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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

Fishing at the end of Energy East

Feature

May 25th 2015

Visual: In part two of this three-part series documenting the stories of Energy East, photojournalist Robert van Waarden casts off with fisherman David Thompson and sails the Bay of Fundy to capture the sights and sounds of his way of life. Thompson worries the new Energy East pipeline will leak, and he questions the logic of major investments in oil infrastructure when we know the future of our society lies elsewhere.

In the oil sands, a painful shift to a new normal

Feature

Jeff Lewis | Globe and Mail - May 18th 2015

Press Clipping: For years, Alberta’s deposits of tarry bitumen attracted billions in investment from the world’s oil giants. Those days are gone. Today, the sector is reeling amid a price shock that has sapped billions from corporate budgets and forced a dramatic rethink about the companies’ role in global energy markets. By one estimate, as much as 1.2 million barrels per day of future production capacity has been put on hold, only a fraction of which will be resurrected. This slimmer production outlook will ease demand for multibillion-dollar pipelines, potentially delaying projects such as Northern Gateway and Energy East well into next decade.

Investors urged to avoid oil sands after Alberta election

Rebecca Penty | Bloomberg Business - May 7th 2015

Press Clipping: Investors may want to steer clear of oil sands developers and coal producers and buy royalty stocks and companies with assets outside Alberta. That’s the advice of portfolio managers and analysts after energy stocks declined Wednesday following the surprise election victory by the New Democratic Party in Alberta. “Oil sands to me is public enemy No. 1 in the new premier-elect’s mind,” said Eric Nuttall, a Toronto-based fund manager focused on energy at Sprott Asset Management LP. “The investment thesis in all of those stocks evaporated overnight.”

HSBC warns clients of fossil fuel investment risks

Luke Hurst | Newsweek - April 22nd 2015

Press Clipping: Global banking giant HSBC has warned investors of the growing risk of their fossil fuel assets becoming useless. In the report, titled ‘Stranded assets: what next?’, analysts warn of the growing likelihood that fossil fuel companies may become “economically non-viable”, as people move away from carbon energy and fossil fuels are left in the ground. The report argues that investors who stay in fossil fuels “may one day be seen to be late movers, on ‘the wrong side of history’”.

Teck Frontier: Poster child of tar sands folly

Lorne Stockman | Oil Change International - April 20th 2015

Blog Post: Amidst the crumbling edifice of the tar sands sector – brought about by the combination of falling oil prices and strengthening opposition to pipelines that would open new markets to the world’s dirtiest oil – is a proposed tar sands mine that defines a bad investment: the Teck Frontier project. For many of us, the wanton destruction of open cast mining for oil that we can’t afford to burn within a sane carbon budget is a bad idea to begin with. And now it’s also unprofitable.

Report: Teck Resources, a major Canadian oil sands promoter, faces difficulties

Feature

Editors | Tar Sands Solutions - April 20th 2015

Blog Post: The Institute for Energy Economics and Financial Analysis released a report today questioning the financial viability of Teck Resources, a Canadian energy company with a substantial stake in the flagging oil sands development of Alberta. “There may be no better example of Canada’s deeply afflicted oil sands industry than Teck Resources,” wrote lead author Tom Sanzillo in a commentary accompanying the report. “The long-established mining company is on hard times today in part for its overly optimistic expectations regarding its venture in oil sands, an expensive source of energy.”

Fossil fuels just lost the race against renewables

Feature

Tom Randall | Bloomberg - April 17th 2015

Press Clipping: The race for renewable energy has passed a turning point. The world is now adding more capacity for renewable power each year than coal, natural gas, and oil combined. And there's no going back. The shift occurred in 2013, when the world added 143 gigawatts of renewable electricity capacity, compared with 141 gigawatts in new plants that burn fossil fuels, according to an analysis presented Tuesday at the Bloomberg New Energy Finance annual summit in New York. The shift will continue to accelerate, and by 2030 more than four times as much renewable capacity will be added.

Another major getting out of the oil sands business

Cecilia Jamasmie | Mining.com - March 31st 2015

Press Clipping: PetroChina (NYSE:PTR), the Asian country’s largest oil major by market value, no longer wants a stake in Canada’s oil sands as the ongoing collapse in crude prices has made the sector less attractive and more costly. In a Thursday filing with the Hong Kong Stock Exchange, the company announced it was “actively engaged” in talks to swap North American assets with international oil companies, acknowledging the negotiations were mostly focused on Canada’s oil sands, which require high crude prices to be profitable.