To understand the energy implications of substantially lower oil prices in Canada you need only turn the clock back 6 or 7 years. In 2008/2009 low oil prices resulted in the cancellation of 90-billion worth of energy projects (mostly fossil fuel based projects including tar sands expansion). The tar sands currently account for 2 percent of Canada's GDP and Canadian Prime Minister Stephen Harper was hoping to see it grow.
Some tar sands production sites like the Suncor and Syncrude Canada Ltd have costs per barrel of around 40, however a number of other tar sands projects are no longer profitable as costs run anywhere from 65 per barrel to well over 100. A recent study by BMO Nesbitt Burns pegged the average cost of developing an oil-sands mine and operating it profitably at about 90 per barrel
Low oil prices are driving down Canada's petro-economy and the value of the Canadian dollar has already plummeted to a multi-year low as a result. According to Statistics Canada, the Canadian economy contracted by 0.2 percent in November. oil and gas extraction was down 0.7 percent due to a decline in tar sands oil and there was a 3.7 percent decline in fossil fuel support activities (eg drilling rigs for the mining and energy sectors).
Economists have already shaved one third off of Canadian growth forecasts for 2015 as oil companies have started cutting spending and laying off workers. As a sign of desperation, the Bank of Canada cut interest rates as a direct response to falling oil prices.
Low oil prices have already caused major declines in the share prices of oil producers. The impact will get far worse as investors pull out of fossil fuels and consumer confidence wanes. This will have a cascade effect that will drag down the job rate and the real estate market.
While other nations were retooling their economies and preparing to transition away from fossil fuels, the Conservative's economic plan ignored renewable energy and doubled down on fossil fuels. Rather than invest in the economy of tomorrow, Harper increased his support for the old energy economy.
With the support of the Canadian government, industry associations like the Canadian Association of Petroleum Producers resist greenhouse gas regulations and environmental laws. The Harper government continues to give oil companies generous subsidies and tax cuts.
In 2011, the International Monetary Fund indicated that Canada's oil subsidies were 34 billion per year. If Canada had used that money to lay the foundation for the next energy economy including renewables, the country would be much better positioned for the future than it is today.
Despite the disinterest of federal politicians, clean energy already employs more Canadians than the fossil fuel industry. The low price of oil presents what an Economist article described as a "once-in-a-generation" opportunity to fix bad energy policy. However this may require a change of government as the ruling Conservatives are showing no signs of backing away from oil.
The current economic predicament speaks to the folly of the Prime Minister's decision to double down on fossil fuels. If Canada can weather oil's volatility it will be due to a strong performance from the rest of the Canadian economy including renewable energy sectors.
The ACCA report titled Canada's Green Economy says there is reason to be optimistic about the future of Canadian cleantech. "Ernst & Young's quarterly Global Renewable Energy Country Attractiveness Indices Report estimated that global renewable energy transactions in Canada increased by 41% from Q4 2011 to Q1 2012. Ernst border:0"/> Subscribe in a reader
