Sunset Industry?

It only took two years for Alberta’s technology-leading oil and gas industry to go from representing the backbone of Alberta’s economy to being a “sunset industry”. Perceptions are a funny thing. Two pivotal changes brought on this malaise. First, horizontal drilling and fracing (i.e. fracking or fracting) technologies enabled a very large increase in USA oil production. Secondly, OPEC flexed its production biceps and reminded world economies that it is they who dictate the price of oil (for now).

I am the first to admit that the economic upside-down cake in Alberta gives me pause. But, I do have to ask, is oil and gas really a sunset industry? Many Canadians seem to think that hydrocarbon energies from the Earth represent a practically Neanderthal technology that will readily and soon be replaced. However, if the past tells us anything, it is that this is an unrealistic statement. I was a teenager in Alberta in the eighties. Back then Alberta’s oil and gas economy had fallen on rough times, having been staggered by the National Energy Program that was coupled to lower world prices for crude oil. I was taught that oil and gas were never going to recover in Alberta because we were out of economically recoverable resources. I was heartily discouraged by Alberta geologists from even choosing Geology as a career!

All that changed as Alberta’s heavy oil deposits became economic. For nearly 20 years, from 1995 to 2013, Alberta’s resources became again the backbone of its economy and an important contributor to Canada’s economy. Now it is about 20 months into a serious downturn and one can watch as an entire province (or country!) jumps off of the ship. I think it is crazy.

Consider this. Alberta still owns the largest exploitable volume of oil in the world. Yes, it is heavy oil, but OPEC’s reserves are shrinking at a far faster rate than Alberta’s. The day when it is Alberta that holds the cards is only decades away. What are the wild cards in that deck? One would think that it is how far technology can advance alternative energies such that they rival the economic position of oil, and I suppose that if civilization is waning and there are no growing economies for the next 20 years, everyone is in trouble.

Let me know what you think. Is Canadian Oil and Gas finished?

10 thoughts on “Sunset Industry?”

  1. I personally don’t think oil and gas is finished in Alberta and can say that I’ve put four years and a substantial amount of money behind that bet. I experienced the same advice as you did from my mother as a result of the 80’s bust to not go into geology, not because oil and gas wasn’t going to recover, but because it is an unstable industry. It may be down now, but that doesn’t mean its never going to pick up. I think past evidence suggests it will recover again, although I doubt we will ever see prices return to what they were since the US has become a major player. The prices of the past were neither realistic or tied to supply and demand since OPEC was artificially restricting the supply. Further, I find advocators of alternative energy often ignore some of the facts and logistics of leaving the oil in the ground.

    Even if the entire world began using other sources of energy, our society is incredibly dependent on petroleum for other products such as plastics. Modern medicine for example is dependent on petroleum for supplies, transport, emergency services and equipment sterilization. Major design overhauls would need to be done on planes, boats and helicopters before oil and gas could be abandoned. Oil and gas are a better source for electricity as well since they are easily transported and can be used to create electricity once they arrive to the consumer. Hydroelectric energy, wind and solar power are all generated locally and need to be transported as electric power through transmission lines. Canada is a very large country that is not very densely populated, creating a logistical infrastructure problem. I struggle to see how this could be practical for isolated northern communities where reliable energy is needed to warm houses for up to eight months of the year. Most alternative energy sources besides nuclear are highly variable, dependent on environmental conditions and come at a high cost for infrastructure development. I think nuclear is the best competitor against oil and gas but needs to be developed safely and far away from tectonic faults. The supply for oil and gas may be on the decline and experiencing competition from alternative energy, but is still a necessity for isolated communities, plastics, emergency transport and regions poor in reliable alternative energy sources. It may never be as prevalent within the market as it is now, but I don’t think its disappearing any time soon.

    1. In fact… it is not even entirely clear that oil and gas as a resource is in decline. There are massive unconventional resources.

  2. Without large technological breakthrough, things are not suppose to change that fast from “backbone” to “sunset industry”. Energy to the world is like food to human, and “food” industry is never a sunset industry. Although a lot of alternative energy have came into use, a great portion of world’s energy supply is still going to be oil products and it is not going to change over decades. With the demanding unchanged or even increased a little, there must be someone is still making money on the oil industry. It just was not Albertans for now because our technology is not good enough or our cost is not low enough. But with “the largest exploitable volume of oil in the world” in hand, Alberta’s oil will have its day to come again, it is just a matter of time and technology.

  3. Canadian oil and gas prices have never NOT fluctuated, thanks to the free market economy. If there is increase in oil and gas prices, there is bound to be a dip. As shown by history, the tough times will pass eventually. The oil and gas industry may by shrinking now, but it is by no means finished.

    Alberta’s oil and gas industry plays a very important part in supporting Canada’s economy. Like you said, it is considered to be the backbone. As a major producer, Canada’s oil and gas industry is heavily connected with the global oil and gas market. There are a number of other countries that depend on Canada’s oil and gas exports. This is all thanks to globalization and the free market economy. Being already a major player, Canada cannot simply cease oil and gas production.

  4. When the day comes that a practical electric car can carry me a long distance on a single charge or when I only have to charge my cellphone once a week is the day that I will start to worry about the demise of the Canadian oil industry. Alternative energy technology is simply not moving forward fast enough to put oil out of business any time soon. They had electric cars back in the early 1900’s and in comparison to other technologies the rate of advancement is unbeleivably slow. Even if in the near future there was a large shift to electric vehicles there are 1001 other uses for our oil that even the best lithium ion battery can’t compete with. Patience is key and before we know it things will be back to where us future geologist would like to see it.

  5. Before considering the Alberta’s technology-leading oil and gas industry is a “sunset” industry, we should think what else can take places of Alberta oil and gas on Canada’s economy. And I do not think there has an option here as the Alberta oil and gas become the important contributor of Canada’s economy and be continuously participate in its economy as a “backbone” character.
    Alberta have one of the largest heavy oil reservoirs storage in the world, this is our advantage, we weapon on economy. So why should we give up this advantage? Nowadays, we still not find out the appropriate alternative energies that can replace the position of oil and gas. I do not think Canadian oil and gas hit the end, at least not in 50 years i guess. Because it takes time for people finding out the appropriate alternative energies and proving to the world.

  6. As you mentioned in the eighties there was a plummet of price of oil, and that wasn’t the first time that happened, nor will it be the last, after this current decrease! The price of oil has always fluctuated, and the public will always find a way to look at this fluctuation as the demise of the oil industry, and hydrocarbon resources as a use of the past. Along with this disappearing of the industry, different media companies want to be the first one to predict the future in terms of a new, more efficient energy technology that creates a clean, sustainable way to live on Earth (because oil and gas = bad!). As alternative ways of energy technology are always growing as an industry, technology to make the oil and gas industry cleaner, more efficient and sustainable is also a growing industry in itself. And this will continue to grow, especially in Alberta. I definitely disagree with the oil and gas industry being a “sunset industry”, and actually believe in quite the opposite. This industry does have room for improvement, and no one should look at it as an industry that needs to be eliminated or and industry that is being eliminated, just because of this (I believe) temporary economic downturn. If an alternative energy does prove to be as crucial as oil and gas, and is cleaner, more efficient, and more sustainable, then the comments on this thread might look different! But as it stands today, I believe the oil and gas industry is here to stay for a long time.

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