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The economic recovery for Fort McMurray is going to depend in a major way on oil.Greg Halinda/The Canadian Press

Spare a thought for Fort McMurray, Alta., as it joins other Canadian communities in taking initial steps toward a reopening.

The city in the middle of oil sands country is crawling out a particularly deep hole. When the coronavirus pandemic hit, Fort McMurray was already living through a multiyear oil price slump in which its unemployment rate soared and real estate values dropped. A wildfire nicknamed “the beast” destroyed hundreds of homes and buildings in 2016. This spring saw once-in-100-year flooding from the rivers that intersect the city. Residents whose homes filled with water had to find a way to evacuate to oil sands camps, while also keeping physical distancing in place.

“The challenges people are going through both mentally and in the rebuilding are overwhelming,” Mayor Don Scott said on Friday.

The mayor noted the local government body, the Regional Municipality of Wood Buffalo, has made the decision to ease the pandemic and flood-related economic strain on the community by cutting $168-million in property taxes this year. Much of the benefit will flow to oil sands companies operating in the region.

In this act of cutting taxes for big bitumen, the council recognizes the economic recovery for Fort McMurray is going to depend in a major way on oil. The same can be said of Canada as a whole.

The debate over Canadian oil lulled in early weeks of the pandemic, but it’s now back. First came pronouncements from federal opposition leaders that the oil industry is effectively dead. Then came the decision by Norway’s US$1-trillion wealth fund to blacklist four major Canadian oil sands companies because of greenhouse gas emissions it says are more than double the global average for oil production. The news is significant, as Norges Bank Investment Management has massive influence, owning 1.5 per cent of the world’s listed shares.

Progress has been made in reducing the intensity of oil sands emissions – the emissions for each unit of production. But in a world where climate concerns are increasingly paramount, industry must show seriousness about reducing absolute emissions, too.

Even with that recognition, a truth remains: There’s no way Canada is going to be able to pay for an energy transition – or the massive government debts being racked up in the pandemic – without oil.

Canada is far from being an insignificant player in the global market for oil. The country produces 5 per cent of the world’s total oil. Crude alone accounted for 15 per cent of Canada’s exports last year. The country is not soon to get to a place where shipping solar panels, carbon capture technology or anything else will replace those tens of billions of dollars in exports.

Direct employment in the oil and gas industry has dropped in recent years but still stood at about 170,000 positions in April. There are hundreds of thousands of other spin-off jobs. All of the activity brings serious money into provincial and federal coffers.

Relative to many other jurisdictions that produce oil, such as Saudi Arabia or Russia, Canada also has a strong tradition of transparency, democracy and women’s rights. This is relevant as the past several years have seen environmental, social and governance or ESG criteria figure prominently in investment decision-making. Rightly or not, environment – especially measurements of GHG emissions – has become the single-most important of those three factors.

Still, it appears difficult for oil sands critics to acknowledge those other ESG considerations, perhaps because those types of arguments have been mainly put forward by Alberta’s war room – the much lambasted entity created by government to promote and defend the province’s energy industry – or conservative political leaders. Those are groups that progressive-minded Canadians tend to disdain.

And even as parts of the world work toward decarbonization, Canada’s oil reserves are a geopolitical strength. It means the country is increasingly less reliant on oil tankers from Saudi Arabia or other overseas oil-producing states. Because Americans usually view Canada as an extension of their own domestic energy supply chain, Canada is likely to keep selling oil in the United States even as populist politicians south of the border make increasing noise about being less-dependent on other countries for key commodities.

It’s unclear whether global oil consumption will return to its regular 100 million barrels per day level quickly, as there are competing forces at play. Investment in renewables has continued through the pandemic. White-collar workers have learned that working from home is more than possible, which could lead to potential reductions in commuting. Discretionary travel – especially by air – will be stunted for years.

At the same time, the virus has prompted China to use ultra-low oil prices as a buying opportunity, and has stockpiled tens of millions of barrels of cheap oil that will be combusted as its economy revs up.

There are also early signs the pandemic could mark a major retreat from public transit. Royal Bank of Canada energy market strategist Michael Tran says in China, where the economic openings started months earlier than other parts of the world, fear of the COVID-19 virus has led to even higher levels of weekday vehicle traffic than seen before the pandemic.

Monitoring the “magnitude and duration of public transit shunning” in China will help determine whether use will return to global centres such as London and New York, also heavily dependent on mass transit.

Oil and energy demand will likely come back. The only question is, as always, what role Canada will play.