Stephen Rees's blog

Western Canada’s First Oil Well: Waterton Lakes, Alberta

“Will it make the same mistakes?”

The headline comes from The Globe and Mail.

The cause:

Analysts predict global oil demand could peak as soon as 2022. Even some big oil companies see peak demand by the 2030s.

But between then and now, in the mid-2020s, oil companies such as France’s Total forecast higher prices on a combination of steady demand and tighter supply.

This scenario, if it plays out, won’t mean $100 for a barrel of crude. But it would mean a profitable oil industry – and potentially quite profitable. Given that Alberta is among the biggest producers of oil in the world, this outlook could be very good news for the provincial treasury.

This annoyed me so much I found that I was writing a reply in my Plague Diary. Which will not be seen by anyone – at least not for a very long time. Perhaps they will have fun comparing the prediction with reality.

I cannot imagine that the provincial treasury will see all that much. Mostly because politicians do not have a long term focus. And this seems to apply in spades to Conservatives and Albertans. The early paragraphs of the editorial lists what happened in previous oil booms. My prediction is that while the mistakes may have some differences, the political instinct will be to devote any windfall to spending that will bring enough popularity to improve the chance of winning the next election. That is all the party in power thinks of. Yes, there are lots of good causes, and plenty of lobbyists. The ones that promise significant donations to party funds and other help to win elections will get the most favorable hearing. And the oil and gas lobby is still the biggest and most generous. While the statistics show Mining, quarrying, and oil and gas extraction, at 16.12% of GDP, CAPP continues to claim “30% of all economic activity in the province” which is obviously not the case.  But most Albertans and nearly all of the politicians probably don’t see it that way.

What has been happening is that the oil and gas sector has been largely bought up by foreign investors. Large multinationals, most of whose profits get squirrelled away in places where there are no taxes. There is a huge overhang of environmental damage, most of which will remain for the public purse to repair long after the end of the age of oil and gas. I doubt that much will be spent on this in the short term unless there is some major catastrophe to concentrate minds. Some inspiring folk are converting abandoned well sites to  solar capture. But the amount of space that occupies compared to the huge swathes of wrecked boreal forest is tiny. And the first thing that a conservative thinks of when there is a “surplus” is tax cuts. Actually it is the only thing no matter what the state of the balance of revenues to spending – unless it is spending cuts to hurt those least capable of withstanding them.

Of course we all know what works and what doesn’t. Conservatives are not persuaded by evidence, they like stories, and they love the old stories. They keep on doing what they have always done even though the outcome is always the same too.

If oil prices rise so too will oil and gas production. Right now there is a glut and the places to store the surplus are at capacity. Note too that the higher prices are predicted by an oil company. Not exactly an unbiased source.

But we also know that Canada has not a hope of meeting its commitments to reduce ghg emissions – mostly because the Canadian government spends far more on propping up a dying industry instead of promoting the green alternative. “As part of its COVID-19 response, Canada’s government is spending $1.7 billion to clean up “orphan” and inactive oil and gas wells in Saskatchewan, Alberta and British Columbia.  Industry should be footing the bill…” (source: Suzuki ibid) 

Many other governments are doing far more than Canada to promote sensible investments in renewables – and they are seeing good rates of return on those investments as well as moving in the right direction. I do not see a Jason Kenney government following that path – but maybe that will not survive long enough to see the predicted boom times.

More likely the predicted boom is unjustified optimism. Or downright lies – which is what I think that CAPP claim is.