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Economic Factors

The rapid expansion of tar sands development has created tremendous economic risks for Canada. Frenzied expansion – 71 per cent of which is owned by non-Canadian companies – has undermined important sectors of Canada’s economy. Expansion has also lured governments into relying on easy oil revenues and tied Canada’s economic future to the unstable world of global oil demand.

Who benefits from tar sands development? Unlike Norway, which has used oil revenues to pay of its debt and save a public petroleum pension fund worth $600 billion, Canada has no federal savings fund to share this wealth with future generations, while Alberta is currently making cuts to education and health care.

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Overview:
Over-investment in a fossil fuel economy carries numerous risks
Key Issues:
- 71% of the tar sands are foreign owned
- Canada has no national fund from this resource wealth 
Current Status:
When a global price on carbon eventually comes, Canada will be left with an unaffordable product

The $1.3 billion spent to subsidize the oil and gas industry has prevented Canada from pursuing a clean energy economy that can create 10 times more jobs (per dollar invested) than oil and gas development, and spur an innovation rather than raw resource extraction driven economy.

Tar sands development has transformed the Canadian dollar into a volatile petro currency that has contributed to the destablization of its manufacturing base. Rapid tar sands development has arguably resulted in a Canadian outbreak of Dutch Disease, which means the increase in the value of the Canadian dollar has made manufacturing goods in Canada more expensive. As a result, at least a third of Canada's 500,000 lost manufacturing jobs in the last decade are a result of its soaring petrodollar. This has created regional wealth disparities, with Alberta enjoying the economic benefits of tar sands expansion while Ontario, Quebec and the Maritimes suffer the consequences of a less diverse economy.

Canada’s economy is an example of a “carbon bubble” that will likely have significant consequences for its economic future. The International Energy Agency has determined that two-thirds to four-fifths of known fossil fuel reserves must be left in the ground because they cannot safely be combusted without leading to catastrophic climate change. Because Canadian financial markets, and pension funds in particular, have over-invested in fossil fuel industries as part of their portfolios, they are at great risk of economic collapse when the global community finally gets serious about limiting greenhouse gas emissions from hydrocarbon energy sources. 

When a global carbon pricing scheme is eventually created – as it must for the planet to be livable in the future – countries who overinvested in fossil fuels will be left with a product no one can afford to buy, and few other options for wealth creation. 

Many of the ancillary developments necessary to facilitate tar sands expansion, such as refineries, pipelines and oil tankers, provide little economic benefit to local communities while exposing them to the economic risks associated with the inevitable oil spills, such as those in Kalamazoo, Michigan and Mayflower, Arkansas.

Preventing the expansion of the tar sands, and eventually phasing this dirty source of energy out of existence, is the only way to create the sustainable clean energy economy that Canada, the United States and the rest of the world needs to embrace.

Economic Factors Updates & Resources

Falling oil prices pose another delay for B.C. pipelines

Mike Hager | Globe and Mail - January 20th 2015

Press Clipping: Energy economists say that a prolonged slump in oil prices will further slow two proposed pipelines already hamstrung by court challenges and community opposition in British Columbia. Analysts say that market instability hasn’t yet changed the economic imperative for Canada’s oil industry to open up its first major conduit to Pacific markets, but most agree that a months-long downturn in oil prices could slow investment in oil sands expansion, which in turn could decrease the supply of oil available to any future pipelines.

Canadian Natural Resources defers oil sands thermal project

Nia Williams | Reuters - January 12th 2015

Press Clipping: Canadian Natural Resources Ltd, the country's largest independent oil producer, said on Monday it would defer the first phase of its 40,000-barrel-per-day Kirby North thermal project in northern Alberta until crude prices stabilize. The company, whose shares fell more than 4 percent, also cut its 2015 capital expenditure and production forecast as global oil prices continued to nosedive.

Fossil fuel subsidies are starving innovation

Feature

Joel Solomon | Renewal Funds - January 8th 2015

Press Clipping: When the Rockefeller Brothers Fund recently announced it would remove fossil fuels from its $860-million (U.S.) investment portfolio, it wasn’t just a PR stunt; it was a smart long-term financial move. Big funds like Rockefeller Brothers see what others have been trying to ignore: that fossil fuels are in decline for a host of economic, political and social reasons, as alternatives reach price parity, regulations increase and public subsidies shift.

Almost $60-billion in Canadian projects in peril as ‘collapse’ in oil investment

Yadullah Hussain | Financial Post - January 5th 2015

Press Clipping: Canadian oil and gas projects worth a total of $59-billion may be deferred during the next three years as the “collapse” in capital investment in the global oil industry echoes the dark days of 2009 and 1999. As many as 16 oilsands’ project phases that have not yet received corporate sanctioning may be deferred if current oil prices persist, according to Mark Oberstoetter, Calgary-based lead analyst of upstream research at Wood Mackenzie.

Oil investors at brink of losing trillions of dollars in assets

Alex Morales | Bloomberg News - December 17th 2014

Press Clipping: A major threat to fossil fuel companies has suddenly moved from the fringe to center stage with a dramatic announcement by Germany’s biggest power company and an intriguing letter from the Bank of England. A growing minority of investors and regulators are probing the possibility that untapped deposits of oil, gas and coal -- valued at trillions of dollars globally -- could become stranded assets as governments adopt stricter climate change policies.

Warmer temperatures are bad for the economy, study finds

Seth Bornstein | Associated Press - December 16th 2014

Press Clipping: Hotter days mean less cold cash for Americans, according to a new study matching 40 years of temperatures to economics. And, the study's authors predict, if the world continues on its current path of greenhouse gas emissions, even warmer temperatures later this century will squeeze the U.S. economy by tens of billions of dollars each year.

The Saudi standoff: Oil-rich nation takes on world’s high-cost producers

Shawn McCarthy and Eric Reguly | Globe and Mail - December 15th 2014

Press Clipping: If the global oil standoff pits the industry stalwart Saudi Arabia against the surging U.S. rival, other global players are coping with the pricing fallout, including Canada. Cenovus Energy Inc. this week slashed its capital budget by 15 per cent and signalled more to come. Canadian Natural Resources Ltd. has said a quarter of its $8.6-billion (Canadian) budget is “flexible” and could be deferred if prices don’t recover. More cutbacks are likely to follow in the weeks ahead, and expectations that Alberta could double oil sands production over the next decade are suddenly in doubt.

Clean energy jobs now exceed oilsands jobs in Canada

December 2nd 2014

Press Clipping: Which industry employs more Canadians? The oilsands or clean energy? Guess again. Employment in Canada's clean energy sector has jumped 37 per cent in the past five years, says a new report from the think tank Clean Energy Canada, and now exceeds employment in the oilsands. Those job gains were the result of about $25 billion in new investment over the past five years, the report said. It singled out Ontario, Quebec and British Columbia as the three provinces leading the way in clean energy investment.