Since the world economy went off the cliff in 2008, resources have kept Canada going. Americans may not be buying Ontario’s manufactured goods, but they have been buying oil — at prices that, thanks to Chinese demand and the production quotas of the OPEC cartel, have been sky-high.
For Prime Minister Stephen Harper this has been a godsend. Insofar as his Conservative government has any kind of industrial strategy, it is one based on oil and resources.
To that end, Ottawa has modified or eliminated environmental rules that resource companies fear might interfere with their business.
At the same time, it is pushing hard for pipelines to move tarsands oil more easily to Asia and the U.S.
But now even Calgary and Edmonton are facing problems. China’s appetite for resources is no longer as insatiable as it was. More alarmingly, new sources of cheaper shale oil are coming on tap in the U.S.
The so-called break-even price for Alberta heavy oil, the price at which extraction is profitable, varies from $65 to $100 a barrel. But in recent months, Alberta’s heavy crude producers have been getting as low as $45 a barrel...
Suddenly, Alberta’s high-cost tarsands are losing some of their lustre.
Curiously, Alberta has much in common with the Venezuela that Hugo Chavez bequeathed to the world. Both rely on heavy oil exports to the U.S. Both are one-party states (Alberta more so than Venezuela). Both are utterly dependent on the price of oil and both have economies that, in different ways, have been deformed as a result of this dependence.
Where we don’t see any change is in the federal government’s approach to the economy. The Harper Conservatives remain dazzled by resources. They believe that if the markets want Canadians to hew wood and draw water, that’s what we should do.
But markets are notoriously fickle. This is a fact the entire country will have to face. Alberta is just getting there first.
Walkom doesn't address the other Bitumen Boosters, the Liberal and New Democrat Parliamentary Petro-Pols. They too want to keep Canada hitched to the Athabasca wagon. They're as myopic as Harper and Redford.
Yet Walkom truly understates the perils of banking on Tar Sands revenues. He doesn't get into the fact that bitumen is, for investment purposes, one of the poorest forms of petroleum in that it's a high-carbon unconventional oil that's uncompetitively expensive to produce.
As Britain's Financial Times reported recently, market analysts are already steering major investors out of high-carbon plays. They realize those are assets that may well become "stranded" in the not distant future. They get it while Harper, Redford, J. Trudeau and Mulcair prefer to look the other way.
We need economic policies for Canada that are based on Canadians not some dodgy resource that may not even have a future. Any poker player knows what you must do when you're holding a losing hand like this - you fold.