The COVID-19 humanitarian crisis is compounded in its severity by an economic crisis that, like the virus, is worsening exponentially. Nowhere is this more pronounced than Alberta where, this week, the price of Western Canadian Select oil plummeted below $5 a barrel — equivalent to the price of a pint of beer.
We are facing the prospect of a depression that will leave no Canadian untouched. Every industry is experiencing the sharpest downturn in living memory as the economy has gone into deep freeze. But in a country where the energy sector accounts for more than a tenth of GDP, and a region where hundreds of thousands rely on that industry for their livelihood, the wholly politically engineered disaster of dirt-cheap oil is tragedy upon tragedy, akin to kicking someone already down.
In early March, when talks stalled between Russia and OPEC, the price of crude oil plunged by a third, thanks to deliberate decisions to flood supply in the market made by Moscow and Riyadh. What’s worse, the repercussions of the OPEC price war have been compounded by massive declines in demand as the world’s two largest oil consumers — China and the United States — moved toward total lockdown in response to the pandemic.
Just as Alberta and Canada’s economy were bolting down for the impact of COVID-19, the OPEC issue has brought challenges for the energy sector in general to the fore. While the impact may look different for conventional versus renewable energy companies, the reality is that both are united in their reliance on access to capital. Across the entire economy, that capital will now be much more difficult to attain than it has been for a long time.
The result? A crisis of unprecedented magnitude.
The falling price of oil means not only is the energy sector hurting but Albertans are seriously hurting right now as well.
And that’s bad news for every Canadian. For all the talk of economic recovery in Canada, we need to face the reality that we won’t have a recovery in this country without the energy sector. It plays a central role in our economy. It is critical for the effective functioning of almost every other industry as well.
And importantly the energy sector goes well beyond Alberta, too. One need look no further than the dire state of affairs in Newfoundland and Labrador, where the combined impact of COVID-19 and the oil crash has left the province in financial ruin.
It may be that the Trudeau Liberals are reluctant to take action to benefit the oilpatch while other sectors, the ones whose impact is more personal to many Canadians, are still reeling. But as our government moves forward with bailout plans for strategic sectors and looks at options to quickly restart the economy, it would be unconscionable — foolhardy to boot — to leave the energy sector behind.
Whether it is conventional or renewable, energy is one industry that can have a direct and immediate impact on jobs, stimulate investment and create benefits for communities small and large, including Indigenous communities.
That said, no matter how well calibrated the response, the impact will be devastating. There will be significant consolidation in the sector.
In the long run, though, this will provide a pivotal opportunity for innovators to come out on top and, in doing so, transform Canadian energy. It is a movie we have seen before: some of the current oilpatch leaders were born out of a previous downturn. Newer companies will be doing things better, with more efficient and sustainable methods.
The key to a successful government response will be not to shy away from traditional oil and gas producers but rather, partly out of economic necessity, to embrace them. And, at the same time, embrace the kind of technology and solutions needed to help the industry achieve a lower carbon footprint. That is where the opportunity lies. Ottawa cannot afford to miss out on it. Canadians certainly can’t.
Especially now that, just when we were facing the greatest challenge of our lifetimes, Saudi Arabia, Russia and others were content to effectively destroy our own energy industry.
Perhaps now, we will all listen more intently to Premier Jason Kenney’s long-standing pleas for North American energy independence.