Tuesday, October 16, 2007

A new blog - The Stride Protocol

There's a new entry in the political/economic category of local blogs: the Stride Protocol.

I'm not familiar with the gentleman but he seems to have an interesting background with much to offer. He says it's a weekly blog about everyday observations.

His observation this week is called Oil Royalties 101. Oddly, the post actually has very little to do with royalties but no matter; there's a few bits of additional information I think would place his post in better relief.

First, Stride is dedicated to Hubbert's peak oil theory and the associated imminent $100 an oil barrel due to a sharp decline in global oil production. Only problem is, Hubbert's peak oil theory assumed a static oil discovery and development environment and that's not the case. As old sources are depleted, economics kicks in with cost-effective feasible technologies to find, extract and/or manufacture more oil.

Keep in mind that Hubbert was a geologist, not an economist. As The Economist notes:
... the oil production peak is unlikely “for decades to come”. Governments may decide to shift away from petroleum because of its nasty geopolitics or its contribution to global warming. But it is wrong to imagine the world's addiction to oil will end soon, as a result of genuine scarcity. As Western oil companies seek to cope with being locked out of the Middle East, the new era of manufactured fuel will further delay the onset of peak production. The irony would be if manufactured fuel also did something far more dramatic—if it served as a bridge to whatever comes beyond the nexus of petrol and the internal combustion engine that for a century has held the world in its grip.
Second, Stride says definitively that "We own the resource" and that there are tremendous implications to developing an ownership mentality over a regulatory one (and then goes on to parrot the Premier's "no more giveaway's" rhetoric - too bad).

In fact we do not own the offshore oil resource; we have never owned the resource; we will never in the future own the resource. Ownership of the offshore oil resource was definitively resolved in favor of the Government of Canada by the Supreme Court of Canada (and the NL Court of Appeal) in every case brought before it since 1969, the last one in a 6-0 decsion on MArch 9, 1984..

Our relationship to the resources is a regulatory one as opposed to an ownership one through the mechanism of the CNLOPB and the original Atlantic Accord enabling legislation which established it. In the end, NL can tax and control development of offshore oil and gas as if it were on land.

Third, Stride holds up Norway is the golden child of the resource royalty world. Rarely is mentioned, and he does not mention, that Norway is the only OECD country to still be in the business of state owned and directed oil projects. Even more rarely mentioned is that they are working to get out of the ownership game and are steadily decreasing their ownership stake and would be moving far faster if it were not for domestic political impediments.

All in all I'm looking forward to more posts on the Stride Protocol.

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