Yesterday morning, whilst on a stroll ’round the snowy neighborhood with the hounds, I listened to Laura Lynch on The Current. Lynch succeeded award-winning host and Windsorite Anna Maria Tremonti earlier this year on the daily show, which covers global current events, similar to NPR’s OnPoint. A panel of Albertans discussed Premier Jason Kenney’s current push for what is basically, uh, secession from Canada. The recently elected Premier has established a panel to explore the idea the province independently managing the collection of income tax, retirement and pension contributions, and the RCMP (Canada’s federal police, for the uninitiated).
I care about this well beyond my undying love for the Land of the Rising Timbit. Kenney’s hardline rhetoric, in a country renowned for its politeness and deference, is notable during a time of bizarre things happening on the global political stage. The man has vilified environmental protesters, aggressively stripped unions of bargaining rights, and delved into the same tactics of disinformation as the Trump Administration. He is convinced that the media is the enemy. And believes that foreign corrupt interests are working against Alberta by promulgating the falsehood that oil is, well, awful.
For those of you who are unaware, Alberta is a weird place. It’s like if Texas and Colorado had a love child. It’s conservative. It has a preposterously oil-dependent economy. It hosts an annual, massive rodeo event that would put to shame the Iowa State Fair. Alberta is basically the only place in the world that has eliminated the brown rat. (As an aside, the province’s oil economy is even immortalized in Canadian national treasure Stan Rogers’ 1981 toe-tapping fiddle-led song The Idiot, in which the singer advises the listeners to “bid farewell to the Eastern town / you never more will see,” noting that “there’s self-respect and a steady cheque / in this refinery.” Rogers’ ambivalence in the song is indicated in his disdain for the barren landscape and the stink of the gas flares and oil.)
The province’s oil-dependent economy struggled under the collapse in global crude following the 2008 bubble. (How could a mortgage bubble be tied to speculation in commodities? It’s almost like markets are interconnected!) A major consequence was a spectacular loss of the long-ruling conservative party in the 2015 election. It didn’t help that Alberta’s conservative movement had already split, a splinter faction forming the farther-right Wildrose party, similar to the US Tea Party movement. As postmodernity increasingly continues to dissolve long-held, common ideas about political identity, we saw the socialist party fight tooth and nail against environmentalists and in favor of oil.
But, try though she did, Rachel Notley was unable to fight the tectonic shift that may well turn out to be the last big hurrah of global oil. Notley lost to Jason Kenney in 2019, suffering an embarrassing defeat while also having to endure death threats from Albertans pissed about her failure to basically fix all of the province’s problems.
Let’s peek at a chart of oil prices to look at when these things happened (below). The blue line is the price of oil. The red part of the line indicates oil prices during Rachel Notley’s administration. Unsurprisingly, one administration’s inability to combat a global energy market– or diversify a provincial economy heavily dependent on that market having much higher prices- did not end well for Notley. Her premiership is, of course, more complicated than one single issue, but oil is the topic du jour for Alberta and has been for years, as the sector accounts for a solid quarter of the province’s economy.
But that’s the weird thing. The panel seemed to think that Kenney’s new panel was some sort of referendum on Justin Trudeau’s perceived anti-Alberta-ism. The Liberals’ carbon tax (acronymically, the GHGPPA, a mouthful) has been vilified by the oil industry and its adherents. Passed by a multipartisan parliament in June 2018 (date indicated in the chart above), the carbon tax hasn’t killed demand for oil. Nor has it killed Canadians’ pocketbooks. Indeed, around 90% of the carbon tax proceeds are returned into Canadian households through rebates and other credits aimed similarly at offsetting carbon impact.
But as Laura Ingraham noted in her bizarre TV segment trying to drink incandescent lightbulb-stuffed-steak through a plastic straw to trigger the libs– energy conservation is a socialist conspiracy!
It feels more as though Alberta is focusing on a futile pursuit– polishing the brass on the Titanic, one might say. As global demand growth slows and is expected to start declining in the coming years, it’s up to policymakers to look for alternatives. This means diversifying an economy heavily-dependent on oil.
To be perfectly clear, I’m strongly in favor of producing oil in North America if the alternative is importing it from countries that behead journalists. Bakken and Athabasca oil have barely hung on in recent years with the price plunge, though. It is unclear whether oil will increase to previous prices. Relatively tepid demand has combined with increasing fuel efficiency standards. In carbon-obsessed economies of North America, that’s huge. Spikes in price would justify production, but they would also see slower demand, and this would in turn, hamper longer-term growth.
Real talk, though. Even if Comrade Alexandria Ocasio-Cortez gets crowned Supreme and Eternal Queen of the Socialist States of Americaland tomorrow, oil isn’t going away in the next couple of years. No one would be so naïve. But the demand curve is going to change a lot. We see this in electric vehicles, which didn’t exist ten years ago and have taken the market by storm. We will see more of this as we move toward electric semis, or maybe even consider options for rail freight!
So, it seems pretty crucial to plan for that change. This involves diversifying from a carbon-based economy. It also involves creating resilient economies that can survive, eventually, without oil. This doesn’t mean killing jobs– it means not blowing millions of taxpayer dollars to subsidize a dying paradigm. It means helping a transition to alleviate the slow demise of an industry that is eventually going to look very different.
Justin Trudeau knows this, and that’s what (in no small part) the carbon tax is about.
Someone should tell Jason Kenney.