Worthless

As of end of trading on Friday, March 27, Alberta’s tar sands bitumen was trading for less than $5 per barrel, about the same price as a Big Mac. It was selling for less than it costs to ship it.

Put this in perspective. The toy Barrel of Monkeys sells for $18.

In the oil and gas board rooms, in Alberta’s legislature, in Ottawa’s corridors of power, the gamblers who promoted Canada as the great energy superpower of the 21^stcentury are reeling in shock.

On March 17, in an emergency midnight session of the legislature, Jason Kenney’s United Conservative government passed a budget that even then was based on a fiction. Kenney pegged the price of oil at $58 per barrel and wagered it couldn’t go any lower.

Wishful thinking. A week later global bond rating firm DBRS Morningstar bumped Alberta down to a AA rating, saying the numbers in its budget were “invalid”: “Unfortunately, a lot of the economic assumptions and pricing assumptions that this plan was based on in this environment are no longer valid. That's not a criticism of government. That's just a recognition of what's transpired in the weeks since.”

Pre-existing condition

Of course the global economic slowdown is related to the Covid-19 pandemic. But just as the virus is a greater threat to victims with pre-existing conditions, so the slump exposed the tar sands’ mortal weaknesses.

It cost too much to extract. It cost too much to ship. It cost too much to use. It cost too much to clean up after.

Capital has been fleeing from the oil patch for years. But the blame was put on Indigenous people, whose territories were the site of resources and pipelines; and on environmentalists who exposed the folly of more investment in fossil fuel as global warming increased in severity. But these were scapegoats. 

Warnings of economic disaster have been around for years.  High cost Canadian oil just couldn’t compete. Politicians and corporate elites who styled themselves as disciples of capitalism’s “free market” either would not or would not face the basic reality of their own system.

Money down the well?

What to do? For Jason Kenney and the oil business he slaves for, the answer is obvious: the federal government has to bail out the industry yet again. It may require some restructuring, they coyly admit, but the industry must survive.

Must it? Will the Canadian public, suffering economic hardship to defeat the coronavirus, sit still for yet another multi-billion-dollar hand out to the oil barons? Will Trudeau and Morneau wrest control of the industry by nationalizing it lock, stock and (forgive me) barrel? At least then they could pretend there was some meagre reward behind the risk.

But even nationalizing an industry in its death throes would be a huge mistake. Some 265 researchers from various disciplines have written an open letter to the federal government, essentially begging them to stop throwing money down a hole in the ground. 

They argue: “Instead of purchasing equity in oil and gas, Canadian governments should pursue the retraining of fossil fuel workers, and public ownership of Canada’s renewable energy sector, where government coordination and large scale investment are needed in the short term and where investments will be repaid. Funding is also urgently needed to support energy and water conservation, public transportation, regenerative agriculture and other areas of mitigation and adaptation to global warming.”

In the short term federal support must go to the health of working people. In the long term it must be invested in sustainability, environmental justice and public service.

We cannot pretend we can go back to business as usual.

The government of Alberta is failing the twin test of economic crisis and public health crisis in spectacular fashion. We are about to see if the federal government is going to follow them down the well.