We don’t know exactly why. It’s as if the Pope proclaimed the Bible as the source of spirituality.
May is the environmental conscience of the country – the disappearance of fossil fuels is an article of faith for her. But she is guilty of wishful thinking. The Canadian oil industry is not dead yet – in fact, it could improve.
In a Policy Magazine article, May said that Canadian oil is a “product that lacks investors.”
However, at Barclays PLC’s annual general meeting in London on Thursday, shareholders of the gigantic European bank rejected a proposal by Share Action, a group of activists who promote “responsible” investment, to leave the oil sector Canadian.
“Tars have no place in a Paris-like world,” said Share Action.
Three-quarters of the bank’s shareholders disagreed.
Financial institutions around the world collapsed before the power of these activist groups, but Barclays said the industry here is supported by the Canadian government and is highly regulated. He agreed to stop lending to the coal industry and stop funding drilling in the Arctic, but argued for continued lending to petroleum industry customers, provided that the carbon intensity by barrel will be below the global median by the end of the decade – a goal that most oil sands producers believe they will succeed.
The reason Barclays risked the wrath of Share Action and its fellow travelers is that it believes that Canadian industry may be in better shape after the COVID crisis than it was. Barclays believes that many Canadian producers will have a greater ability to weather the current price war than the over-indebted American shale producers; he believes that a new pipeline from Alberta to the west coast will be built; and she sees the prospect of Canadian oil sales to the East Coast by ship, via the Panama Canal. The world is still dependent on oil and is expected to do so for many years, according to the International Energy Agency, although its latest review suggests that demand may suffer in the short term.
This does not mean that the industry is in poor health. Suncor was one of several oil sands giants this week to report massive losses in the first quarter, joining Canadian Natural Resources, Crescent Point, Cenovus, Husky and others.
Suncor said gasoline demand has halved and aviation fuel sales have dropped 70%. The sector has already closed 600,000 barrels per day of production and that number is expected to reach one million. Planned capital spending was generalized in an industry where investment was already around one third of 2014 levels.
The price of Western Canadian Select has stabilized, trading around $ 22 on Thursday, but remains below break even for many producers.
But while the energy sector is down, it hasn’t come out. This is equally good for the Canadian economy, given that it is the country’s largest export industry, responsible for 10% of the GDP; employs more than half a million people; and contributes about $ 8 billion in tax revenue.
If it were dead, the deleterious effects would spread beyond the Prairies: Canadian banks, for example, have about $ 60 billion in oil lending exposure.
May and Bloc Québécois leader Yves-François Blanchet showed an almost indecent haste to demand that the pandemic be used as an opportunity to redirect the energy mix away from Alberta oil. “The pandemic in a very real way, as horrific as it is on many levels, gives us an opportunity to stop and think about how we are getting this economy back on its feet,” said May. Alberta Premier Jason Kenney said Thursday that May and Blanchet should stop kicking Albertans while on the ground.
While the energy sector is down, it has not come out
But there is considerable sympathy for May’s point of view in liberal circles. At his morning press conference, Justin Trudeau said the government’s efforts to stimulate the recovery will take into account how to “build better” – greener results with less pollution.
The federal budget, when it finally lands, is likely to be fraught with sustainable funding measures, policies that could encourage funding for innovation, clean electricity, renovations and climate-resilient infrastructure.
But the Prime Minister was politically clever enough not to rejoice over the setbacks that hit the oil-producing provinces.
“I don’t share this assessment,” he said, when asked if he agreed with May.
Since April 17, Trudeau has been talking about aid to the oil and gas sector. There has been a commitment of $ 1.7 billion to clean up orphaned and abandoned wells, as well as funds made available to reduce methane emissions.
But the province has asked the federal government to go further and use its ability to borrow at extremely low interest rates to provide a $ 20 billion safety net for major producers.
Frustration with the federal government in Kenney’s Alberta government is generally high, but the temperament has gone from sporadic levels of Happy Gilmore to what you might call Goodfellas.
The finance ministry is believed to have developed a plan for a liquidity facility which the Prime Minister’s Office delayed for political reasons.
Alberta officials say companies are not looking for bailouts, they are just helping to withstand a period of prolonged instability. “The government’s support signals to the markets the desire to support this industry. He says “we are the fire department and we have a ton of water to throw on this fire,” “said a senior source.
The federal cabinet seems divided over whether to help quell a conflagration caused by COVID and the overhang of oil supplies created by Saudi Arabia and Russia.
Critics point to the high carbon content of bitumen in Alberta: Stanford University places Canada behind Venezuela, Cameroon and Algeria only in terms of greenhouse gas emissions per unit of energy .
Supporters point out that half of the crude extracted in the United States has a similar emission level; that the amount of energy used per barrel has decreased by 20% since 2011; and that the province has an absolute cap on emissions. If Canadian oil is moved by overseas products, it will likely come from a country where environmental activists would not dare to operate.
The bottom line is that the energy industry is in transition – even Kenney admits it.
But the country needs a functioning fossil fuel industry to help finance this change. It will not happen overnight.
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