SharperDingaan

It would appear there is going to be a cease-fire, and that the Ukraine is going to agree to never join NATO. I would also suggest that oil sanctions are going to remain on Russia for some time, and that China will continue to extract the USD 25-30/bbl discount it is taking on each barrel of Russian crude. SD

Simply look around you. Both the CAD & US economies are coming out of lockdown, employment levels are pretty much what they were pre-Covid, large numbers of office workers being recalled to downtown offices, people are pushing hard to shake off 2 yrs+ of cabin fever, and there is way too much money sloshing about (inflation). Today, the 1M people+ city events are back on across the land, and are as common as water. 2022 is looking pretty good! We have no idea how the Ukraine ultimately turns out. All we know for sure is that the Ukraine will have a very limited harvest this year, and that a great many displaced Ukrainian farmers will very likely take up Canadas offer of relocation - all good for Canadian agriculture and demographics going forward. The long term economic solution remains Putin in a box, same as the 1942-45 solution was the early and successful assassination of Hitler; in the interim, sanctions are likely to remain with us for some time. Higher prices for everything, less hasty interest rate rises to cool the economy, shares prices remaining high as they continue to discount at artificially low rates. Everybody paying more via higher mortgage interest on variable loans, and higher prices on everything they purchase. Lots of bitching, because folks either have to lower expectations, buy less, or move to a cheaper location - 'cause the piper always gets paid. Lots of disruption and uncomfortable change. SD

The return of the Iron Curtain is a very valid possibility here. Whatever we might think, Ukraine grows the food for a great many people in Europe, and the economies of both Russia and Europe would prosper under a return to the military spending of the old 'cold war'; generals on all sides need a robust career path. SD

Americans aren't being stupid, they are being entirely rational. Give me use of the auto TODAY, for the LOWEST possible monthly operating cost. Buy new and pay most of your cost in financing, or buy a clunker and pay most of your cost in repairs and higher gas/oil/fluids cost. Decision depends on the individual car & its history. Fact is .... used SUV gas guzzlers ARE going to get real cheap .... 'cause they will be scrap Most lessee's are going to have a pay a terminal cost when they discover that MV is well under the guaranteed RV on their leases. The SUV bad mouthed because of its high operating cost ... bad mouthed again because of the terminal payment ... and bad mouthed a third time as the more expensive the model was the greater its 'loss of value' has been. Even if it were completely free, it would still cost more to run than similar functional alternatives. If you cant give it away, and it costs too much to drive, isn't that the definition of scrap? Different POV. SD

I just pulled the numbers from our spousal car, a leased 2022 Toyota hybrid RAV4, and compared against a posters mileage example. This RAV4 is not a plug-in, is current state-of-the-art tech, & converted at 4.5 litre/gallon. Point is that between gas, upkeep, and insurance a driver has a large enough monthly cash saving to make the next car electric. Posters clearly agree, as everyone is claiming their next car will be electric! Data came from Statista, as at 2020. Most people do not care about cap cost, they care only about the monthly cost (lease/loan) - we all know how to manipulate that as low as possible. It's also not just this boards posters going electric, it is everybody else doing it as well, en-mass and all at the same time. https://www.statista.com/statistics/183505/number-of-vehicles-in-the-united-states-since-1990/ EV uptake is reaction to higher costs; but as monthly driving costs rise - rising numbers are forced to public transit. Cant use public transit unless you are in a major city, and if you want less congestion around those cities - cars need to come off the road. Virtuous circle both retiring existing fleet 'early', and reducing overheated demand for EV. Agreed, current state, there isn't enough commodity to meet anticipated EV demand. Thing is, future state looks quite different, and many of todays bottle necks have already been solved; todays batteries are recyclable, weigh less, use far less rare material than they used to, and save way more charge for longer. Newer batteries aren't even batteries anymore, they are integrated fuel cells, using hydrogen vs plug-in. Future state also isn't a decade away, it is 3-4 years at most, and getting shorter as manufacturers scale up. So what? The reality is that much of the money for upgraded electric grid, EV and hydrogen roll out, is going to come from o/g. O/G assets being run down, and cash from production going into these new areas. We don't see it, because we do not want to. Invest today for where you want to be in X years, NOT next quarter. SD

