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.