Alberta Oil Sector Facing Volatile and Long-Term Decline Even in the Absence of Domestic Climate Policies
Winnipeg, MB (May 26, 2021) – A combination of market forces, international climate policies, and geopolitics will push Alberta’s oil sector beyond a tipping point and drive its long-term decline by the end of this decade. That’s the key finding of a new report and modelling by the International Institute for Sustainable Development.
The report identifies eight key factors that will affect the future of Alberta’s oil sector. It finds that five of the factors will apply downward pressure on the sector over the long term. The biggest factor is the global transition away from internal combustion vehicles and toward electric and alternative-fuel vehicles, which will sap the 44% of demand for crude oil currently coming from transportation.
According to the report, the only factor that will apply upward pressure on Alberta’s oil sector over the long term is increased global demand for plastics. Domestic climate change policies, such as a carbon price, were excluded from the assessment in order to focus on factors outside of Canada’s immediate control.
The report predicts a steady long-term decline in Alberta’s oil sector beginning by the end of the decade. Geopolitical dynamics, particularly in relation to the behaviour of OPEC+ members after peak oil, will make this a volatile decline.
New modelling in the report shows how volatility poses a much greater threat than low prices to the Alberta economy. A conservative outlook on price volatility finds that its damage to Alberta’s economy could be more than five times worse than the effect of just low prices.
The report concludes that, unless there are innovations in the uses of oil for non-combustion, also known as "bitumen beyond combustion," the oil sector will contribute less and less to Alberta’s prosperity. The report models a potential drop in employment from the oil sector of 24,300 full-time jobs per year on average toward 2050, as well as a potential 43% drop in royalties from the sector to the Alberta government.
"After a temporary rebound this decade, the long-term outlook for Alberta’s oil sector is bleak," said report author and economist, Aaron Cosbey. "Governments need to focus investments not on propping up a shrinking sector but on diversifying the economy and advancing new growth opportunities."
View the full report here.
(613) 238-2296 ext. 114
The International Institute for Sustainable Development (IISD) is an award-winning independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies. Our work inspires better decisions and sparks meaningful action to help people and the planet thrive. We shine a light on what can be achieved when governments, businesses, non-profits, and communities come together. IISD’s staff of more than 120 people, plus over 150 associates and consultants, come from across the globe and from many disciplines. With offices in Winnipeg, Geneva, Ottawa, and Toronto, our work affects lives in nearly 100 countries.
You might also be interested in
Canada vows to stop funding overseas oil and gas projects, but billions in support still on the books
In November 2021, Prime Minister Justin Trudeau issued a warning about the dangers of climate change at the United Nations’ 26th climate change conference in Glasgow, Scotland.
Canada Delivers on Glasgow Statement Pledge With Policy Guidelines to End International Public Finance for Fossil Fuels
The Government of Canada has released new policy guidelines to end international public financing for fossil fuels and reprioritize support for clean energy by the end of 2022. Today’s announcement is expected to redirect CAD 2.5 billion per year away from fossil fuels.
Why Government Support for Decarbonizing Oil and Gas Is a Bad Investment
This policy brief analyzes whether providing government support for decarbonization is an effective use of resources and finds that public dollars are more effectively spent supporting readily available and proven low carbon technologies instead.
Ottawa Playbook: 2022 in 22 numbers
This week, we take stock of the whirlwind that was 2022. Today we present the year in numbers. Plus, we do the math on which lobbyists registered the most meetings. Also, an excerpt from the farewell speech Jim Carr had hoped to deliver in Parliament.