280/20 = 14 years to replace entire fleet, 7 years to replace half the fleet. You don't need to replace all of a fleet for it to go all EV. Do any M&A and you will quickly discover the tipping point is around 30-40%, depending on circumstance. At 5 years, 36% of the entire current fleet has turned over, and that will be enough to push the entire fleet into EV. SD

Assume your current car is using 15 gallons/week (67.5 litre). Your current hybrid ('cause plug-in is not available everywhere) will use maybe 30% of that, 20 litres/week. Costco gas is currently CAD 1.69/liter, and there are 4.33 weeks/month (52/12). Just the gas saving on that hybrid is CAD 347.59/month (67.5-20)x1.69x4.33. Repair/insurance is also cheaper, and savings of CAD 100-150/month are fairly common. At savings of CAD 450-500/month you are going to switch to hybrid asap. https://www.gasbuddy.com/gasprices/ontario/toronto The average family car may be 12 years old, but that ownership is over 2 or more owners. Most cars are leased, and most are for sales reps who have to be seen in fairly new cars. Most leases will be for 5-7 years, and they represent the company as well as the rep. If your company is selling "greening" tech, your reps need to 'walk the talk', and your fleet needs to be all hybrid asap. When the average lease is 7 years, the average fleet age is roughly 4 years (lease life/2). Every major auto manufacturer makes EV's, exports, and a high cost spread over a 15 year life cycle is peanuts/yr. A 2022 Toyota RAV4 Hybrid only costs roughly CAD 40,000, even in a constrained supply chain environment. Capex isn't a limiting factor. We just cannot imagine such radical change happening so quickly, even though it is staring us in the face. We do not see that gasoline powered auto's are not wearing out, they are becoming obsolete. Just as your fully functional ancient beer fridge was replaced with a new one, when you eventually decided that its 2-3x power consumption just wasn't worth the cost anymore. It became obsolete. SD

It is already here. I would suggest to you that most gas guzzlers on the road today, would already be gone were it not taking the supply chain 6-9 months to deliver a replacement hybrid car. Once Covid recovery starts to dominate, and supply chains begin to untwist, the re-sale value of those gas guzzlers drops like a brick - and hybrids don't need price 'rebates' any more. New car plants produce all electric/hybrids, very few produce new IC cars. As existing IC car plants are run down; the existing vehicle fleet will rapidly be replaced. Assuming an average 8-year new-vehicle cycle, about 4 years until most cars on the road are electric/hybrid. Less demand for oil & more demand for gas to fire up the electricity generating power station. O/G reserves extend their lives as the gas/water cut typically rises at the expense of liquids/condensate; existing collection facilities transition to gas at minimum incremental cost. However, there is NO new reserve addition - you simply extend the life of what you already have. Hence the idea that the 'best' oil, is that oil which is never produced. Effing heretics!!! Lot of implications here. SD

The tax thing is unlikely to pass. O/G companies are not paying taxes, because they are both incurring big tax losses when writing down assets to comply with ESG, and carrying forward prior year losses. Every 100B of write down reducing tax owing by roughly 37B. No additional moneys other than royalties on additional production. The Biden view is longer term, the industry view short term. Like it or not IC engines are being phased out in favor of electric, creating less demand for ongoing o/g. Restricting drilling on new lands, foot dragging on egress, etc. is just asset stripping; minimize ongoing net capex, and get as much out of the existing infrastructure now while you can - before o/g production is wound down in favor of electric generation. The industry view is 1970's first oil price shock. Get the gas pump price down! asap!!! Give us the leases, give us the financing, get out of our way, and let us drill baby, drill. Problem is that it is now 50 years later, times have changed, and a great many haven't been able to move on with the times. Lots of frustration 'cause its our last shot at the golden ring, we know exactly what we have to do, yet you will not let us do it - what the f*** is wrong with you people!!! Obviously, lots of ways by which this could be played. SD

