Arguments about the environmental impact of oil sands growth are moot because the market has already addressed the problem. It won’t come back, with or without pipelines.
Fracking in the US began to grow dramatically in the early 2010s and displaced smart capital from our tar sands to a lower cost, less capital intensive, closer to the market, less risky and better quality source of crude oil. And since then there has been little development of new projects in the tar sands.
Therefore, the industry and government obsession with pipelines is irrelevant to the growth of the big tar sands. Sorry Alberta, the market has declared the loser.
Now in Canada we are focused on an emissions cap on the oil and gas sector, taxpayer support for carbon sequestration in the oil sands, and government assurances to the industry that carbon prices will be in place or The government will pay the oil industry the equivalent if it has invested to reduce greenhouse gas (GHG) emissions.
It’s all really complicated, but at its core is the assumption that Canadian oil will be pumped at the current rate or more until 2050 and beyond. It’s the same story we tell ourselves about more pipelines: if we just close our eyes and wish with all our might, we’ll go back to the golden days of Canadian oil in 2005.
Let’s talk about fundamentals. The purpose of crude oil is to refine it and produce products that people burn, such as gasoline and diesel, and almost 75 percent of typical consumption. barrel of crude oil is used precisely for that. If the demand for those products decreases, the demand for crude oil decreases. And if demand decreases, then the price drops and the less efficient producers quit.
But of course the demand for oil will continue to grow, won’t it? It always has been, right? Global demand for crude oil reached an all-time high in 2023, so of course the sky is the limit. Mistaken. The dark clouds of decarbonization are already here.
He International Energy Agency (IEA) said last year: “Global road fuel (gasoline and diesel used for driving) will decline from 2025.” Further support for that forecast came from CEO of Phillips 66, who recently said, “We absolutely believe that in the United States we have reached peak demand for gasoline” and that diesel and jet fuel will follow in the “not-too-distant future.” China’s Sinopec said last year that Chinese demand for gasoline had already pointed due to accelerating acceptance of electric vehicles (EV) and its CEO believes China’s total crude oil demand will increase top in 2026.
The IEA also noted in that same report last year: “Despite marked growth in the global economy and population, global demand for oil, excluding petrochemical feedstocks, remains lower than in 2019 and has grown little since 2017. “. That means we’ve already reached peak oil for uses that burn crude oil products like gasoline and diesel, and oil demand growth comes primarily from an increase in Chinese petrochemical development.
Sorry to tell you this, #Alberta: #oil demand is going downhill from here. #oil #CleanEnergy
Peak burning oil has already occurred.
And we are not going to stay at these peaks, there is a substantial drop on the other side. Economies are still expected to grow, but oil demand is in the process of disconnecting from that growth.
If we bother to look up from our tar sands plants, we will see an avalanche of declining demand on the way. We do not have the cheapest crude oil to produce nor the best quality. We have no advantage over other major producers such as the United States, Saudi Arabia, Russia or China in a world with surplus crude oil.
Who will want Canadian oil once demand falls? Our main customer is the United States, and some volumes go to China and India. And those countries are our customers because they have the advanced refineries necessary to run our terrible quality oil. All of those countries are working hard to electrify their road transportation sectors. The world price of crude oil will plunge with falling demand for gasoline and diesel, but the price of poor quality crude oil like ours will plummet further. And this is about to happen long before 2050. We are already after peak oil for those uses.
The idea that we can continue exploiting the tar sands by simply putting the carbon we generate when we produce bitumen back into the soil is simply wrong. The market will determine whether we continue to do that. The avalanche of declining demand is coming and we don’t want to be in front of it and try to push it back. No amount of money we invest in our oil and gas industry is going to reverse this trend.
Wouldn’t it be better to accept that the market dictates what happens to our tar sands producers and invest all the money we are giving to the oil industry to prepare for the energy transition? Sink or swim, tar sands, as we electrify Canada, build the grid with renewable electricity sources, and prepare for the new economy.
To borrow a phrase from a former oil industry boss: If we keep pretending that what’s happening isn’t happening, we might as well just put all the taxpayers’ money in the parking lot and set it on fire.