Nature Waits For No Financial Crisis

Even as the markets ponder the pending arrival of the Great Depression Jr, the laws of physics and nature continue their onward march.  Consider two interesting articles from today’s Globe and Mail.

First, Suncor is cutting its 2009 capital spending by 70%. While the cause of this cutback stems entirely from the oil price collapse, let’s step back and look at the bigger picture. According to the all-mighty Wiki, 44% of Canadian oil production originated from the oil sands in 2007.  Suncor (SU) is among the premier players in this space (along with Canadian Natural Resources [CNQ] and Syncrude) and enjoys several advantages such as favorable tax treatment and lower costs.  SU’s troubles portends trouble for the rest of the Canadian oil-sand producers and by extension, Canadian oil production.  Keep in mind that Canada is the largest foreign source of oil for the US.

Next is this short article regarding water usage restrictions in oil sand production.  Only a handful of firms are affected, including CNQ and SU.  But it’s a reminder that the resource and environmental degradation associated with oil-sand production hasn’t gone away despite the global economic distress.  Central banks can print more money but they can’t print more clean water or low-cost oil.

Unless human civilization peaked in 2007/2008, the fundamentals in the physical world have not changed. The problems of high-cost oil production and water scarcity will be waiting for us after this economic downturn lets up. As always, timing projections are difficult and investors should seek out the players best situated to survive a prolonged and severe slump.

One Response to “Nature Waits For No Financial Crisis”

  1. kindy Says:

    there are great books. Thanks you.

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