Just five years ago, Alberta, Canada's oil heartland, was a rather depressed place as its main industry—oil and gas—struggled with the pressure of discount oil prices because of a pipeline shortage and tons of red tape stifling new projects. Now, Alberta is booming. Canada is currently growing at the fastest rate in the G7 group, Bloomberg reported this week, adding that job creation in Alberta is expected to be the highest in the country this year. Indeed, Alberta's economy alone is seen expanding at a rate topping the G7 and most other developed countries, at 5.6 percent.
"Overall, we are forecasting solid gross domestic product (GDP) growth for the province and that's beneficial and it ripples across the economy," said ATB's deputy chief economist Rob Roach last week, as quoted by CBC. "It might mean that you are able to find a job but when you go to the grocery store, food prices are getting higher because of inflation. There is a give and take."
The natural resources sector will be the driver of this growth, Roach added, saying, "We had a good 2021 and it looks like we will probably lead the country in GDP growth this year, because of those high commodity prices helping give us that extra boost."
Post-pandemic energy demand recovery is one reason behind this growth spurt, as it is across most of the world. Another is the energy crunch that the war in Ukraine—and the sanctions that the West promptly imposed on Russia—kickstarted in a world already short of the oil and gas it needs.
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Canadian oil exports to international markets hit a record this year after a pipeline's flow was reversed to respond to strong demand for the commodity from other markets besides Canada's biggest one to the south. Line 3 was also completed this year, adding more pipeline capacity to a country struggling for years with insufficient capacity for shipping its crude abroad.
Oil exports to the U.S. are also running high, prompting Alberta Premier Jason Kenney to say during a recent visit to Washington that the Canadian province could add 1 million bpd in new pipeline capacity over the next two years.
"With political will from Washington, we could also get another major pipeline built that would forever allow the United States to free itself from imports from hostile regimes," Kenney told the Senate energy and natural resources committee.
Alberta, then, seems ready and willing to supply the world with more oil. The federal government, however, is not so ready or willing. The federal government has an energy transition agenda, which sees the contribution of the oil and gas industry declining as the country moves towards a more renewable energy-focused future. And it has been doing its best to curb this contribution already.
"Canada could be supplying more energy to the world if we'd gone ahead with a few projects. And that's one of the things that frustrates people in Alberta quite dramatically," Deborah Yedlin, chief executive of the Calgary Chamber of Commerce, told Bloomberg. "We should be more of a global player, and we're not because we don't have enough infrastructure."
Indeed, oil transport infrastructure shortages have been the main reason for the relatively stunted growth of the industry in the past few years while demand has been on the rise. LNG export terminals have also failed to really take off in Canada, which, besides oil, also have substantial natural gas reserves. And Alberta is diversifying away from oil.
The share of the oil and gas industry has declined substantially in the past 20 years, going from a record 32.6 percent in 2005 to 22.1 percent just four years later. But even though it is a smaller absolute contributor, the industry has continued to be the main driver behind Alberta's—and by extension Canada's—economic growth.
This is not about to change soon, given the fundamentals in oil and gas right now, Macdonald-Laurier Institute senior fellow Heather Exner-Pirot wrote in a recent column for the Edmonton Journal.
Despite all the renewable energy transition ambitions of the federal government, she wrote, Canada is, in fact, exporting record amounts of oil and bitumen, and the uses for this oil are so many that even when the current market imbalance disappears, demand for oil will remain robust. But while the market imbalance lasts, Exner-Pirot noted, the government might consider retraining coders for drillers instead of the other way round.
That reports of the oil industry's death have been greatly exaggerated has been made clear more than once since the energy transition push really got going. Canada's current renaissance, although not without its problems such as shortages and substantial inflation, is simply the latest proof that the world continues to need growing, rather than falling, amounts of fossil fuels.
By Charles Kennedy for Oilprice.com
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