Monday, September 11, 2017

Pipelines to Nowhere

Don't expect Justin Trudeau to admit it but his government is subsidizing Canada's foreign-dominated fossil energy giants to the tune of $34-billion a year.  That's not the claim of some eco-radicals, Joe Oliver's 'enemies of the state.' It's the number reached by the IMF, the International Monetary Fund, in a 2013 report that found global fossil fuel subsidies totalled about $2 trillion.  In fairness to Justin and our Petro-Pols, the IMF amended its subsidies tally in 2015 to a staggering $5.3 trillion or over 6% of global GDP. That's a whopping giveaway. Somebody must be very, very happy.

That's a very long bet for the petro-states, one that offers a minuscule payback especially in the mid- to long-term. Yet despite the mounting evidence that it's a losing bet, Trudeau isn't backing off.

The bet is particularly bad for Canada which brings to the table the lowest-grade, highest-carbon form of ersatz petroleum in the world - bitumen. That's the stuff that First Nations once used to seal their birch bark canoes. It's the stuff that's still used in places as a durable coating for dirt roads. It's the same stuff that in times past carried sabre tooth tigers to their end in the pits of Le Brea. Contrasted with the light oil of the Middle East and elsewhere, Canadian heavy "oil" is in the crosshairs to become a stranded asset.  We seem to forget how the oil giants fled Athabasca almost overnight when news came through of a giant, conventional oil discovery in Prudhoe Bay, Alaska. Th

Then Liberal leader, Michael Ignatieff, labeled Athabasca the "beating heart of the Canadian economy for the 21st century." Prime ministers, Conservative and Liberal alike but especially Stephen Harper, dreamed of Athabasca transforming Canada into an "energy superpower."

What makes the bet so bad for all fossil-fuelers is that the world is turning away from oil.  Even Jaguar-Land Rover has seen the writing on the wall. CEO Ralf Speth says the petro-states are in for a rough ride.

Speth cited the impact battery-powered cars will have on oil demand, and the “considerable stress” that could have for major oil-producing countries’ budgets.

“Many [governments] could be forced to impose substantial spending cuts within the next five years, straining living standards and so creating unrest in areas already suffering from instability. So changes in mobility, in technology, will change the geopolitical map of the world,” he said.

The energy giants such as BP, Exxon and Shell continue to whistle past the graveyard even as prosecutors close in on them for misleading investors and shareholders about the true value of their fossil energy holdings.  These petro-execs and their political minions have boxed themselves into a very nasty corner and they've put the global economy in grave jeopardy.

Jeopardy? There's a name for it, the "Carbon Bubble." It's a term that refers to the roughly 27 trillion dollars in proven fossil fuel reserves these energy giants have taken to market. That's 27 trillion dollars of notional wealth backed by hard currency invested by governments, banks, institutional lenders, pension funds, even ma and pa punters on the stock markets and bourses of the world. If, no when, that bubble bursts it will be a body blow for the global economy and much worse for some petro-states.

Experts such as Bloomberg and Aston University’s David Bailey predict a tipping point in the 2020s in some parts of the world, when electric cars simply make more financial sense for drivers than those powered by a combustion engine.

And while the oil companies are right that increasingly affluent Chinese and Indians will want cars, they seem to ignore the fact that electric ones offer a fix for those countries’ air pollution problems, which their citizens are pushing further up the political agenda.

What's that you say, China? It just happens there's word from China and it concerns cars, electric cars.

China, the world’s biggest vehicle market, is considering a ban on the production and sale of fossil fuel cars in a major boost to the production of electric vehicles as Beijing seeks to ease pollution.

The move would follow similar plans announced by France and Britain to outlaw the sale of petrol and diesel cars and vans from 2040 in order to clamp down on harmful emissions.

Xin Guobin, vice-minister of industry and information technology, told a forum in the northern city of Tianjin at the weekend that his ministry had started “relevant research” and was working on a timetable for China.

Xin said the policy would be implemented “in the near future”, according to the official Xinhua news agency.

