It’s been over 30 years since Alberta faced a crisis in its oil industry of this magnitude, but when prices collapsed, as they did in the mid-1980s, the collateral damage was mostly confined to that western province.
It’s much different now, and Alberta’s woes will increasingly become Canada’s in 2019 as it tries to sort out the challenge of low prices and production issues.
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Right now, Alberta’s challenge would appear to be Ontario’s advantage. Prices at the fuel pump haven’t been this low in 15 years, and motorists are revelling in their good fortune. But beyond that buyer’s delight, there shouldn’t be any celebration. In November, it was estimated the dramatic drop in oil prices since late September/early October was costing the Canadian economy anywhere from $50 million to $80 million daily. Ground zero has been Alberta, where companies are scrambling to reconcile their future with a new low-price reality. They are scaling back and high-income workers are losing their jobs.
Part of the problem is a lack of pipeline capacity. But oil stockpiles have also been building in the United States, which is now the world’s No. 1 petroleum producer.
Alberta’s answer has been dramatic. The province will help augment the shipment of more oil to eastern Canada by rail, while introducing production cuts. These are desperate measures for desperate times.
The federal government has been pathetically absent in this crisis. The Trans Mountain pipeline expansion stalled in 2018, as did the Keystone XL pipeline. The Northern Gateway pipeline, meanwhile, was mothballed. Outside of the Trans Mountain Pipeline, Ottawa has kept its distance from these crises, perhaps believing they are Alberta’s alone and not Canada’s. In the case of the Trans Mountain, the feds purchased the pipeline for $4.5 billion, but have not come close to solving the more important challenge of getting it built.
As always, the federal Liberals believe that throwing public money at a problem is the answer.
Indeed, in mid-December Alberta was offered a $1.6-billion bailout package, although almost all it is in federal loans. Most of the loans come from Export Development Canada and are designed for oil and gas exporters who want to invest in new technologies and to diversify their markets.
Again, the gesture emphasizes how tone-deaf the federal government has become to Alberta’s needs. The province’s oil producers have plenty of markets. Their problem is getting their oil to those markets.
It’s not known how Alberta’s oil crisis will figure in this year’s federal election. Almost all of the Liberals’ support was in eastern Canada in 2015. The two provinces that lead Canada in oil production, Alberta and Saskatchewan, overwhelmingly voted Conservative.
– Peter Epp