Climate Change has been a dominant topic in the 2019 Federal election campaign. It appears Canadians want something done but we have yet to hear any leader articulate a realistic end state. If that end state is for zero emissions and the climate to hereinafter remain stable, then I offer that the geologic record indicates that such a state has never occurred nor would it be natural.
Presumably the main public concern is over the role of CO2 affecting the rate and magnitude of change. It is this anxiety that is driving many politicians to expose the egocentric and environmental delusion of many Canadians that Canada can solve climate change alone. The price for this misconception will be national unity.
It is commonly accepted that Canada is producing ~1.6% of global emissions. This is high on a per capita basis but our lifestyle, northern climate, geographic dispersion and extractive industries ensure we will have higher than average emissions. Rather than accept that, politicians have been making ever more outlandish claims about how they will get the country off fossil fuels and address the climate crisis. Even if they managed to do so through some miracle of technology that I am unaware of, would it make a difference?
The notion of climate change and the role of CO2 emissions came in to the public domain during the 1980’s and became much more mainstream with the signing of the Kyoto Protocol in 1997. In 2006 the movie An Inconvenient Truth introduced the concept to the masses. Despite this the world has continued consuming more hydrocarbons. “Big Oil” is often made out to be a villain yet there appears to be no appetite for the world to curb demand for its products.
In every rolling 5-year period global consumption has continued to increase. In the 1970’s the world consumed less than 60 MM bopd and that has now risen to more than 100 MM bopd.
Oil has a myriad of uses but we think of it primarily in terms as a transportation fuel. It also helps pave our roads, shingle our roofs, lubricate machinery, power ships, tanks, trains and other industrial equipment that cannot yet run on an alternative source. Will the electric cars of tomorrow travel on dirt or gravel roads? Some quantity of hydrocarbon consumption will continue for as far out as we can realistically imagine.
Demand will one day peak but at what level and how quickly will it then decline? In the meantime, which jurisdictions should produce it?
Many, if not most in Western Canada, are justifiably wounded because the answer it appears most Canadians are accepting is “anybody but Alberta”. Yet arguably no jurisdiction has done more to responsibly produce its hydrocarbon resources and share its wealth in a positive way.
Four of the top five oil producing jurisdictions are the world’s largest military spenders. The United States is first in both categories, Saudi Arabia is second and third respectively, Russia is third and fourth respectively and China is the fifth largest oil producer and second largest military spender. Canada is the fourth largest producer and ranks around 15th in military spending. This is even more remarkable considering Canada’s economy is materially larger than that of Saudi Arabia and Russia.
Unlike the aforementioned jurisdictions Alberta’s wealth is shared to ensure quality health care, education, transportation infrastructure and other government programs. Despite this many Canadians appear eager or indifferent to Alberta raising its share of global supply. Is this because they are looking at oil production only through a GHG lens? If so, Canadians are not being well served.
Over the past four years Canada’s real GDP has been growing more slowly than its population resulting in a per capita GDP decline. According to the IMF the gap between Canadian and US per capita GDP is now an eye opening $13,516 (PPP). In 2018 the GDP of Texas, with just 28.7 MM people, exceeded that of Canada with 37 MM people. Is it not reasonable to ask ‘Why’?
For starters the United States and Texas in particular, has embraced energy development. Their domestic production has increased from 5.5MM bopd to over 12 MM bopd in just a decade. Accompanying this has been massive investment in midstream, downstream/petrochemicals and oilfield services. Does this sound like a nation willing to compromise its prosperity to reduce its CO2 emissions? Of course not. The US is now among the largest exporters of LNG and light oil. Albertans have had a front row seat as investment, jobs and workers have all left for the Lone Star State. They justifiably want their share of that prosperity and the rest of Canada appears willing to deprive them of it while consuming imported oil. It is beyond insulting, its repugnant.
If there is a minority government coalition that intends to kill expanded egress from the Western Sedimentary Basin then I would expect a surge in Alberta/Saskatchewan separatist sentiment. As an individual country they should have more rights to the sea than as a sub-national jurisdiction. The UN Convention of the Law of the Sea, to which Canada is a signatory, provides rights for landlocked states on the sea.
If independence is not favored then perhaps becoming the 51st state is. With the world’s third largest oil reserves, abundant natural gas, some of the most productive agricultural land on the continent, beautiful scenery and over 4 million of the most educated and industrious people in the world would President Trump not covet that real estate? Securing Alberta would be a great way to change the dial from impeachment or Syria to one of positive transformation. It may even get him on Mount Rushmore.
If that sounds preposterous I counter that the words ‘President Trump” did to many just 4 years ago or that a PT drama teacher/snow board instructor who enjoys dressing up in blackface would lead a G8 nation. Stranger things have happened.
David A. McLellan is the founder of Ridgeway Strategic Consulting. Ridgeway provides commercialization strategies for emerging Oilfield Services technologies. His previous experience includes OFS and upstream sector in both Canada and the USA where he worked on strategy, project economics. energy policy, intellectual property and investor relations.