Prime Minister Justin Trudeau’s recent visit to Calgary drew thousands of protesters frustrated by the low price for Alberta oil in the United States and the federal government’s failure to oversee construction of a pipeline.
In response, Trudeau acknowledged “this is very much a crisis” and reiterated the federal government’s commitment to build the Trans Mountain Expansion pipeline, which would triple capacity to carry Alberta oil to the West Coast.
The recent fall in the price of oil is all too familiar. The Canadian oil industry has struggled with the slump in global prices since 2014. Oil prices made an uneven recovery starting in 2016, but never approached the “good old days” of $100 a barrel before declining precipitously again this fall.
These trends are not limited to Canada. The prices for U.S. and Organization of the Petroleum Exporting Countries oil have fallen by $22 to $26 a barrel in recent months, compared to the $27 a barrel decline in the price of Western Canadian Select, a blended crude oil that includes oilsands products and acts as the price benchmark for heavy crude oil produced in Western Canada.
But Canada’s heavy oil is especially vulnerable in a world of persistently low oil prices because it’s more costly both to extract and refine than conventional oil.
Although low oil prices in recent years reflect a market response to growing supply, a more extreme version of this phenomenon can be expected as global actions to address climate change reduce the demand for oil.
Dire climate change warning
A recent Intergovernmental Panel on Climate Change report that made headlines worldwide urged a rapid transition away from fossil fuels to limit a dangerous global temperature rise above 1.5C.
The Canadian government itself has embraced the goal of limiting climate change to “well below 2C.”
The transition from oil will also be hastened by technological change. Already, countries like China are acting as leaders in switching from gasoline to electric vehicles.
History is replete with examples of declining resource industries that left communities devastated in their wake.
In the U.K., coal communities experienced a decline from 750,000 coal miners in 1947 to fewer than 9,000 in the 1990s. This decline was due to a combination of mechanization, a policy shift towards the import of coal and increasing availability of cheaper natural gas. In the absence of long-term transition plans, many workers remained unemployed and fell victim to drug abuse when coal mines were closed.
In Canada, the decline of the Atlantic cod industry off the coast of Newfoundland and Labrador in the 1990s — initially due to overfishing and later the imposition of a moratorium — was a notable economic shock in Canadian history. Close to 40,000 people lost their jobs in regions with few economic alternatives at the time.
Single-industry communities vulnerable
Communities dependent on a single industry are especially vulnerable. Close to 140,000 people work in the oilsands in Alberta. Apart from these direct jobs, there are a large number of people in “indirect jobs” who supply equipment or services to oilsands operators, as well as “induced jobs” in local retail industries in oil towns like Fort McMurray.
Since the 2014 decline in oil prices, we’ve seen a glimpse of what the future could look like for oil-dependent communities in the absence of a long-term plan. By the end of 2016, thousands of these jobs were lost in Alberta. Many people in towns like Fort McMurray who lost their jobs could no longer make their mortgage payments, mailed their keys to the bank and left town.
But a critical difference between the examples above and the ongoing impact of climate change mitigation on global oil demand is that we can see it coming.
Canada has joined the international community in calling for a transition away from fossil fuels. There is no reason to wait for more painful disruption before planning for that transition, and envisioning alternative industries both in and out of the energy sector.
A transition plan founded on principles of justice should be built through dialogue among governments, businesses and workers.
Leadership on coal
Similar initiatives are already in play for coal communities in Alberta. In keeping with their commitments to transition away from coal-based electricity by 2030, both the provincial and the federal government have shown leadership.
The Alberta government has adopted various policies to help coal workers and community members access retraining and transition to employment in other industries. The federal government committed $35 million in their 2018 budget for skills development and economic diversification, and launched a transition task force to recommend how best to support coal workers and communities.
The next transition will be a much bigger challenge given Alberta’s and Canada’s greater economic dependence on oil. However, that makes it even more critical to anticipate the needs of oil-dependent communities in Alberta and other provinces.
Devoting public resources to building lasting infrastructure to temporarily increase oil production will leave workers, communities and the Canadian economy even less prepared for the changes to come.
It’s time for Canada to look beyond pipelines and envision a just transition to a future beyond fossil fuels.