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Jeff Rubin is a senior fellow at the Centre for International Governance Innovation (CIGI) and the author of The Carbon Bubble: What Happens to Us When It Bursts.

Oil sands producers may have collectively breathed a sigh of relief on Prime Minister Justin Trudeau's recent failure to get the premiers signing on to a national price for carbon emissions. However, domestic measures to reduce carbon emissions are the least of oil sands producers' concerns when it comes to how actions to mitigate climate change will challenge their industry's survival.

Efforts to abate the less than 2 per cent of global carbon emissions that originate from Canada are not what threatens the industry's future in an age of profound and rapid climate change. Whether Canada lives up to its emission reduction pledges will have a negligible impact on world oil demand and global carbon emissions. The real threat that climate change poses to high-cost oil sources like Alberta's oil sands is the actions taken to curtail the 98 per cent of global emissions that emanate from outside of Canada.

More than 190 countries committed to global emission reduction recently in Paris at the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21), and if we take them at their word, the future for high-cost oil is even bleaker than in today's glutted oil market.

The international commitment to hold the increase in average global temperatures to less than a 2-degrees-Celsius rise requires the destruction of billions of barrels of future oil demand through either carbon taxes or through support given to renewable energy.

According to the International Energy Agency, holding atmospheric carbon to 450 parts per million and global temperature to an average increase of 2 degrees Celsius requires world oil demand to peak by 2020, and fall by more than 20 million barrels per day (bpd) over the next two decades. If the goal is to hold average global temperature to less than a 2-degree increase, as endorsed at COP21, even greater reductions in world oil consumption will be required.

Where will the oil sands fit in that world? It is the sector's huge production costs, not its emission profile, that poses the greatest threat. As one of the most expensive sources of oil in the world, no improvement in oil sands emissions is going to safeguard production levels in a decarbonizing global economy that will be consuming less and less oil over time.

As is the case in clearing today's glutted oil market, the cuts in future global oil consumption mandated by the need to mitigate climate change aren't going to come from low-cost producers like OPEC. They are instead going to come from high-cost producers. U.S. shale production has already been cut back by more than 600,000 barrels a day over the last year and the U.S. Energy Information Administration is projecting more than a 500,000 bpd cut this year. It's only a matter of time before more production from the oil sands, which has an even higher cost, is forced to shut in as well.

Instead of pursuing new pipelines to tidewater and global markets when even world prices no longer justify production costs, the industry needs to shift its focus to generating greater value added from what in all likelihood will soon be significantly lower levels of production. Considering that half of the nearly 2.5 million barrels of bitumen extracted every day isn't even upgraded into crude oil, let alone value-added refined products such as gasoline or diesel, there is certainly lots of room to climb up the value-added ladder.

Whether the industry will do so is unclear. However, with Western Canadian Select, the benchmark price for oil sands fuel, trading as much as 50 per cent below world oil prices, the cheap feedstock price provided by Alberta bitumen potentially offers some of the most attractive refinery spreads anywhere in the world.

A contracting oil sands industry not only requires a change in economic strategy but in environmental policy as well. While production shut-ins will leave a fainter carbon trail in the atmosphere, they could soon leave a much larger footprint on the ground as oil sands mines are forced to close well before their economic lifetimes are over. Will taxpayers ultimately have to pick up the costs for decommissioning oil sands mines, and the reclamation of millions of metres of toxic tailing waste?

Over the past decade, Canadian economic and environmental policies have been designed to fast-track what at the time was seen to be the country's principal engine of growth.

But as high-cost production from the oil sands becomes increasingly untenable in the emission-constrained global economy around the corner, both policies need to be rethought to meet the challenges posed by a sunset industry.

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