds that they don’t want to invest in oil and gas any more, or fossil fuels. So people joined each camp over the course of the year.
Peter Tertzakian:
Yeah, yeah. Just as a point of clarification, what we’re finding is that a lot of institutions may not be investing in new oil and gas investments, but they’re not necessarily divesting of their old because they want to keep exposure to the global energy economy. Because the oil and gas economy is so large that if an institution wants to keep its weighting to the global economy and the GDP of energy, which runs anywhere from 6% to 10% of GDP, you necessarily have to have oil and gas. So it’s interesting that institutions are not necessarily divesting, but they are equally not investing in new projects. And this creates this bifurcation, and I think we’re going to be talking more about that in 2023.
Jackie Forrest:
Yeah, and I think it’s becoming a harder decision for some of these groups. Oil and gas equities were up over about 30% in the past year, where the general market was down 10%. And so this whole theory that you hold oil and gas in your portfolio to help you during periods of inflation, that certainly showed that it worked this year. And I think some groups are keen to keep some exposure because of that.
Peter Tertzakian:
Right.
Jackie Forrest:
The other question we asked was, will these GFANZ commitments be soft or hard? And I think we got the answer that they’re going to be a bit softer this year. GFANZ introduced the race to net zero as a requirement earlier in the year, and the requirement was that you must restrict the development of financing and facilitation of any new fossil fuel assets. And the rumor was that a number of groups were going to back away and quit the alliance because of that requirement.
Peter Tertzakian:
When you say groups, you mean big banks. Yeah.
Jackie Forrest:
Big banks and big institutions that didn’t want to finance new fossil fuels, and so they softened the requirement. And so far we haven’t heard of anyone leaving the group, so I think it is going to be a bit softer. And they definitely did increase their reporting requirements. There’s been a number of reports come out over the last year on that.
Peter Tertzakian:
Yeah. Well, again, I think this speaks to the tension and the polarization within this group. Against this is the backdrop of energy security, which we didn’t have when the Glasgow Financial Alliance was constituted in 2021. That was pre-Ukraine invasion. And so affordability and energy security introduced a completely new dimension into the thinking about financing of energy. So this is a story that’s not over yet. And when we think about the financing of energy, it’s not just a debate about financing and fossil fuel projects, but it’s also the subject of whether or not institutions are spending money on financing clean energy spending. And that was the next thing we talked about.
Jackie Forrest:
That’s right. And your view was that clean energy spending has the potential to fall short of expectations, and that was a lot of because of the inflation and some of the supply chain issues that we were predicting. And I think you got that one right. The IEA says that clean energy spending will be up 8% year on year in 2022. However, almost half of that additional spending is going to be eaten up by higher costs. It’s not going to result in more energy supply coming on. So we’re actually going to see a slower year in terms of growth of some of these clean energy projects that maybe would have been anticipated a year ago.
Peter Tertzakian:
Yeah, it’s sort of a double inflationary problem. The cost of the materials to build out clean energy infrastructure went up as a consequence of broad inflation. But then there was the rising interest rates, and because a lot of these big infrastructure projects are levered or financed by bank debt, whenever interest rates go up that chews into the profitability and the spending as well. So we got it right for sure that things were going to fall short this year. Although I certainly didn’t think it would be as dramatic, again, because I didn’t predict the interest rates going up quite so much as they did.
Jackie Forrest:
Yeah. Well, and another thing that was tough to predict but turned out to be quite consequential in the US is there was a tariff investigation on solar manufacturers in Asia. So the US had tariffs saying it wouldn’t import products from China without slapping a big tariff on them. But the investigation alleged that some of these companies were just routing all their product to Southeast Asia, stamping that it came from Vietnam or Malaysia on it and selling it into the US. So that investigation actually put a real slowdown in terms of people buying solar panels. And there’s recent news actually that the preliminary findings are that some suppliers were doing this, and there’s ongoing investigation. I think that will be wrapped up by May, but that was another thing I think that slowed things down in the US quite a bit.
Peter Tertzakian:
Yeah. Well, again, it’s not a function, as I said at the outset when we were talking about German building LNG projects, it doesn’t matter what kind of project, the impediments to building stuff now are not technology and engineering. The impediments are things like trade flows and regulations and all sorts of other factors, macroeconomic, that are impediments. But hey, things can change quite interestingly, because we did talk also about energy and climate policy a year ago, and I think some things changed quite dramatically there.
