Even before much of Alberta’s tar sands/oil sands production, untouched by fire, was idled by the absence of evacuated workers last week, at least one climate science doubter was speculating that the province had passed its oil peak.
Whether it is “true or not” that global heat records and climate disruptions are “all caused by burning carbon fuel,” Calgary oilpatch accountant David Yager blogged on industry site OilPrice.com in the days before the fire, “the future will not be like the past” for Canada’s oil sector.
“Previous [price] downturns eventually reversed themselves; low commodity prices recovered and damaging government policies were rescinded,” Yager writes. “This recovery will be different for a variety of reasons which will combine to cap growth, opportunity, and profits, even if oil and gas prices spike.”
Two problems, he says, cloud the future for Canada’s fossil producers. One is the amount of debt that oil field service (OFS) companies took on to expand their capacity during the pre-2008 North American fracking boom. “Now,” Yager says, “OFS is overbuilt and many operators over-levered. It will take some recovery to clean this up.”
Another is the abundance of more attractive, lower-cost production options for fossil investors. “Iran is said to be open for business. As is Mexico. Saudi Arabia wants to diversify its economy away from oil and sell its refining operations to global investors. This is not a price war Canada can win,” Yager notes.
“Western Canada is not the only oil-producing jurisdiction wondering about its future.” the analyst concludes. “It is, however, the highest-cost oil-producing jurisdiction wondering about its future.”