Crude Observations

Early Spring?

Time for the annual Groundhog Day post.


And for once, I am doing it on the actual day of groundhogging. In fact, by the time I push send on the old Mailchimp interface, all of the hogs from the ground across all of North America will have opined on whether we will get an early spring or suffer in winter’s dark and frozen hell into eternity.


And as I contemplate Groundhog day, I am, as always, reminded about the many ways the expression “the more things change the more they stay the same” is in fact a universal truism.


And February and Groundhog Day is no exception.


First off, February is a month of ritualistic annihilation in energy markets, as the financial markets, disconnected as they are from the physical markets and reality, pound away on energy prices, driven by some misguided idea that oil demand is crashing and that prices per barrel must drop.


Every bit of bad news (a slight bump in production, layoffs at Fedex) is a precursor to a $2 per barrel drop in prices while bullish news (global inventories at decade lows, production is declining, the entire world is at war) leads to a weak $0.05 rally, only to be undone by some poorly interpreted press release from Aramco, a property liquidation in China or a crypto distraction.


Speaking of distractions – I picked Buffalo and Dallas for the Super Bowl and I apologize for being so wrong and missing the boat so badly. Had I known that Taylor Swift was a Pentagon Psyop asset I would for sure have realized that the Kansas City Chefs (great googly-moogly) were going to be back in the Super Bowl to spread support for Joe Biden and brainwash the soon to be universally woke NFL fan community. I know this because I saw it on Fox News. We do indeed live in stupid times. For the record, having attended not one, but two Taylor shows with my wife and daughters, I am considered a late middle-aged Swifty. I was going to cheer for San Fran but with all this nonsense, I am back on the Kansas City bandwagon.


February as well is the time of year where natural gas storage and supply is challenged by wintry consumption. Only to be undone by some mild weather in Pennsylvania and the usual suspect furry rodent not seeing its shadow, crushing gas prices. Granted, natural gas prices have no one to blame except themselves. Producers are producing too much. Exporters (LNG and pipes) are exporting less due to shutdowns and other physical limitations – so storage is, relatively, bloated. And prices have reacted accordingly. Whatever – as you know, gas always disappoints, until it doesn’t. Stay the course.


Then you get some well-meaning yet pandering government shutting down approvals for climate saving energy projects and export licenses – except this time it isn’t Danielle Smith slew-footing the solar industry or Stephen Guilbeault drop-kicking Canada’s nascent LNG ambitions. Nope, this time it’s none other than Joe Biden taking late to the party LNG license seekers out behind the wood shed for a little electoral lesson. “Sorry guys, this Gen Z guy on Tik Tok said LNG was bad so we’re going to polish our image by deferring approvals until after I’m re-elected, OK?” While the pause offends me on principle as an energy sector participant, as a long-suffering Canadian natty investor, I’m kinda chuffed – we just need to get more shovels in more dirt here. Woot!


Finally, we don’t have to suffer through Tom Brady retiring for the third year in a row, but we are getting Patrick Mahomes in the Super Bowl for the 4th time in his 6 year career (thanks Swifties!) and, notwithstanding all efforts to avert this, Donald Trump is still mostly around.


Ugh, I say. Ugh.


That said, I suppose there is something to be said for consistency.


Speaking of which, and where this was obviously going, because it does every year, this is the time of year when I get to do my annual Groundhog Day reprise. And not just on TV, but in real life, here in this blog.


I do this reprise because as I observed above, we seem to inhabit a real-world version of the movie Groundhog Day wherein we are destined to, like the character played by Bill Murray, relive the same day repeatedly until it feels like our heads will collectively explode.


I wrote my first Groundhog Day blog 7 years ago and thematically, it still works.


I like to dig it up every year to point out that the more things change, the more they seem to stay the same. But at some point, metaphorically and actually speaking, it is time for a new day.


So, Groundhog Day (note to media – not “Groundhog’s Day”). What the heck is it all about anyway?


Based on ancient pagan traditions (‘cause what isn’t?) it’s a midwinter day of hope and a welcome break from drudgery of winter where some overfed wannabe muskrat lets us all know whether we will have hope or not for the renewal that is spring.


