Peter McKenzie-Brown

As an oil producer, Saskatchewan seems to have it all. The Bakken light oil trend is a play of frenzied activity. So is Cenovus Energy’s carbon injection oil operation at Weyburn (the world’s largest carbon capture and storage facility). But the province’s meat and potatoes – conventional heavy oil production in the Lloydminster and Kindersley areas – are hidden behind these high-profile developments. The province’s first 2010 land sale tells the story, but it’s only clear if you dig deeply into the numbers.

“This is a way of getting inside the energy system, getting a sense of its possibilities. I’ve been around for a while, and I’ve never seen anything like it.” The speaker is Bob Taylor. After a long corporate career with a pair of big oil companies, he joined Alberta’s Department of Energy’s as assistant deputy minister for oil development. Now retired, in that job he had responsibility for conventional oil, oil sands, land access, and energy and Aboriginal relationships. Today he is excited about something he believes is much bigger than all of these combined.

“I’d rather you didn’t mention the company by name. In fact, better not mention my name, either, because the story is a disaster. We don’t want (the information) out yet.”

From an officer in a small oilsands company – call him Don Fischer, – that comment sums things up for many juniors. Fischer argues, however, that the recent meltdown in global financial markets is only the killer blow in a credit squeeze within Canada’s petroleum sector that has been developing for three years.

All OPEC can now do is raise prices by cutting production. They cannot lower prices by increasing production because they don’t have the capacity. We are in a very pure free market situation, with prices being set by supply and demand. When I look at that dynamic, I have stopped worrying about the demand side. No matter how much the US goes into recession, for any period that is important to any of us, any decline in consumption there will be offset by increased demand elsewhere – in China and India, but also in developing countries that produce their own crude oil.

Until recently, there has been a constant refrain to the effect that Western economies seem undeterred by higher oil prices. Demand destruction does not seem to be taking place within OECD, even at today’s high numbers.

Canada is rich, big and cold, and we share two borders with the United States. Those factors explain why we are the world’s energy pigs, but they do not justify it.