Oil pumpjacks operating in a farmer’s field near Calgary on Nov. 26. Canada sits on one of the world’s largest oil reserves.Todd Korol/Reuters
In 1912, First Lord of the Admiralty Winston Churchill decided that the Royal Navy’s new Queen Elizabeth class battleships would be powered by oil. Until then, coal had been the fuel of choice for naval vessels, industry, heating – pretty much everything.
But oil has twice the thermal content of coal, and as a liquid it’s far easier to store and move. Oil was the future. Coal was the past.
In 1900, more than 99 per cent of the world’s fossil-fuel energy came from coal. Today, coal accounts for less than a third of fossil-fuel consumption, and a quarter of energy from all sources.
But though coal’s share of the energy market has dropped, the amount of coal used has never stopped rising.
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Between 1900 and 1950, the amount of energy produced by coal doubled. Over the next half century, coal use doubled again. Since 2000, it has nearly doubled once more.
The amount of energy produced each year from oil has increased more than 100-fold since 1912. But coal is also up, roughly fivefold.
A similar pattern holds for the first human energy source: burning wood, charcoal and crop waste. Since 1900, energy generated by traditional biomass has nearly doubled.
All of which is to say that those predicting (or hoping) that Canada need not drill any more oil wells, build any more oil-sands facilities or construct any new pipelines, because oil demand is just minutes from peaking and cratering, don’t have history on their side.
That may not be the best news for the planet. But to benefit the planet, while striking a reasonable balance between the environment and the economy, we have to deal with things as they are, not as we might wish them to be.
That’s why the broad strokes of the Ottawa-Alberta memorandum of understanding on the future of the oil industry looks like the best path forward.
That won’t cheer some (though certainly not all) environmentalists, who want to limit or shutter the oil industry. Nor will it win over the most entrenched fringe of Alberta separatists, whose grievance is with the existence of Canada itself.
But the vast majority of Canadians should see it as a realistic plan, rooted in economics and the world as it really is. It stands a decent chance of delivering long-term economic returns through higher oil production, with new pipeline capacity ensuring that the oil will fetch something close to world prices.
The deal would also lock in relatively high industrial carbon pricing, which will support major investments in carbon capture and storage. That would deliver a drop in emissions – though not by as much as many environmentalists would like, and likely not by as much as the previous government promised.
Prime Minister Mark Carney’s aim is to author a sequel to the oil boom that Canada experienced between the start of the century and 2014. He’s never put it so plainly, but it’s clearly the target.
During that period, an estimated $227-billion in investment went into the oil patch. It produced a decade-long boost for jobs, wages and economic activity, as oil-sands facilities and other infrastructure was built. The enduring result was permanently higher oil production – which means higher corporate revenues, payrolls, royalties and corporate tax receipts.
Prime Minister Mark Carney says a memorandum of understanding with Alberta strengthens federal-provincial collaboration in the energy sector. Calgary business leaders responded to his speech with a standing ovation, while one environmentalist says the deal throws the climate 'under the bus.'
The Canadian Press
The reason the prequel hasn’t yet had a sequel is partly attributable to a hostile regulatory environment. There’s been heavy investment in finding and extracting new oil around the globe, notably in the United States, which is now the world’s largest producer. But in Canada, roadblocks to new pipelines – and the gap that opened up between domestic and global prices – created strong disincentives against investment.
Would you plant a crop if you had a well-founded fear that, come the fall, you wouldn’t have a road to get the harvest to market?
In a speech on Nov. 26, Mr. Carney said that American tariffs and tariff uncertainty are expected to knock 1.8 per cent off our gross domestic product, costing the economy around $50-billion, or $1,300 for every Canadian.
But, he said, if his government can generate an extra $1-trillion in new investment, that could increase Canada’s gross domestic product by 3.5 per cent, adding $3,500 per capita in national income.
Making those numbers real won’t be easy. It includes reaching for a certain amount of what might be described as high-hanging economic fruit.
For example, there’s a goal of using higher defence spending to build a bigger domestic defence industrial base. It’s a reasonable objective to aim for, but Canada’s history in this area is a distinctly mixed bag, featuring more than a few boondoggles. First World War industrial policy saddled our soldiers with the Canadian Ross rifle, which didn’t work. In the Second World War, the Canadian-designed and built Ram tank could not be used in combat.
An economic strategy of enabling more investment in Canadian oil, which will deliver more Canadian oil production and exports, is low-hanging fruit. Extremely low-hanging.
Canada sits on one of the world’s largest oil reserves, most of which is right next to sites already being exploited. Few countries are in such a favourable position. No other has chosen to deliberately hamstring itself.
Editor’s note: A previous version of this article incorrectly referred to the federal government's plan to generate an extra $1-billion in new investment. The plan is to generate an extra $1-trillion in new investment.