Western oil magnates and their fellow travellers in government and media once crowed superciliously about their pride of economic place in Canada. They and they alone, they insisted, were responsible for the nation’s surging fortunes in global markets.
They still exult this way, though lately their gloating has become a tad muted thanks to the pounding the price of oil is taking on international commodity exchanges. West Texas Intermediate crude (WTI), the standard used to benchmark all grades, fell to $82 a barrel earlier this week. That was off by more than 10 per cent since the beginning of the month.
We wretched urchins on the East Coast may be tempted to indulge in a little schadenfreude when we witness the fear and loathing that cyclically descends on Alberta’s oil patch. Something about the best laid plans of mice and men rattle around in our brain pans as we watch yet another plane load of New Brunswickers abandon their unpromising, little towns for putatively greener pastures under big sky country.
But, in the broader context, when Alberta hiccups, all of us should worry.
For more than 30 years, economic planners and regulators at both the federal provincial levels have been slowly and deliberately transforming this country into an oil and gas giant. They have nurtured, with countless millions of dollars in publicly supported research and development and tax breaks, astonishing advances in drilling and extraction technologies. Now, we’re all dependent on this continued success, for without it, there’s precious little else to fall back on.
Today, Alberta companies employ nearly as many Maritimers between the ages of 18 and 35 – many of whom are the major breadwinners for their families back home – as do Atlantic firms. Over the past year, the bitumen-rich province generated all of the country’s net jobs growth, adding some 82,000 positions.
Currently, Alberta accounts for nearly a third of Canada’s GDP. According to Oil Sands Today, quoting figures compiled by the Canadian Energy Research Institute, “New oil sands development is expected to contribute over $2.1 trillion (2010 dollars) to the Canadian economy over the next 25 years – about $84 billion per year. According to Statistics Canada, $84 billion is enough to feed more than 90 per cent of Canadian households for a year.
What’s more, “The oil sands industry will pay an estimated $783 billion in provincial ($122 billion) and federal ($311 billion) taxes and provincial royalties ($350 billion) over the next 25 years.”
Meanwhile, “employment in Canada as a result of new oil sands investments is expected to grow from 75,000 jobs in 2010 to 905,000 jobs in 2035 with 126,000 jobs being sourced in provinces other than Alberta. . . .It is estimated the oil sands industry will purchase about $117 billion in supplies and services from Canadian provinces outside Alberta over the next 25 years – about $5 billion/year. For every direct job created in Alberta’s oil sands industry, approximately one indirect and one induced job will be created in the rest of Canada.”
All of which is swell, unless you’re an environmentalist worried about humanity’s rapacious ways with Mother Nature or, as the case may be in the current circumstance, an economist.
Although oil prices have been sliding globally for only a few weeks, the signs of steadily softer demand are everywhere, especially in emerging powerhouses such as China and India, where the pace of growth is slowing. And the causes of this bottoming trend are especially perplexing.
“Historical pricing has been affected by, and dependent upon, turmoil facing the Middle East,” writes Brigham McCown, a former government executive, attorney and public policy expert, in a recent commentary for Forbes. “In times of war and geopolitical instability, prices have historically increased rather quickly, often overnight. As turmoil eased, so too would oil and gas prices, albeit at a much slower pace. Based on historical data, one would expect prices to be dramatically spiking given current events in Syria, Iraq and Libya, yet for all of this instability, prices continue to drop.”
That they do suggests that something more systemic than routine price fluctuations is at work here.
Canada’s unequally booming industries may soon feel the brunt of a great, leveling downturn thanks entirely to Alberta’s outsized pride of economic place in this country.