As of right now the results are in and it seems like a universal declaration of an early spring. True to form, oil prices fell $1.87 on the news and natural gas is now free.


But who doesn’t love the sense of anticipation as overstuffed rodents across the continent poke their heads out of cages or holes and indicate to the huddled masses whether spring will be early or late, should they short natural gas, buy stock in chip manufacturers or Bitcoin ETFs, start a tech hedge fund or buy Toronto real estate?


And there is no shortage of rodents. The most famous of course is Punxsutawney Phil, Seer of Seers, Sage of Sages, Prognosticator of Prognosticators and Weather Prophet Extraordinary.


But we also have Milltown Mel and Essex Ed from New Jersey, Chattanooga Chuck, French Creek Freddie, Jimmy the Groundhog, Buckeye Chuck, Stormy Marmot (Colorado). Not to outdone, Canada has it’s own bevy of overfed rats, including Wiarton Willie, Balzac Billy and Manitoba Merv.


That’s a lot of rodents looking for shadows.


At any rate, I have polished the piece a bit over the years and today was no exception, but it does stand the test of time.


Groundhog Day


Well, what if there is no tomorrow? There wasn’t one today.”


Sound apropos?


For those unfamiliar with the movie this quote comes from, Groundhog Day tells the story of Phil Connors, the egomaniacal, self-absorbed TV weatherman trapped reporting from Punxsutawney, Pennsylvania on Groundhog Day, who finds himself inexplicably repeating the same day over and over again no matter what he tries to do to alter his situation. Intertwined within this existential dilemma is salvation in the form of the love interest – the sweet and gentle Rita, and we all know that once Phil figures out how to win her over, it will be the perfect ending.


For my purposes here, Phil is alternatively the energy sector or Alberta, and Rita is of course the Rest of Canada – expanded to be the “rest of the world”.


Think about some of the doom and gloom that always seem to dominate the Canadian oil patch discussion: single market price-taker, environmental laggard, lack of market access… each of these seem to be running on an endless loop with no progress on any front. Now with an added dose of Just Transition – like can we transition out of this endless loop?


Ultimately though, the one topic that seems to dominate is that of pipeline and infrastructure projects being proposed, pushed back, delayed, embattled, over-budget, protested. Whether it’s Coastal Gas Link and First Nations protests, TransMountain Expansion and its ballooning costs, Line 5 and spurious attempts to shut down a section, Line 3 and misinformed celebrity protestors, Dakota Access and lax environmental permitting, Keystone XL and Biden executive orders, uneconomic ideas like Energy East that just won’t go away, LNG that lacks business cases, LNG approvals paused by vote-seeking Presidents, seeming Liberal indifference and resulting Conservative anger, it seems no matter what we do, pipelines and major projects can’t get a leg forward and move to the next step.


“Do you ever have déjà vu, Mrs. Lancaster?”

“I don’t think so, but I could check with the kitchen.”


Much like many sector participants’ current views of our government and politicians or even the views of those self-same politicians that they know best what to do – at the beginning of the film, Phil, secure in the superiority of his worldview, looks down his nose at the traditions and needs of the quaint town of Punxsutawney.


“This is one time where television really fails to capture the true excitement of a large squirrel predicting the weather.”


Then as the same day repeats and the eternal recurrence deepens and becomes more absurd, his mood changes, his despair grows.


“You want a prediction about the weather, you’re asking the wrong Phil. I’ll give you a winter prediction: It’s gonna be cold, it’s gonna be grey, and it’s gonna last you for the rest of your life.”


When you think of it, the parallels are interesting, starting from Stephen Harper’s “It’s a no-brainer” through the 2015 Keystone rejection to it being revived to it being cancelled again to the doom and gloom predictions for the Canadian energy sector to our own Prime Minister and his emissions-capping Environmental sidekick seemingly singularly focused on ending the energy sector (no business case for LNG), it seems that the quote above could be easily have been written as an opinion piece on the Alberta energy industry. In fact, it just might have. And those people who would bury the sector point to all the bad news as proof – the energy industry in Alberta is as good as dead – we should just give up to the forces of nature outside of our control. It sure seems like things are bleak, but as always, there is a glimmer of hope. That hope of course is rising prices for both gas and oil, the realities of how the energy transition may or may not unfold, demand that never stops growing and the impacts on provincial finances. Not to mention the pending completion of two massive projects – the Transmountain Expansion and LNG Canada!