This would be a great time for Justin to start doing a bit of homework of his own. Time to begin to anticipate a world with no appetite for petro-sludge. Time to assess the prospects of foreign energy giants keeping their promises to clean up their mess in Athabasca and return the area to pristine wilderness (guffaw, guffaw). Time to evaluate a post-bitumen future for Canada. Time to shut off the goddamned subsidies.


Dana said...

Jason Kenney will soon begin talking about suing China or some such.

The Mound of Sound said...

Jason could be too busy setting up soup kitchens, Dana.

Owen Gray said...

That fact that China is betting on electric cars provides a clear signal -- to those who are paying attention.

Anonymous said...

Anyong...All while China is the world's #1 for getting rid of fossil fuel and has become the world's #1 developer of alternative energy. China Aims to Spend at Least $360 Billion on Renewable Energy by 2020.

Anonymous said...

Anyong....for the love of Humanity...why do we keep voting these...excuse me because that is what it is...stupid people into power?

Anonymous said...

Anyong....Spain will have all diesel vehicles off the road by 2025. Canada needs to be spending billions on rail from coast to coast to coast to beat the problem of moving people. Aww yes, but the monied people won't like having to travel close to or stand next to anyone who is not wearing Channel, will they? We need to take a good look at Norway and the difference in pay between doctors and a labourer. All while governments in Canada waste money on 1965 platforms, China is moving ahead on all forms of reducing what is wrong with Democracy?....Too many Loop Holes perhaps.

The Mound of Sound said...

There has been gross negligence on the part of our political case, Trudeau included, in ignoring the day of reckoning for fossil fuels. What did they expect the governments of China and India to do? Diesel and gasoline engines are already a plague in both countries and a direct threat to their future stability, much less their prosperity. They're not motivated by altruism but survival and we're too stupid to see the writing on their walls and our own. Trudeau offers up a few goodie bags for the kids but on the big issues he's not far off Harper's mark. In fact if you strip away the facade they're remarkably the same and we'll wind up paying a huge price for their refusal to come to grips with reality.

Anonymous said...

Anyong.......Thanks Mound....I know that is the problem. Cheers

Lorne said...

An excellent post, Mound, that shows how much of an outlier North America is becoming in continuing to push fossil fuels. To me, the game-changer will be China's embrace of electric cars. They are far too massive an economic influence to ignore.

The Mound of Sound said...

Outlier, indeed, Lorne and that's a bad spot to be in when you have a resource that you're expecting to pay for itself and generate royalties from sales overseas. For our target market - China and, to a lesser extent, India - it's a matter of survival, not a function of price, any longer.

Anonymous said...

Political incompetence needs to be seen within the context of geography. China, India, Spain, France, etc. aren't major oil producers so they don't have the same stake in oil and can more easily move off it.

Again, geography makes the US our biggest trading partner which naturally leads to a desire for trade treaties to ensure efficient movement of goods across our border. Political incompetence entered in when we agreed to NAFTA's investor-state provision. This is the big elephant nobody wants to talk about, because it effectively prevents Canada from shutting down the tar sands without paying billions in compensation to American oil companies.

I agree that Trudeau's pipeline approvals come down to political incompetence. He could have kept his promise to rework the NEB and tied up the approval process with enhanced environmental impact analyses. This could very easily have taken him beyond the next election with little political cost. His failure to do so was a huge mistake.

Toby said...

On the weekend CBC's Sunday Edition ran an interview with a climate scientist, Harold Wanless, who explained that Miami and much of Florida is going under water permanently. In the interview Wanless explains some of the reasons and presents startling facts (such as all of Greenland's ice will melt) but he also talks about political incompetence, the failure of the people we elect to address Global Warming and make plans to deal with its effects. It's the same political incompetence we are seeing from our Canadian politicians.

You can find the piece here.

Trailblazer said...

The writing is on the wall and has been for some time.
At the end of the day it boils down to money and investment.
A panic withdrawal from the fossil fuel industries would lead to world wide economic collapse especially for the well connected.
Yes there are Luddites but as loud as they are they are a minority of numbers catering to the willfully ignorant.


Trailblazer said...

All kinds of stuff going on!