Tar Sands Oil Slumps, and Albertans Starting to Question Big Oil

October 14, 2015

NYTimes:

At a camp for oil workers here, a collection of 16 three-story buildings that once housed 2,000 workers sits empty. A parking lot at a neighboring camp is now dotted with abandoned cars. With oil prices falling precipitously, capital-intensive projects rooted in the heavy crude mined from Alberta’s oil sands are losing money, contributing to the loss of about 35,000 energy industry jobs across the province.

Despite a severe economic downturn in a region whose growth once seemed limitless, many energy companies have too much invested in the oil sands to slow down or turn off the taps. In addition to the continued operation of existing plants, construction persists on projects that began before the price fell, largely because billions of dollars have already been spent on them. Oil sands projects are based on 40-year investment time frames, so their owners are being forced to wait out slumps.

After an extraordinary boom that attracted many of the world’s largest energy companies and about $200 billion worth of investments to oil sands development over the last 15 years, the industry is in a state of financial stasis, and navigating the decline has proved challenging. Pipeline plans that would create new export markets, including Keystone XL, have been hampered by environmental concerns and political opposition. The hazy outlook is creating turmoil in a province and a country that has become dependent on the energy business.

Canada is now dealing with the economic fallout, having slipped into a mild recession earlier this year. And Alberta, which relies most heavily on oil royalties, now expects to post a deficit of 6 billion Canadian dollars, or about $4.5 billion. The political landscape has also shifted.

Last spring, a left-of-center government ended four decades of Conservative rule in Alberta. Federally, polls suggest that the Conservative party — which championed Keystone XL and repeatedly resisted calls for stricter greenhouse gas emission controls in the oil sands — is struggling to get re-elected in October.

“The pendulum has swung,” said Stephen Ross, the president of Devonian Properties, an Alberta development company that has built several residential and commercial properties in Fort McMurray.

Pembina Institute:

EDMONTON — New public opinion research shows that 53 per cent of Albertans want the province to adopt stronger policies to cut carbon emissions. This result comes from a survey of more than 1,800 Albertans conducted by EKOS Research Associates and commissioned by the Pembina Institute.

Half of Albertans (50 per cent) also support the introduction of a carbon tax that applies to all polluters, including both individuals and companies. Support for this kind of carbon price is 10 to 20 percentage points higher when the revenue is directed to specific sources, such as infrastructure projects or technologies that reduce carbon emissions.

Quick facts

  • A majority (56 per cent) of Albertans think the province has an obligation to cut emissions to address climate change, with only 26 per cent disagreeing.
  • A large majority of respondents (70 per cent) support investing in renewable energy sources to reduce the province’s reliance on coal-fired electricity.
  • Most Albertans (53 per cent) want the province to adopt stronger climate change policies, even if that means oilsands companies must pay higher costs to produce oil.
  • Two-thirds of Albertans (66 per cent) think the government should prioritize diversifying the province’s economy over helping the oil and gas industry be more competitive (29 per cent).
  • Roughly half of respondents (48 per cent) think that the oilsands industry is currently large enough, or that its size should be reduced.

Huffington Post Canada:

Those hoping for a quick recovery in Canada’s oil patch got bad news Tuesday from the International Energy Agency, which now says the global oil glut will likely last through 2016.

In its latest market report, the IEA said it expects a “marked slowdown” in global oil demand growth next year, from an increase of 1.8 million barrels per day in 2015, to an increase of 1.2 million barrels per day in 2016.

If the IEA’s forecast is right, it means the oil glut will continue next year, making any bounceback in oil prices unlikely.

The IEA noted that the slowdown in demand for oil comes in part from the very countries that produce oil, as their economies have suffered in the low oil price environment. It noted the IMF recently downgraded its economic forecasts for Canada, Brazil, Venezuela, Russia and Saudi Arabia.

“Lower commodity prices, with all else held equal, eventually equate to lower public spending and a potential dampening in consumer expenditure in many of these countries,” the IEA report said.

2 Responses to “Tar Sands Oil Slumps, and Albertans Starting to Question Big Oil”

  1. earlosatrun Says:

    Unfortunately, the questions most of us Albertans seem to be asking is why did people stop buying our oil?

    We’re not the brightest province…


Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: