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Just capitalism doing its thing

December 6, 2018   ·   0 Comments

By Laura Campbell

This weekend the Globe and Mail ran a sob story on how intermediate players in the Alberta oil industry are wringing their hands nervously, and are angrily pointing their fingers at anyone and everyone who they feel is to blame for their poor fortunes.

The blame gets laid at the feet of a regular cast of characters: Trudeau, environmentalists, foreign oil, and folks like me. Laura Campbell: Young, “naive,” spoiled millennial from Ontario, who doesn’t understand how important Alberta’s oil is to my own well-being, and the well-being of our economy.

What of course they’re not acknowledging is just how much taxpayers like me support them (yes, $3.3 billion in direct subsidies annually- and that’s not including all the varying ways in which their own government in Alberta has propped them up along the way: lowest royalty rates around, paying for their dormant well clean-ups, etc etc).

Premier Rachel Notley, they claim, is also to blame for all of this. Notley has the poor fortune of having to govern during a time where the global price of oil is quite low – a factor that is completely beyond her control. The irony, of course… this is just how capitalism works. The market is cruel. That’s what average victims of globalization are told! I don’t like it any more than CEO of Bonterra Energy Corp., George Fink, does, apparently. 

In a nutshell: the industry is arguing that it is low transport capacity that is causing suffering. They’ve produced too much and they can’t get it to market. It’s a classic over-supply problem- and it’s driving the prices down. When the prices go down, so do the ‘taxable’ profits – and hence Trudeau and Notley’s claim that it is costing Canada’s public purse $30 million a day (a claim based entirely on a suspicious Scotiabank report- incidentally a financial giant closely tied to the industry itself).

But there is so much more at work than this. Industry expert Robyn Allan recently made a clear case* that the largest players in the game (Husky, Suncor, and Imperial) are essentially not bleeding like the smaller players are. Why, she wondered? What she discovered was that the big guns essentially secure all the space they want in Enbridge’s pipeline capacity, by telling Enbridge that they’re producing more barrels of oil than they actually are (what Enbridge itself termed ‘Air Barrels’).

This means that there’s quite a bit of unused export capacity on existing pipelines. This matters because that means the price-differential that Alberta oil is being crushed by right now can’t be blamed on the lack of a pipeline.

So then what explains the suffering of this industry at the moment? Other than the obvious geological factors that Alberta heavy crude is just extremely expensive to extract, refine, export etc., and therefore has a hard time competing with light oil, a lot of it also has to do with the very government handouts the industry gets. And by some strange stroke of ironic fate, this means I get to say the words: corporate welfare just encourages laziness!

(Please note: I do NOT believe actual welfare for people in need encourages laziness – indeed, I am a major advocate for the minimum basic income  I’m merely noting the irony that it is conservatives who always scoff at social democracy by implying that government “handouts” only hurt the poor in the long run. I guess that logic doesn’t apply to the companies they own shares of).

Corporate welfare in the oil sands goes something like this: incredibly low royalty rates. Energy expert Andrew Nikiforuk’s research recently showed that the problem with these low royalty rates is that they do not encourage “value-adding” investments. So while Husky and Suncor have the capital to build refineries at home or convert crude to better product, the smaller players simply extract more and more and therefore cause a massive over-supply, because it’s cheap to do so.

The piece written in the Globe by David Ebner was asking us to feel sorry for these suited gentlemen. Only, these are the last people we should have any sympathy for. Their workers are the first to suffer. Our blue collar workers have been the backbone of our economy for generations. Their buying power keeps every other sector of our economy humming. And when every macro-economist makes this casual statement, “Oh, our economy is shifting towards services rather than production…” they fail to acknowledge the key problem, that services can’t possibly employ our entire labour force.

So these CEOs feel a bit helpless? Well, now they know what it feels to be someone who genuinely cares about the planet we all live on. Helpless. Because Justin Trudeau bought a pipeline, and he intends to see it built. As I’m writing this, Rachel Notley’s impo

sed production cuts are having their desired effect on the price of Alberta crude. It soared on the market on Monday. But we all know who suffers from production cuts, the workers. And even as I celebrate less carbon going into the atmosphere, (even the tiniest amount), I am devastated that the people of Alberta and the workers from across the country who go there for employment must suffer through such chronic insecurity. But I also wish I could convince them that the answer is in better work, not more of the same work.

The global Clean-Tech industry is growing (currently stands at a worth of $6 trillion). These issues will define our next election. If we really want to help the working class, and save the planet, we’ve got to ensure we stand our ground on building a new economy.

* For interested readers, her work can be found at https://www.nationalobserver.com/u/robyn-allan

         

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