Bear in mind that the US/Poland exchange is really an open-ended revolving 'lend/lease' arrangement. US supplied Polish planes (of different types) over the Ukraine, flying out of Polish air bases, supported by US AWAC assistance. Predator drones continually looking for high-ranking 'targets of opportunity'. Arms merchants need to demonstrate the efficacy of their weaponry, live targets are better, and it is very easy to make foreign pilots 'dual nationals'. Hot pursuits back into Polish airspace providing live targets for sophisticated friend/foe air defense systems. Putin propaganda cant hide large numbers of crashing aircraft, or burnt bodies coming home in body bags, and it would appear that is now the intent. It also cant hide how the war has turned the 1945 Russian 'special hate' for Nazis... into todays very similar Ukrainian 'special hate' for Russian troops. Afghanistan repeating itself. SD

US/Canadian production is to be held down, and put under ESG controls. Iran/Iraq/ME production increased to supply Europe and displace Russian oil. They can supply a lot more o/g and quicker than the US/Canada can, and the more they do the less extreme the price spike will be. 'Cause after this is over, we're all going to driving electric, and all those US/Canadian investments need to have already been paid off. It's just being smart. SD

Not a big risk. Russia already has weapons, and still needs USD/Euro to pay for what it needs - can't easily do that with Yuan. In the near term there is no real reserve currency alternative, in the long term it just accelerates replacement with a functional digital currency equivalent. All good. Today the sanctions are primarily banking, tomorrow it would seem that oil will be added, the day after - the illegal drug trade selling into the West? When the troops coming back from the Ukraine start talking about what they saw/did, 'external' news feeds cannot be totally kept out, and ruthless rich men become poor - what do you think happens? Putin in a box, and we all go back to being friends again. He pushes the button, we all lose. Go back to being a gang level street punk, or take care of the problem? SD

The primary end buyers of black market oil are India and China. In simplified terms, the oil sanctions discussion is remove Iranian sanctions, and impose Russian ones; China and India sell their Iranian purchases into Europe, buy the replacement crude from Russia, and keep the price difference. Temporary demand/supply imbalances met from SPR releases and new drilling. The US clearly sees new drilling/infrastructure repair as primarily coming from Iran/Iraq, not the US/Canada. The risks are relatively small, the increments very large, and egress already established. However, not what many from US oil want to hear. It would appear that the tool of choice to tame inflation pressure is going to be higher oil prices versus higher interest rates. Oil prices were already going to rise as Covid related recovery demand came to bear. However, it will rise a lot higher when Russian export terminals suddenly experience ongoing 'accidents', shutting in production. While Russia may take the Ukraine, sanctions are unlikely to stop until Putin is gone. High crude prices for at least another 12 months. SD

The reality is that the USSR used to be a super-power. Now it's just Russia, and its the junior in what are now three super-powers. The powers that be recognize they have little remaining time at the top, and want their 'glory' days back! Gaming wise they have little to lose - whether death by misadventure, or death by dementia/failing health, death is still very near. The world has moved on, whereas these individuals were not able to. THE big takeaway from 1945, was that an early and successful assassination would have saved millions of lives. The SECOND takeaway was that population/infrastructure replacement will touch off a long and sustainable economic boom. Putin in a box, as an economic policy; wars exist because it was not possible to reach a political solution. Lot of direct investment opportunities presenting themselves, but expect to lose everything invested. The reality is that trying to predict outcome on the other side of a difficult regime change is impossible. In the meantime try to take in as many Ukrainians as you can, get them to safety, support them in a fresh start, and get out of their way. Stand up to be counted when it mattered, and you will reap the rewards for DECADES to come. SD

We used to be mocked by those in love with their Ford 150, 250, etc. - primarily because we prefer the zip of the Mini (Baby BMW), and now the hybrid. Many of the folks who own those 150's, also own variable mortgages, and their overall costs (inflation) are now escalating by at least $100/month - each and every month. They knew they were taking a risk, but the money was good! and the risk? ... far away, and remote! But if enough people were 'wrong' at the same time, it really wasn't going to be 'their' problem anymore - it was going to be 'ours'. Welcome to poor mans moral hazard ! Obviously, if you took precautions, you're going to do very well; whereas those 'others' ... not so much. Just keep in mind that it's not a lot of fun when you're making a killing, and your neighbors are losing their homes to their new inability to make ends meet. Everyone has to live somewhere, but to keep your wealth - others have to allow it. 'Gated Community' is just the pretty word for 'compound' ... otherwise known as a 'gilded cage' SD

