This morning, Alan Freeman asks the question nobody else wants to ask: What if Alberta oil doesn't have a future?
That word — ‘curse’ — is one development economists use to describe the anomalous position of countries awash in natural resource wealth (like oil) where economic growth is nevertheless sluggish and outcomes are actually weaker than in countries that aren’t as “blessed”.
When oil prices are high, there’s so much money to be made in extracting it that other sectors of the economy tend to languish. Agriculture and manufacturing suffer because nobody can compete with the inflated wages in the resource sector. Government revenues are subject to booms and busts, driven by global commodity cycles completely beyond local political control. And oil wealth too often breeds corruption, as those close to power scramble for a share of the resource manna.
This isn't a new phenomenon. Harold Innes coined the phrase "resource trap" decades ago.And our contemporary world is full of examples of it: Venezuela, Kazakhstan, Angola and Nigeria.
In Alberta's case, consider the numbers:
The statistics are striking. In the two decades between 1994 and 2014, Alberta’s GDP grew by an average of 3.5 per cent a year. The province, with something over 11 per cent of Canada’s population, accounted for 25 per cent of net new jobs for the entire country in the ten years to 2014. Two years ago, resource concerns, led by the oilsands producers, invested $126 billion in their facilities, accounting for almost half of all non-residential capital investment in Canada.
Now the situation has changed:
The Saudi oil minister, Ali Al-Naimi, could have been talking directly to Canada’s oil industry this week when he told an energy conference in Houston that he plans to pump as much oil as he can to maintain his market share — even if the price remains mired where it is, around US $30 a barrel.
“Inefficient, uneconomic producers will have to get out. That’s tough to say, but that’s fact,” the Saudi said.
For the last thirty years -- and particularly for the previous ten years -- we have been obsessed with the Economics of Oil:
The problem is that while we were busy convincing ourselves that turning northern Alberta into a giant open-pit mine was the surest way to fortune, we forgot about the benefits of a diversified economy. It became our version of the resource curse. In 2014, natural resources accounted for a whopping 31 per cent of Alberta’s GDP, the same as in Saskatchewan. In Newfoundland, it was 33 per cent. In Ontario, natural resources accounted for only 7 per cent of GDP, while in Quebec the figure was 10 per cent.
But now the Gold Rush is over.