Skip to main content

This is part of Fort McMoney, an interactive documentary game that lets you decide the future of the Alberta oil sands, and shape the city at its centre. Columnists Eric Reguly and Margaret Wente will be writing about their evolving views as they play along. Read Ms. Wente's first take.

In 1983, I started my journalism career in Alberta as an energy writer. It was a thrill. The oil sands were coming on strong, Calgary and Fort McMurray were boomtowns and stupid money was being thrown around. What fun, I thought; this otherwise dreary expanse of pasture was an energy superpower in the making.

The party was rudely interrupted by the commodities cycle. Even as hundred-buck cigars were being chomped at the Petroleum Club, oil prices went into free-fall, taking Dome Petroleum, Alberta's oil and gas champ, down with them. The jobless rate hit 10 per cent and inward flow of workers from the rest of Canada reversed itself. A friend of mine handed his house keys to bank and hit the road – the mortgage exceeded the value of the property.

Story continues below advertisement

I left too, with the first big lesson in macro-economics drilled into my beer-soaked brain: Beware one-product wonders. Economies that are tilted towards a single industry are accidents waiting to happen, just like single-crop farms.

Three decades later, I wonder if Alberta – and Canada – have learned the risks of backing one industry at the expense of others. Exposing the Alberta economy, and to some extent the Canadian economy, to inevitable boom-bust commodity cycles is rather tedious and sporadically inflicts cruel damage on workers, bank loans and Canadian Tire sales.

There are many more reasons not to like the oil sands. Excessive output of planet-warming carbon dioxide is, of course, one of them. It is beyond debate that producing oil from the oil sands is more energy intensive, and therefore CO2 intensive, than producing conventional oil. So let's not debate it, other than to say that pumping out a lot of C02 to keep CO2-belching American SUVs on the road is morally as well as environmentally dubious.

While Alberta is justifiably proud of developing technologies that can turn black guck into synthetic crude oil that can flow through a pipeline, the other provinces have paid a steep price for Alberta's success. The Canadian dollar is increasingly viewed as a petro currency as the oil industry expands. While economists will debate until their gums bleed about the degree of "petro" in the currency, there is no doubt the higher the oil and gas price, the higher the dollar. That's bad for manufacturers and exporters.

In 2002, the C-buck bottomed out at 61 cents U.S. In 2007, when oil was galloping towards $147 U.S. a barrel, it was worth a dime more than the greenback. The two dollars are now close to parity. While the strong Canadian dollar makes it cheaper for Canadian snowbirds to load up at Taco Bell in Florida, it has done no favours for industrial Canada, that is, Ontario and Quebec. Manufacturing jobs are disappearing at an alarming rate. While this trend is firmly in place in more than a few Western countries, a cheaper dollar would certainly have slowed the decline, if not prevented it.

But won't an oil bust cure the high-dollar disease? As the United States turns into a shale oil and gas gusher, oil prices could easily fall. But that scenario would not magically restore Canada's manufacturing base. Once factories are dismantled, they tend not to get rebuilt. The Heinz ketchup plant in Leamington, Ont., which is on its way to tomato heaven, along with 740 jobs, isn't coming back even if the dollar falls by 50 per cent.

It's a wonder that the Canadian government has been so gung-ho on the ever-expanding oil sands given the industry's obvious shortcomings – the environmental damage, the rising potential damage from boom-bust cycles and the creation of a petro currency. It seems like Stephen Harper & Co. have decided that Canada has but one stand-out industry – oil sands – and that all policy will be skewed to work in that industry's favour.

Story continues below advertisement

Since oil sands growth and falling CO2 output are incompatible, Canada had no choice but to deliver the Kyoto accord on climate change to the blast furnace. Environmental assessment processes for energy projects have been made less burdensome for the industry. Even foreign policy has been skewed towards the oil sands. The lobbying effort to save the Keystone XL pipeline, which would provide a vast new outlet in the United States for Alberta's oil output, and to prevent the European Union from discriminating against "dirty" Canadian oil, has been formidable. Imagine if that effort had gone to promoting other Canadian industries.

In 50, even 25, years, Canadians will wonder why Alberta and the federal government devoted so much financial, political and regulatory capital to one industry, and a highly polluting one at that, while so much of corporate and industrial Canada received the B-list treatment. The wonder will intensify when the oil bust comes, and one will surely come.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Comments

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • All comments will be reviewed by one or more moderators before being posted to the site. This should only take a few moments.
  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed. Commenters who repeatedly violate community guidelines may be suspended, causing them to temporarily lose their ability to engage with comments.

Read our community guidelines here

Discussion loading ...

Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.
Cannabis pro newsletter