Americas News
Canada Contemplates Reality of "Lower Forever" Oil Prices as Big Business Ramps Up Efforts to Go Green
Despite Canada's oil sands being touted as a significant global contributor to the crude market, operators need to face the new reality of "lower forever" oil prices: so says the president of the Alberta Federation of Labour, who thinks that with U.S. shale's likelihood of creating more gluts, the resource-rich province can no longer take "risky, long-odds" bets "on high global oil prices."
Writing in The Edmonton Journal on Thursday, Gil McGowan portrayed the Canadian crude industry as having for the past 40 years "gambled on the price of oil, relying heavily on non-renewable resource revenue to fund our provincial operating budget" and referred to this as "the height of irresponsibility."
Relying on previous predictions from heavyweight producers such as Shell that the oil sector overall is heading towards as "lower forever" price scenario, McGowan called for revenue reform for Alberta but was cagey about what form this should take, preferring to state only that the province could either wallow in mounting debt or make "devastating" cuts to public services such as education and health care.
McGowan's remarks were published on the same day Alberta projected a narrower budget deficit in 2019 (to about $8.8 billion), despite declining revenue from non-renewable resources: this is due to a decision to extend a 30 percent tax credit for equity investments in certain Alberta businesses and a 10 percent tax credit for some capital spending in manufacturing, processing, and tourism infrastructure.
Echoing McGowan's sentiments, Joe Ceci, Alberta's finance minister, told the province's legislature that "For too long, Alberta has been locked in a cycle of boom-and-bust spending that tracked the price of non-renewable resource spending."
While economic diversification is a commonsense approach to business in the 21st century, Alberta's strategy is predicated on several assumptions, including that oil will eventually give way to other forms of energy generation and that these new forms of generation will be sustainable, fulfill the needs of users, and be just as profitable to the energy providers as oil has been - all of which, enthusiasm from academics and the mainstream media notwithstanding, has yet to be proven.
However, just as Alberta has traditionally placed its fortunes in one form of energy generation, more and more companies are embracing alternative energy, case in point: Microsoft, which this week announced it will purchase 315 megawatts of energy from the new Pleinmont I and II solar facilities in Virginia; the deal is said to be the single largest corporate purchase of solar energy ever in the United States.
Microsoft's total of directly purchased renewable energy now stands at around 1.2 gigawatts - about enough power to light 100 million LED bulbs.
Another example of an iconic brand eager to live up to green standards is McDonald's, which this week stated it will cut greenhouse gas emissions related to its restaurants and offices by 36 percent between 2015 and 2030, by promoting "renewable" energy and using it "efficiently," according to Steve Easterbrook, the fast food chain's president and CEO.
And of course, the public sector overall continues to aggressively adopt so-called "sustainable" energy alternatives to fossil fuel: CNBC reported that even China has replaced all 5,698 Shenzhen buses with electric vehicles (although the news agency didn't bother to speculate where the massive extra amounts of electricity generation necessary to power a world of electric vehicles would come from; instead, it went on to tout the benefits of walking and cycling as a means of transport).
The only certainty in the headlong rush to be green is that it will be an interesting next few decades, both socially and economically: the International Energy Agency predicts that by 2030 the world's electric fleet could grow to 160 million vehicles, compared to just 2 million today.
