Fort Mac's Lingering Demise. End of the Road for Canada's Petro-Pimps?

The fire is a separate matter. Fort Mac was going terminal well before the blaze began. The Tyee's Andrew Nikiforuk writes of the other fire, "a slow economic burn" that's been smouldering, unmentioned for some time.

Although the chaotic evacuation of 80,000 people through walls of flame will likely haunt its brave participants for years, a slow global economic burn has already taken a nasty toll on the region's workers.

That fire began last year when global oil prices crashed by 40 percent and evaporated billions of investment capital in the tarsands.

As the project's most high cost producers started to bleed cash, corporations laid off 40,000 engineers, labourers, cleaners, welders, mechanics and trades people with little fanfare and even less thanks.

Many of these human "stranded assets" endured home foreclosures and lineups at the food bank.

Worker flights to Red Deer and Kelowna got cancelled and traffic at the city's new airport declined by 16 per cent. Unemployment in Canada's so-called economic engine soared to nearly nine percent.

...What resembles a string of bad luck may actually be the unfortunate consequence of rapidly developing a high risk and volatile resource with no real safety net.

The first undeniable factor is weakening demand for oil, the engine of global economic growth. China's economy, the world's largest oil importer, is faltering as its industrial revolution peaks and fades.

Europe, Japan and the United States are also using less oil, and their economies are stagnating too.

In such a world, little if any bitumen will be needed in the international market place. In fact economists now trace about 50 per cent of the oil price collapse to evaporating demand.

...Murray Edwards, the billionaire tycoon behind Canadian Natural Resources, one of the largest bitumen extractors, has decamped from Alberta to London, England.

Edwards and company slashed $2.4-billion from CNRL's budget in 2015.

Since the oil price crash, by some accounts, Murray's company has lost50 per cent of its market value.

(Cenovus, another oilsands player, got cursed with junk bond status.)

...In addition Carbon Tracker, a market friendly group, now informs investors that low oil prices will favor existing production from low carbon and low cost conventional sources.

That's a terrible forecast for Alberta's oilsands and its product which is neither low cost to produce nor low carbon to refine.

...In February the Alberta government set a minimum value for bitumen at $10 per cubic metre. That equates to a value of about $1.50 per barrel of bitumen.

But in 2014 the government's monthly report valued bitumen at $421 per cubic metre. The data suggests that bitumen has lost 97 per cent of its value during the price collapse. In other words companies once worth billions are now worth millions.

Could that be why Edwards sailed to England?

...When oil prices stood at $100, rash bitumen development made some sense. But when prices fell below $45 the gamble turned into Russian roulette.

Unlike Saudi oil, most bitumen projects require prices of at least $60 to $70 a barrel to survive.

And so most tarsands extractors (except those who own refineries) are now bleeding cash; many banks have developed nervous twitches; and thousands of workers have found themselves unemployed.

The overproduction of bitumen explains why, says [former CIBC chief economist, Jeff] Rubin, "the oilsands morphed from an engine of economic growth into the epicenter of a made-in-Canada recession."

...The wise course of action for Alberta and Canada, therefore, rather than being caught by surprise, would be to plan for an orderly transition that protects communities and oilsands workers, and rewards them for the economic contributions they've made by providing funds for retraining and industry diversification.

It'll be interesting to hear what prime minister Slick has to say when he shows up for his photo-op in Fort Mac today. He'll probably go all Churchillian with grand promises of how we'll rebuild Fort McMurray bigger and better than ever, new pipelines and a great future for "the beating heart of the Canadian economy for the 21st century." Sorry, that quote was from the previous Liberal petro-pimp, Ignatieff.

Oh, yes, one other thing. Do make sure those energy giants clean up all those tailing ponds and restore those pits before they switch off the lights. Please?