The Harper government strives mightily to get more of Canada’s economic eggs into one oily basket. They seem unable to imagine a future based on things other than what we can dig up from the ground and the means of moving those things around. Suddenly, however, two global events make clear just where grandma’s caution about eggs and baskets came from. Grandma was no dummy.
The first event is the price of oil dropping like a stone. This may be good news for drivers, but it is very bad news for high priced energy from the tar sands and fracking. Since OPEC recently opted against production cuts, oil prices are barely covering what it costs to get tar sands energy out of the ground, separate the bitumen and get it to the refineries that are rather inconveniently located on the other side of the continent (near to where the oil used to come from or arrive at).
This new reality will give pause to any investor thinking about plunking down another $10- or $20-billion on new extraction facilities. Nothing puts off those with billions to spare than two words: stranded assets. I do not know about you but when I spend billions I prefer to know that what I am paying people to dig up is worth more than it costs to get it out of the ground.
The second event may have an even bigger effect on Canada’s economic future. We are going to need a few more economic baskets, for sure, because the planet’s two largest fossil energy consumers, China and the United States, are now taking climate change (along with other fossil fuel environmental challenges) more seriously: they have agreed to cut carbon emissions. Europe is also on side with reducing fossil fuel use and India and other rapidly industrializing countries are joining in as well. The customers are running for the exits even as prices are falling.
These events have not escaped media notice. Thomas Walkom, writing in the Toronto Star regarding the drop in oil prices, opens with: “Oops. There goes the tar sands.” Carole Goar, regarding Obama’s climate agreement with China says that Prime Minister Harper can no longer “shelter in China’s dirty shadow” and he can also no longer “move in lockstep” with the United States because President Obama: “has leapt out in front of him, determined to use his second term to leave a positive legacy on climate change.”
If you want more reading on the US-China deal read Paul Krugman in the New York Times who notes that the agreement removes the last line of defense against the efficacy of climate action by the United States (and needless to add, Canada): if China doesn’t act on the climate, there is no point in our acting.
All this means that the largest potential customers for tar sands oil may not suck up every drop we can produce after all, even if it is produced at below the going market price. This does not mean that no one will buy any oil from us, but it does mean that many nations will be increasing their investment in renewable energy and energy efficiency and buying less and less oil as a result. In this context it makes no sense to build Canada’s long-term economic future primarily on fossil fuel exports.
Intelligent governments would now anticipate that oil company boardrooms will look at the drop in oil prices and at climate policy decisions. They will rethink sinking billions into additional tar sands extraction. They may even walk away from some of the pipelines that are presently being pushed forward for approval.
This imminent pause in the oil patch boom suggests that it might be past time for a Canadian government (or potential government) to again think about Canada’s global reputation and its economic future. It has been a very long time since anyone in Ottawa tried that.
For our part (as green-inclined citizens) there may be an opening to push for long-term limits to tar sands extraction and for alternative Canadian economic possibilities. We may never get another opening this good to promote an overall economic and environmental strategy that includes a cap on annual tar sands output. An investment pause opens political room regarding the question: how much is enough.
Most readers here will think that what we extract from the tar sands is already more than enough, but a decision to cap output would be very important; perhaps more important than stopping particular pipelines (other than perhaps the worst of the lot: Northern Gateway). Recent events on the energy front need not be seen only as a threat to Canada’s economy. They are also an opportunity to create a more sustainable economy that will be a source of national pride rather than a loud global declaration of Canada’s disinterest in the global future.
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