Physically sever where the (western) replacement parts/expertise cannot be easily replaced. Can't bribe if the pipe is physically bust, to repair they have to cannibalize from elsewhere, and accidents happen . Cut off the money flow (oil sales, banking, etc.) and they suffocate. Use military force to physically sever the drug pipelines to the west, and the oligarchs have to react. Quickly becomes a choice of give up the Ukraine, or give up your life. Peace negotiations take time, Putin's time is rapidly running out, the failures are mounting (Kiev airport), tanks/choppers are trapped in the Ukraine, and mercenaries now have the required weaponry. Ultimately the czar has to go, and everybody (oligarchs included) loses if he goes the nuclear route. Both Cesar, and Genghis Khan, were not able to survive their hordes SD

There is more than enough existing LNG capacity in Qatar and Oman. Tankers only need to go to/from the Netherlands &/or southern European facilities from which the LNG/gas can be subsequently piped - short trips. Tankers can also go to/from US Gulf & East Coast facilities direct to Rotterdam, at the already tested roughly 12/week - longer trips. There is a reason why the Netherlands o/g loading facilities were recently cyber attacked. https://www.spglobal.com/platts/en/market-insights/latest-news/energy-transition/091521-global-gas-power-sector-to-drive-middle-east-gas-demand-as-hydrogen-stays-small https://www.cpomagazine.com/cyber-security/fuel-troubles-continue-in-europe-as-oil-terminals-in-netherlands-and-belgium-suffer-cyber-attacks-unclear-if-breaches-are-coordinated/ Physically sever the Nord Stream pipelines, and you cant bribe to let the gas through There will be disruption, but the Russian gas will ultimately be permanently displaced - hence the new deal with China. The smart folks would also ban off-loading tankers from Russia, and physically sever the loading facilities on the Northern Sea Route to the Pacific. Russian would be forced to sell to China at a both a discount and a fearsome transportation differential - welcome to the egress bitch!. The Chinese in turn selling their now 'surplus' imports into Europe at elevated prices https://en.wikipedia.org/wiki/Northern_Sea_Route The banking stuff is important, but to really make it bite - states need to coordinate seizure of toys/assets/accounts, liquidate them, and keep the proceeds. Even in a Canada, protestor truck rigs are seized and sold, with proceeds going to the City of Ottawa to pay for damages Suddenly make lots of rich people poor, and they will be quick to assign blame. With mercenaries everywhere you go, Moscow becomes a very dangerous place. SD

The reality is that the Ukraine will be invaded .... however Russia then needs to keep it. The political solution is another Ukrainian state declaring itself independent, recognition by the west, and a provisional acceptance into NATO subject to missile placement in that state. Sanctions remain, Putin goes ballistic, and the Ukraine remains a no-mans land until both sides pack up and go home. Mercenaries exist for very good reasons, and are widely used by all. Sever the Nord Stream pipelines, such that they can't pump for a while, and can't be easily repaired under sanctions. Prices go up, Germany temporarily gets its gas from the ME/US instead, and everybody but Russia makes out like bandits. Call the bluff. SD

Growing cross border shelling has gone on for 2-days now, and the news has been hidden behind the Olympics. Invasion delayed because the big buyer of Russian gas doesn't want an upstaging of the big event they are hosting - invade while the games are on, and the deal is off? Ukrainian officials talking 'soothingly' with the assistance of a AK-47 at their head? Tanks cross the border, for whatever reason, and WTI very quickly goes > $100. And if they don't take Kyiv by nightfall on day-1, those tanks die - by the hundreds. SD

The trick to severing o/g infrastructure is to localize the damage. Long enough to stop the flow and cut off income, but strategic enough that replacement parts/expertise can only come from the west. Disable the collection points, blow the storage facilities, and force a hard suck on the reserves. Can't project force for too long, if you do not have the oil. Russian exports can be readily replaced by Iraqi, Iranian (NG), Qatari (NG), and US/Canada (NG, heavy oil) supply - but the timing differences have to be met from global inventory. We get higher WTI prices because of that inventory squeeze. We get higher drilling costs when the primarily western technology is put under sanctions. Failing at invasion is dangerous. Freeze all Russian western assets and loan facilities, dismantle Russian drug and weapons supply, and Moscow becomes a very dangerous place. Oligarchs can be a bastard, and how often does a crime family get to clean house and move up? The smart move is not to start. SD

