Help is at hand: the WSJ liveblogged the C-Span feed of the Big Three (Ford, GM and Chrysler) begging for a stay of execution. The comments are pretty entertaining, too.

Meanwhile, the Houston Chronicle has the solution.

(Meanwhile, Russia’s gas flaring targets are another casualty of the downturn.)

That’s sensible.

But Texas is still angry about his carbon capping proposals.

With its strange perspective on democracy, it is certainly acting like one.

Yesterday, Harper asked the Governor General of Canada, Michaëlle Jean — the country’s head of state — to prorogue parliament until 26 January. Chances are, if he hadn’t picked up his ball and gone home, Harper would have lost a no confidence vote against his minority Conservative government. It was elected in October.

All three main opposition parties — the Liberals, the NDP and the Bloc Québécois — had opposed the government’s planned budget. They want, instead, a financial stimulus package to bail out Canada’s resource-oriented economy, which is tanking amid falling commodity prices. (They had other political motives too: one of Harper’s proposals was to scrap some party funding. The Conservatives are by far the best-funded party in Canada.)

No wonder emails are now circulating showing Harper’s head imposed on Stalin’s figure.

The unprecendented manner of this prorogation effectively leaves Canada in a worse position than the US during the global financial crisis: both countries now have a lame-duck executive ostensibly “in power”. At least in the US’s case, we know who will be leading the country on 25 January. In Canada, the opposition say they may even vote down the government as soon as parliament resumes.

What to make of it? Since the decline of the Liberals — which considered themselves Canada’s governing party — the country has had three elections in four years. There could be another in the early months of 2009.

None of it makes Canada’s future as an energy supplier any clearer. After Harper’s victory in the October election, Petroleum Economist’s WJ Simpson dissected the confusion in energy policy. Green or not green? Oil sands policy decided by Ottawa or Alberta? Greenhouse gas a problem or not? Renegotiate Nafta or leave it as it is?

Harper is a Calgarian. So as oil prices sink — along with everything else in the city’s overheated economy — he’ll be aware of the dangers to Alberta and, especially, its costly oil sands. Not long ago, the oil sands were being described as the engine of Canada’s economy. Now the motor is spluttering badly.

Perhaps a two-month break will give Harper time to think up an adequate response to Canada’s economic problems. In Stéphane Dion, leader of the Liberals, Canadians aren’t blessed with a particularly appealing alternative to Harper. He’d be less likely than Harper to win a majority government — even after the blow to the prime minister’s reputation caused by yesterday’s antics.

But as genuine change arrives on 25 January in the US, Canadians will feel disappointed if their government — such as it is — fails to respond to their own economic woes. Canada needs a radical economic plan. But it also needs a leader with vision. Both are in short supply in Ottawa.

Derek Brower

Quite a few reasons there.

It’ll be painful reading for the Alberta government. But StatoiHydro did have some words of comfort. It says the decision doesn’t affect its upstream oil sands activities and its long-term view of the Canadian oil sands development remains unchanged, which is, presumably, that one day it will all be worth it.

The construction of its 20,000 barrels a day Leismer SAGD project is progressing according to plan with start-up on schedule for late 2010.

The upgrader would have processed the bitumen from oil sands into a synthetic crude oil. As it is, the Norwegian firm will hedge its bets, marketing its production as less-valuable unprocessed bitumen but saving itself the cost of building the upgrader – hardly an appetizing prospect with costs still so high.

Tom Nicholls

Thesis: as long as the world remains addicted to oil, it needs more of it to come out of the ground, and falling prices deter investment.

As we wrote in October’s leader for Petroleum Economist:

On the face of it, lower prices are good news: they make other goods cheaper and might help Western economies avoid the nightmare of 1970s-style stagflation – inflation compounded by low or negative economic growth. It therefore seems counter-intuitive to say that falling oil prices could also be a danger to the world economy. But high oil prices have done the world a service: in the short-term, they have persuaded oil companies to spend more on exploration, improving the outlook for long-term supply and energy security.

More importantly, high oil prices convinced governments to reduce consumption. The message seems to have got through to individual consumers, too. Nowhere is this more evident than in the US, where demand for crude and its products is falling as Americans drive less, buy more efficient vehicles and look for other concrete ways to spend less on energy. That could have long-term and profound implications for the oil industry – and for the environment.

But a collapse in the oil price now could stop the nascent conservation movement in its tracks, with disastrous consequences. Cheap oil would encourage more profligate consumption, especially as economies recover. It would destroy the financial incentive to find alternative energy sources. And it would discourage upstream investment: energy executives have frequently pointed out that cost inflation has pushed up the break-even point for big energy projects. Last month, for example, Total’s chief executive, Christophe de Margerie, suggested Canadian oil-sands projects might not work if prices fall below $90/b.

[...]

Falling prices might provide relief to the world economy. But if economies fail to change their energy consumption habits and develop new sources of energy, it will be only a temporary reprieve. It seems hard to believe it now, but, next time, the threat to the world economy and the energy security of individual countries could be even greater.

Now many louder voices are making the same argument — even the IEA, defender of the West’s rich energy consumers.

So what is the equilibrium? Leo Drollas, of the Centre for Global Energy Studies in London, says $50/b is the historical marginal price for oil: the price that covers costs and also encourages future investment.

But Drollas also argues that the world should “use the cheap oil first”. That makes sense. If a sustained low oil price leads companies to cut back in costly regions like the oil sands, that is all well and good — provided the spare capacity Opec is building up now comes on stream when the world needs it.

Ideally, the pattern should run like this:

prices fall – Opec cuts – pricey production plans get scrapped – demand begins to rise – Opec countries respond by releasing more oil – pricey production plans get sanctioned again adding marginal incremental production.

The problem with that? It can be painful (the section called “pricey production plans get scrapped” means a lot of people losing their jobs in Fort McMurray) and it leaves the world in exactly the same oil-price cycle it has been in for the past 40 years or more.

Derek Brower

And Merrill Lynch — yup, it still exists — said yesterday that $25/b was now in the sights:

A temporary drop below $25 is possible if the global recession extends to China. [...] In the short run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations.

A recovery will begin in June 2009, the bank predicts. (Some go even further: Gulf Oil says $20/b is possible)

Other analysts say “ugly” data leave them worried that not even another cut by Opec at its meeting in Algeria this month can thwart the bears.

Other data aren’t much more encouraging. The credit crunch is “looming large“, with smaller market players struggling to finance storage. That means a widening contango.

Recession in the US, Europe and even China is the big worry for Merrill — and anyone else who likes economic growth.

But things are looking bleak elsewhere. The EBRD says Europe’s emerging economies are in trouble too.

Derek Brower

On Wednesday, oil prices had got off to a weak start, tumbling to their lowest level in three and a half years – more than $100 a barrel below their mid-year highs – as old worries resurfaced. For one thing, Opec may not be reducing oil output as much as promised. For another, the world economy is so bad that there just isn’t enough demand around.

There was a brief recovery late in the day on Wednesday,  after US oil stocks unexpectedly fell.

But it didn’t last long. Analysts such as UBS brushed aside the significance of yesterday’s surprise stock draw-down. The bank says a slim decline of half a million barrels of crude “is no trend-break”. There is plenty of evidence that more oil is being put into storage. And demand for crude from refiners isn’t robust enough to mop up the spare crude.

Meanwhile, companies continue to feel the pain of low oil prices.  Schlumberger has said its 2008 profits would fall short of expectations because of the slow-down in spending by its clients.

The next rung down is $40 a barrel. Six months ago, that would have seemed preposterous. But who would bet against it now?

Tom Nicholls