Alberta: We have a revenue problem

There is chatter on the national campaign trail of Canada building new pipelines to transport Alberta crude oil and natural gas to destinations across the country, including BC’s coast, Hudson Bay and Atlantic refineries.

Even though the last thing the world needs right now is more carbon dioxide emissions driving crazier and deadlier fires, floods and droughts, there is one glaring question this conjecture demands: Who do we think is going to buy our expensive, carbon-intensive oil? 

This vexingly obvious question is missing from the current federal election, and it's conspicuously absent from budget discussions in Alberta. Before anyone gets too excited about spending tens of billions of dollars on another pipeline — and before we miss the chance to have a rational conversation about revenue in Alberta — we had better consider this basic element of consumer economics: You need both a buyer and a seller in any financial transaction. 

More than 97 per cent of Canada's oil exports and about half of our natural gas are sold to the United States to be refined, used and resold. 

Despite U.S. refineries investing in processing Alberta’s heavy bitumen, their loyalty as customers is uncertain. According to Reuters, Marathon Petroleum — the largest US refining company — is considering switching back to light crude, and Trump’s push for energy independence further threatens this relationship, regardless of whether analysts believe this goal is achievable.

China purchases 720,000 barrels daily from Canada ($4 billion yearly) via the taxpayer-funded Transmountain Pipeline (that has cost in excess of $34 billion to bring online), which sends equal or greater volumes to California and to Asia. While China leads global oil consumption, it’s also the world’s top renewable energy producer — generating twice the EU’s output and triple America’s — and its fossil fuel use has recently peaked as renewable production surges.

While Liquified Natural Gas (LNG) exports could make up some of the difference for Alberta and other gas-producing provinces (with global demand growing 2.5 per cent annually), Canada’s late market entry faces uncertainty. Emerging economies may soon abandon this greenhouse gas-emitting resource for cheaper domestic renewables. 

Don’t look to Europe for new oil and gas markets. According to EuroStat, the European market for natural gas has fallen by two-thirds in the last two decades and the market for heavy crude oil is practically non-existent. 

According to the International Energy Agency’s (IEA) 2024 Energy Outlook, global oil demand will decrease by about 1 million barrels per day in coming years, with Alberta’s expensive, carbon-intensive heavy crude presenting a promising target for carbon and cost-conscious buyers. Despite this, politicians continue proposing new pipelines costing tens to hundreds of billions and requiring decades to complete, while Alberta simultaneously faces a self-created revenue crisis.

There are solutions to this problem, but so far no politician in Alberta wants to face the fact that one in every four dollars Alberta spends on health, education and social programs comes from petroleum exports, whose future is almost certainly in decline. 

The largest buyer of our oil is working to wean itself off our oil, for economic reasons rather than climate, but the impact is the same. Pounding our fists on the table isn't going to change things, and nor is pipeline boosterism — there's neither proponent nor market and even if there were either, this is a solution that would take years, if not a decade, to come to fruition. That’s not a good bet given the long-term prospects for oil.

The most important thing Alberta must do is have an adult conversation about how we will pay the bills in the future. Whoever is governing after 2027 will face this challenge head on. There is no longer time to kick this problem down the road. 

Stephen Legault is senior manager for the Alberta Energy Transition at Environmental Defence.