First though, our protagonist (hero?) needs to learn.


After Phil gets over the initial shock of reliving the same day over and over, he blunders around trying to figure out how he will get out of his mess. And in the process, he goes through his own version of seven steps. He tries to have fun with it and overindulge. He rages, he gives up. He gets rich, he steals, he buys ridiculous amounts of insurance (Bing!) and steps in the same flooded pothole seemingly every day.


He even kidnaps and kills the groundhog (“There is no way that this winter is *ever* going to end as long as this groundhog keeps seeing his shadow. I don’t see any other way out. He’s got to be stopped. And I have to stop him.”) and ultimately tries repeatedly to kill himself.


“What would you do if you were stuck in one place and every day was exactly the same, and nothing that you did mattered?”


And all the while, much like Alberta attempts to court the Rest of Canada and prove how important it is, he tries to hit the perfect stride with Rita, but again, because of his nature, he tries too hard to be his version of perfect. His efforts are contrived and awkward. And because the days are short (it’s winter after all), he continually runs out of time with Rita and then with each subsequent reliving, he gets more anxious, more desperate, ultimately becoming almost manic, angry and bullying and ultimately pushes her further away.


Sounding familiar? Is this not reminiscent of the last (far too many) years of pipeline and oil and gas advocacy? Project supporters and provincial leaders coming off as increasingly desperate as they are unable to make their case to the object of their desire and in their efforts to outsmart the situation revealing a part of themselves and a strategy that was best left in the idea box.


Phil Connors:     Who is your perfect guy?

Rita:                    Well, first of all, he’s too humble to know he’s perfect.

Phil Connors:     That’s me!


But the attraction is undoubtedly there – unbeknownst to her, Rita actually needs Phil as much as he needs her. Much as Canada needs Alberta, energy, pipelines, tax money and GDP contributions and vice versa. There is a karmic connection, if only the conditions are made right to let it happen…


As the story advances, and his failures become more egregious and reactions more outrageous our hero isn’t static. Underneath all the noise Phil is adapting, he is learning. He is starting to understand that what it is that Rita wants is not necessarily what he is projecting on her.


So, after finally exhausting every last option and angle to get something for himself, bend Rita to his will and make it happen under his own terms, he finally lays himself bare to Rita, tells her his fears, his temporal dilemma and she sympathizes and she stays with him – to help. Phil learns that by giving something of himself and allowing events to unfold without attempting to control them, he is finally able to have the perfect day and get the perfect girl – redemption, transmutation, transmogrification, Nirvana… a new day – take that Nietzsche. Maybe even a Just Transition from yesterday’s Phil to today’s Phil.


Phil:       Do you know what today is?

Rita:      No, what?

Phil:       Today is tomorrow. It happened


So, is Alberta/the oil patch really Phil?


I don’t know. Are we crusty on the outside but with a heart of gold on the inside once we let down our guard? Can it happen like that for us? Can we use the lessons of a ‘90s movie about a rodent to convince the rest of Canada that we can be who they want? Who knows. But the traditional way hasn’t worked in close to 80 years, so I like to think so.


Distilled to its basics, the most applicable lesson to be learned from the film is that the only way out is through and that we can escape from whatever situation we’re in by adopting the correct attitude and adapting to the environment instead of trying to force it to fit our paradigm.


To get to the result we want here in Alberta and for the oil patch and ultimately for critical infrastructure projects that will secure our ability to supply ourselves and our largest trading partners with needed hydrocarbon molecules and derivative products, we need to allow the process to happen on its own and stop trying to force it into a narrative that is stale and unproductive outside of our tight little silo, no matter how painful and no matter how frustrating or how often it seems like we are back at square one.


We also need to understand that the object of our desires isn’t simply going to do what we want them to do because we say so and on our terms. They have their own terms as well and we need to find the balance that moves us forward.


For Phil, Rita was worth it. He adapted to her and was able to move on.


Is it worth it for us? Absolutely. We need to continually send the rest of Canada a positive message, not doom, gloom and conflict – something like “I got you babe.”


And then maybe the clock changes over.




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