Jackie Forrest:
Yeah, yeah. So we were expecting lots of clean energy policy in Canada. Most of that happened, and we’ll review some of that. And we were also watching for this greenhouse gas reductions in Canada on the oil and gas sector, the idea that there might be a cap on emissions from the oil and gas sector. And we said, “well, is that going to be a fight or a collaborative process? We’ll be watching for that.” And at the time in January, the US, Biden’s Build Back Better bill was sidelined and it was uncertain if a bill that could be passed, and we discussed that. So policy was huge. And as you know, the US did pass something that was quite large with the Inflation Reduction Act. So that actually did happen.
Peter Tertzakian:
Yeah, I think quite large is an understatement. I think it’s huge, and I think that the investment that is going to start going into this space, especially even research and development and beyond, is going to be a catalyst for what we see down the road. So whereas 2022 was definitely a period of, I’m not going to call it stagnation, but certainly volatility, and I’ll call it seeking direction as a consequence of all the macroeconomic uncertainties and the war in Ukraine. I think by the end of the year 2022, policies like the Inflation Reduction Act in the United States are setting a bit of a different stage going forward.
Jackie Forrest:
Yes, yeah. And in Canada too we have a long list of policies that are under development. Not all of them are done yet, but there are drafts out. And I think there’s a much better sense of how these projects could be supported, if not all finalized now, I would expect in the first part of 2023 we’ll see that. I will say, for all my years covering energy policy, this might be the biggest year of my entire career.
Peter Tertzakian:
Oh, yeah.
Jackie Forrest:
When it comes to what’s happened, not only in the US but think about Canada. We had Clean Fuel Standard, an ITC for CCS, and now we’re finding out thanks to the fall economic update that that’s going to be applied to a much wider set of low-carbon technologies. We’ve got ZEV mandates, we talked about that with Daniel Breton.
Peter Tertzakian:
Financing it with a clean growth fund.
Jackie Forrest:
There’s a Clean Electricity Regulation. That’s a big deal, how we’re going to get to net zero by 2035.
Peter Tertzakian:
Right.
Jackie Forrest:
So anyway, there’s just been a lot. It’s kept us busy this year, and a lot of it was positive, I think, in terms of creating certainty around investing in clean energy.
Peter Tertzakian:
Mm-hmm. But then there was the emissions on the oil cap, and we had the summer podcast with Sandra Duncanson from Osler who joined us.
Jackie Forrest:
Yeah. And remember we asked that question, “is this going to be a fight or a collaborative process?” And that discussion document made us feel like it was a fight, in that it was a directive that you’re going to have the cap and you have an option A or an option B, but both of them aren’t great. And lots has been done on this. Now, we haven’t heard how this policy’s going to come out, if it’s going to come out at all. I’m hoping it’s going to be delayed because we haven’t heard about it yet.
Peter Tertzakian:
Well, it has dramatic consequences, as we discussed, on the conventional side of the business, the side of the oil and gas business that is not centralized in the oil sands. The conventional business includes all the way from natural gas drilling to light oils and medium oils, using drilling across a wide swath of the three western provinces from northeast BC to southeast Saskatchewan. And so when you think about the emissions cap policy and the fact that it is far more difficult to reduce emissions in a short timeframe on that side of the business than it is in terms of centralized emissions coming from the oil sands, then there’s energy security spillover considerations.
Jackie Forrest:
There really are. Just to put it in context, the industry produces about 1.5 million barrels a day of conventional liquids, so non-oil sands, and about 18 BCF per day of gas. And that group, it is much harder for them to drastically reduce their emissions in the near term because, well, they depend on electricity and that’s out of their control in terms of the greenhouse gas emissions associated with that. But also CCS is a lot harder, carbon capture storage, on these projects that are small emitters over such a large geographic area. And I think there’s been a lot more discussion and understanding about this even since the summer, about the energy security issue that could come if it resulted in some of this being shut in, because western Canada and eastern Canada really rely on these hydrocarbons, much more than the oil sands.
Peter Tertzakian:
Yeah, I don’t think that realization has set in as much as you think. I don’t think the realization is there that the conventional oils are largely refined domestically. And if you have to shut in conventional oils, that dramatically impedes the energy economy of Canada.
