“ Imagine a world in which most of the
vehicles are electric and yet they are
powered off the grid by natural gas
and solar. So you reduce coal emissions and
you reduce burning oil. Eighty percent of all
petroleum demand is transportation.”
- Jim Chanos – CBNC
The glut in oil continues to push the price of oil south to a seven-year low meaning energy exporters like Newfoundland that depend on oil as a source of income are continuing to be pounded.
International benchmark Brent crude fell by three per cent to a little above $37 a barrel. The provincial government pegged oil prices at $62 a barrel for the 2015-16 fiscal year. Keep in mind that even at that rate, the former Davis Government estimated expenditures would outpace revenues by $1.2 Billion. The deficit is now anticipated to be in the range of $1.8 to 2.1 Billion.
The good news, Reuters says that prices could recover to between $50 and $80 in 2016 by the end of 2016. It cannot come fast enough to get our province into the red.
However, hedge fund manager Jim Chanos is telling oil producers to pump now because oil might not be worth a lot in a decade with the advent of the electric car and the rise of solar energy.
The province’s new Minister of Finance is set to release a mid-year financial update early next week. It will be interesting to learn how the government will deal with the escalating deficit, the overall debt situation and it’s plan to balance the books.
I cannot help but wonder where the stronger tomorrow is without a radical departure from our staples oil fueled economy and a potentially doomed oil industry.
On the other hand, if Chanos is right, The Lower Churchill might actually have a market to sell to in the long run.