
The Fabian strategy is a military strategy where pitched battles and frontal assaults are avoided in favor of wearing down an opponent through a war of attrition and indirection. While avoiding decisive battles, the side employing this strategy harasses its enemy through skirmishes to cause attrition, disrupt supply and affect morale. Employment of this strategy implies that the side adopting this strategy believes time is on its side, but it may also be adopted when no feasible alternative strategy can be devised.
On tuesday President Obama’s press secretary signaled that the POTUS would veto congressional bills aimed at jumpstarting the blocked Keystone pipeline project.
In the several years while this process has ground on, a number of factors critical to the success of the pipeline have been in flux. Public awareness of global climate change is increasing, and although nationally, most polls show approval for the idea of a pipeline, much of that has been related to the idea that a pipeline was needed to lower gasoline prices. Now those prices have come down, for a number of (most likely temporary) reasons.
I’ve argued that the extreme volatility in oil prices is an achilles heel of the fossil fuel industry. The uncertainty around fuel prices, in an era when alternatives are increasingly available, hastens the adoption of those renewable alternatives. The hapless boobs who are running out to buy SUVs during this hiatus will make good cautionary examples when the whipsaw of prices catches up in 18 months or so.
But for investors expected to pony up billions for this supposedly indispensable energy lifeline, uncertainty is poisonous.
The first thing Canadians should recognize about the new world order for oil prices is that – contrary to what we’re being told by our federal government – the economy is no longer in dire need of any new pipelines. For that matter, it can live without the new rail terminals being built to move oil as well. Yesterday’s transportation bottlenecks aren’t relevant in today’s marketplace.
At current prices there won’t be any massive expansion of oil sands production because those projects, which would produce some of the world’s most expensive crude, no longer make economic sense.
The recent spate of project cancellations by global oil giants – Total’s Joslyn mine, Shell’s at Pierre River, and Statoil’s Corner oil sands venture – is only the beginning. As oil prices grind lower, we can expect to hear about tens of billions of dollars of proposed spending that will be cancelled or indefinitely postponed.
Not long ago, the grand vision for the oil sands saw production doubling over the next 20 years. Now that dream is in the rear-view mirror. Rather than expanding production, the industry’s new economic imperative will be attempting to cut costs in a bid to maintain current output.







