That’s one dark perfect storm. Oil rig image via shutterstock. Reproduced on Resilience.org with permission.
Economists, an irrational tribe of short-sighted mathematicians, are now calling Canada’s declining economic fortunes "a perfect storm."
It seems to be the only weather that complex market economies generate these days, or maybe such things are just another face of globalization.
In any case, economists now lament that low oil prices have upended the nation’s trade balance: "Canada has posted trade deficits every month this year, and the cumulative 2015 total of $13.6 billion is a record, exceeding the next highest, in 2009, of $2.95 billion."
But this unique perfect storm gets darker. China, which Harperites eagerly embraced as the globe’s autocratic growth locomotive, has run out of steam.
As the country’s notorious industrial revolution unwinds, China’s stock market has imploded. Communist party cadres are now moving their money to foreign housing markets in places like Vancouver.
Throughout the world, analysts no longer refer to bitumen as Canada’s destiny, but as a stranded asset. They view it as a poster child for over-spending, a symbol of climate chaos, a signature of peak oil and a textbook case of miserable energy returns. Nearly $60-billion worth of projects representing 1.6 million barrels of production were mothballed over the last year.
A new analysis by oil consultancy Wood Mackenzie reveals that capital flows into the oilsands could drop by two-thirds in the next few years.
The Bank of Canada doesn’t describe the downturn led by oil’s collapse as a recession because the "R word" smacks of negative thinking or just plain reality.
Surely lower interest rates will magically soften the consequences of a decade of bad resource policy decisions, Ottawa’s elites now reason.
Meanwhile the loonie, another volatile petro-currency, has predictably dropped to its lowest value in six years along with the price of oil.
A Wall Street short seller sums up the mess better than the mathematicians. "You have a resource economy that’s been blown apart sitting on top of a housing bubble," Marc Cohodes told Maclean’s magazine. "That’s a toxic mix."
And so my editor asked me to write this sentence: I told you so.
What I warned
Years ago I warned Canadians and Tyee readers that bitumen would not make us a superpower, or pave our streets with gold.
I detailed the pitfalls of petro-currencies and the economic inequalities bred by dependency on oil exports.
I warned that countries that rely on black gold for revenue generally come to represent the interests of petroleum extractors. Cursed by oil, they become more belligerent and thumb their noses at international institutions.
I wrote that rapid bitumen expansion would lead to reckless overproduction and reintroduced Canadians to the ghost of Harold Innis.
Innis, our greatest historian, said that Canada had a resource addiction problem: it got hooked on the raw export of trees and rocks to global empires and then went on a mining binge, only to awake with no memory of the destruction and no markets.
I warned that oil exports would diminish our democracy and expose our economy to uncommon vulnerabilities and increasing volatility.
Others cautioned, too
I broadcast the pioneering research of political scientist Terry Lynn Karl, who wrote that "Oil revenues are the catalyst for a chronic tendency of the state to become overextended, over-centralized and captured by special interests."
Karl herself warned Tyee readers in 2014 that if low oil prices persisted, then Canadians could expect to see "a rapidly declining Canadian dollar, greater problems over pipelines, the reduction of future investments, and a very bumpy oil ride, especially for Alberta."
I, too, warned that bitumen was a difficult resource with extreme liabilities and therefore the most vulnerable to price shocks.
Though Canada’s shameless politicians still deny the fact, the carbon liabilities remain defiantly large.
Of 30 oils recently ranked by some of the continent’s top energy researchers, extra-heavy synthetic crude oils from Canada still produce the highest greenhouse gas footprint.
Kepler Cheuvreux, a large European financial services company, warned that in addition to climate change, the increasing costs and capital intensity of extreme hydrocarbons have created another perfect storm: "The oil industry’s current dynamics look unsustainable to us."
The agency also predicts that when global climate policy gets real over time, it will "squeeze out the high-cost, high-carbon sources first," such as bitumen miners. Meanwhile Saudi Arabia, which owns lower-cost and lower-carbon reserves, will happily optimize their selloff.
Slow motion train wreck
Last but not least, I have warned, since 2008, that governments that do not go slow or save the money from non-renewable resource extraction will bankrupt their citizens and reap nothing but political instability.
And now the petro-state of Alberta, an impoverished kingdom with no savings and unrelenting deficits, has arrived at the doorstep of bitumen’s future.
Its new NDP government still thinks, and insanely so, that the future lies in fast-tracking more bitumen pipelines for energy markets that are declining or have peaked. It even calls the plan, one crafted by Big Oil, "aspirational."
No commodity that promises explosive price volatility, diminishing energy returns and increasing carbon insecurity on the scale of bitumen can ever sustain a nation, let alone a province.
It is a train wreck in slow motion that will surely immolate innocent bystanders.
The Uruguayan journalist Eduardo Galeano once wrote that "History never really says goodbye. History says, ‘See you later.’"
It also says: I told you so.