Friday, September 11, 2015

Stephen Harper's Oily Comeuppance

A Saudi prince once said that the Stone Age didn't end because man ran out of stones.  The Age of Oil may be headed for the same fate.  A Goldman Sachs outlook suggests the price of crude oil will hover around $45 a barrel for the next year or so and could even hit $20.

That's not good news for self-styled 'energy superpowers,' i.e. Canada.  Richard Fantin of Canadian Trends has an insightful report of what's in store for his province, Alberta, and it makes for grim reading.

Remember when then Liberal leader, Michael Ignatieff, proclaimed Athabasca the "beating heart of the Canadian economy for the 21st century"? Remember, "Iggy"? Oh, you would rather forget? I see.

That's the problem with betting the farm on the idea of flogging the world's highest-carbon and costliest oil.  It's like eating too many of those Pringles with Olestra. Something bad is bound to happen in your pants.

Poor Stephen Harper. He's devoted his entire premiership to Canada's Alberta's bituminous bounty. He rode roughshod over every possible obstacle, sweeping aside fisheries, navigation and marine habitat regulations; transforming Canada's National Energy Board into a blatantly kangaroo tribunal; even harnessing the state police and security agencies into service of Big Oil, all on the taxpayer's dime.

They knew it was a race and that time might not be on their side. Harper even brought in a repeat offender jailbird to be his envoy to the Oil Patch, brought the guy right into the PMO (which, judging by recent revelations, must have felt like a second home to Bruce Carson).

At one point Harper's then natural resources minister, Joe "Leatherback" Oliver, let slip the urgency of getting bitumen to "tidewater" and into the holds of supertankers. Oliver, perhaps imprudently, noted that if these pipelines weren't brought online and soon, Canada was at risk of bitumen becoming a "stranded asset."

The world is moving toward carbon pricing (no, it's not the idea of the opposition leaders) and even Harper is going to be hard pressed not to follow suit.  It could be a "perfect storm" - low oil prices, high-cost/high-carbon oil, carbon taxes.  As Richard Fantin noted, the squeeze is already causing Big Oil to 'cut corners' on its operations and that usually translates into shoddy maintenance, monitoring and, eventually, more oil spills.

If we're to have any hope of avoiding the worst climate change outcome, runaway global warming, the world is going to have to decarbonize very soon. The first fossil fuels to be abandoned will be the high-cost and the high-carbon. Coal, while relatively cheap, is very high-carbon and there's no shortage of US coal companies going bankrupt these days.  Bitumen, while not as high-carbon as coal, is the highest carbon fossil oil and, unlike coal, it's also costly to produce.

Harper gambled everything on bitumen, including Canada's reputation abroad. He and his government have brainwashed Canadians into believing the Tar Sands are indispensable to our economy whereas bitumen revenues really only represent 2% of Canada's GDP.  Two per cent doesn't sound like much but it's Heaven and Earth to the province of Alberta where royalties are treated as general revenue to fund essential services.

Albertans have a term for it. During boom times they "piss it all away" and when boom turns to bust in the oil patch the province dives headlong into recession. They've institutionalized a bubble economy. If you organized your household finances that way people, especially your creditors, would heap scorn and derision on you. In no time you would find yourself in a very ugly place.

There's more than schadenfreude to this. I don't live in Alberta. I live in British Columbia, coastal British Columbia.  Out here the collapse in world oil prices may be enough to halt Stephen Harper's pipeline/supertanker obsession. Let us pray.


Grant G said...

I enjoyed your posting...Correct on all counts.

Northern PoV said...

We BCers might just get lucky when it comes to pipelines. But don't forget the crude-by-rail is going strong and will be poised to grow REALLY BIG if the price of oil rises.

The Saudis seem to be determined to keep market share. They can likely still make money with sub-$40 oil unlike the frack-oil producers in the US and our crazy bitumen-oil shieks in the Tar Sands.
The Saudis may also be trying to delay the inevitable movement to green energy by keeping oil cheap.

But the assets will only be stranded for a short period of time. "Fossil fuels" (carbon in the earth) are needed for producing all kinds of products and burning them for fuel is a waste.
The frack-oil and bitumen will be available in a few decades when we've learned how to use them w/o killing ourselves in the process.
So leaving the carbon in the ground - is a great hedge for the future. It should not be pissed away for pennies while we overheat the planet.

The Mound of Sound said...

@ Grant, thanks.

@ NPoV - you've touched on a rarely mentioned point - the need to husband our petro-assets for other uses such as plastics. Given that it took hundreds of millions of years to accumulate that organic material and any number of catastrophic events to sequester it deep underground in solid, liquid and gaseous forms, we'll be long gone before there'll be any new supply.