The reality is that a large portion of the Ukraine population is pro Russian, and that population largely lives near the Russian border. However they are a minority within the Ukraine, and the majority of Ukrainians choose democracy. So ..... if you can't get your way, and life would be better for you under Russian rule ... what do you do? Even the US thinks Russia has little choice but to invade, and that they very likely will take some territory. Then Russia has to keep it, NATO has to demonstrate its chops, and the end goal is regime change without triggering nukes. The fighting stops when the Ukraine is no longer worth the cost, and there is a graceful way out. The hostilities stop with Putin in a box, as the next 'ace of spades'. All one can do is stay as far away as possible, and position oneself for volatility. CNN isn't going to be reporting on the killing fields until well after the event, and it is going to be both heavily sanitized and censored. This isn't Disney .... What do think happens if/when the hundreds of tanks discover there is no gas one day in? at the same time the night killing begins? What do you think happens when the Russian oilfields, pipelines, refineries, loading facilities, and storage (including tankers) are severed, at the same time that Iranian sanctions and US drilling restrictions are lifted? We're pretty sure o/g will do very well. SD

Similar story in the craft beer biz ... We have more demand than we know what to do with, but it is just impossible to reliably get the most basic of packaging - cans, glass, keg components, sealers, labels, C02, etc. If you are not part of a bulk buying collective, or sharing trucking, you're f****d. We pass the costs on per batch, and try to minimize impact by producing as big a batch as possible. The good news is that customers are telling us they'll pay up to 25%+ more - if we bring back the small batches. Direct feed from the bright tank, $10 a glass in the summer beer garden; $12 if we throw in live music for the afternoon. People are willing to pay, but the price increases are permanent, and materially more than the headline CPI number. Lot of staff are burnt out, and most employers are keeping total pay the same, while cutting hours - to produce pay raises in the 5% range. The loss in hours being made back through higher productivity. SD

It really doesn't get much better than this. Should the rumors hold up, we close out the next 2 weeks at WTI > USD 100 https://www.pbs.org/newshour/world/putin-to-invade-ukraine-next-week-according-to-u-s-officials SD

These numbers have been heavily manipulated. The numbers divide the C02 spent to maintain the infrastructure, by the throughput - hence 2020 C02/BOE trends up because throughput was reduced for part of the year (lack of pipeline egress, super-wide differentials) Industry arguing C02/BOE declines, IF you allow us to raise throughput further! all quite true as long as no new mines are opened. Environmentalists arguing bullshit as CO2/BOE is inherent to the extraction method, and has nothing to do with economies of scale. Hardly surprising there is grid-lock, and difficult for either side to admit they ain't playing fair. Good news for investors is that new mines are impossible, and new capex can only go into efficiency improvements &/or CO2 sequester. FCF for buybacks, putting a minimum ROE under the share price. Environmentalists forcing the capital discipline that industry couldn't do itself. The next time you see an environmentalist, give them a hug! SD

We all also need to keep in mind the 'stun' factor which is very real here. When BTC was < USD 15,000, very few imagined that it would go much higher - despite the accumulating evidence that significant and material structural market changes were taking place. People just could not imagine, that net money inflows would be so large - that BTC really had nowhere to go but up. It was much more comforting to simply deny, and spout slogans - BTC is rubbish, nothing backs it, etc. Mass cognitive failure, great for the rest of us It is the same thing with O/G. On our little island, people just cannot imagine the coming change, despite the overwhelming and growing support for it. Mass cognitive failure, great for the rest of us! Every druggie eventually gets to the end of their fix, whereupon the search for the next fix begins. Should the supply be restricted in some fashion, mass cognitive failure turns into mass panic USD 200/boe forecasts are not unrealistic, they just aren't sustainable - which doesn't matter for an o/g producer. All that is really required at the time, is a deep and liquid forward market. All of which is just the tide changing. Anything that can float (turkeys flying in strong winds) does extremely well. GLTA SD