Jackie Forrest:
Yeah. Just to give you some numbers, western Canada consumes around 220,000 barrels a day of conventional oil in our refineries. And then in eastern Canada the light oil and conventional oil, most of that coming from western Canada, does go through the US and then come back in to Eastern Canada.
Peter Tertzakian:
Through Line 5.
Jackie Forrest:
So if we had less conventional crude, that would be a problem because there’s only so much conventional crude in North America, and there are refiners that are geared up to take those crudes. And so if our refineries in eastern Canada can only take these light crudes and suddenly there’s a lot less from Western Canada, that’s going to have an implication in terms of price and availability.
Peter Tertzakian:
Right. Well, and this is the thing, is that most people don’t fully appreciate the wide hydrocarbon spectrum that is produced from the Canadian oil and gas industry, all the way from natural gases to light to medium to heavy, all the way to bitumen and synthetic crude oils. And that large part of the focus over the last many years has been on oil sands, which is the far right-hand side of the carbon spectrum. In other words, the most carbon intense. But the other part of the industry, which is conventionally based, is really vital to our own energy security here, because most of the oil sand is exported to the United States, whereas a lot of the lighter oils and the natural gas is consumed domestically here in the West. So the emission reduction targets, which are very aggressive for 2030, if the only way you can achieve that is by reducing production, then it becomes a pretty significant energy security matter.
Jackie Forrest:
Right. And natural gas, we send a lot of natural gas to eastern Canada. Of course they bring some up from the United States, but western Canada still continues to be a very important supplier of gas to eastern Canada.
Peter Tertzakian:
Okay. Well, those are the seven things that we talked about a year ago. What are some of the things that completely were off our radar?
Jackie Forrest:
Well, natural gas was a huge story. First of all, the shortages in Europe, the realization that that Russian supply needs to be replaced. And we’re seeing some suppliers like the Qataris and the United States start to get more business to fill that void and deliver more gas. Unfortunately, we’re not seeing Canada a big part of that yet. So natural gas was huge. And then also how the outlook for natural gas has changed a bit as a result of these high prices and the shortage, which we talked about on a previous podcast.
Peter Tertzakian:
Right. I think the whole China zero-Covid policy and how long it has gone on for, now there’s some relaxation happening now. But to me, that was off my radar. I just really did not anticipate that that would be such a dampener to the Chinese economy and then rippling into the global economy and the demand for energy as a whole. So that was that. And frankly, I didn’t really think hard about the implications of the Inflation Reduction Act. And for at least six-to-eight months, it wasn’t really talked about all that much, and then all of a sudden, boom, it was passed.
Jackie Forrest:
Yeah, I think that surprised everybody, even people really close to it. Hydrogen I think is another big story. You can love it or hate it or be skeptical of the projections, but there’s definitely a lot of momentum and a lot of discussion around hydrogen. I do think that’s something we need to talk about in 2023 on the podcast a little bit more.
Peter Tertzakian:
Yeah, I think we do need to talk about it a bit more. So yeah, it was one of those years that was just very volatile, lot of turmoil, lot of big changes as a consequence of the energy crisis and the price shocks and the leftover from the pandemic supply chain issues and so on. So, I’m hoping 2023 will be a little calmer. I don’t know about you, but we’ll be talking about 2023 in January.
Jackie Forrest:
Yeah, I definitely think 2022 is one that you will remember for many years. A few decades from now I’ll be like, “remember the year of the invasion of Russia into the Ukraine and how that affected the energy markets?”
Peter Tertzakian:
Yeah, It’s kind of like a 1973 moment, for those in our audience who were around in 1973 like me. There’s no question that it’s a year that you would remember. And ’79 was a pretty big year in energy too, with the oil price shocks and all the invasion of Afghanistan. And I can go on and on in terms of the turmoil of the ’70s, and it appears that we’re in that kind of a situation now. But again, hoping that 2023 is calmer, hoping that everyone has a great holiday season, some relaxation. Take your mind off these big macro events and enjoy time with your families.
Jackie Forrest:
Yes, and thank you so much for listening to our podcast this year. We enjoyed it. I always enjoy when listeners come up and tell me about the podcast, and thanks for a great year. To our listeners, if you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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