A confidential government memorandum obtained by CBC News warns that soaring costs of developing the Alberta oilsands could put the brakes on the massive project, stalling one of the main engines of the Canadian economy.Well, what have I been telling you all?
Of course now that it's actually happening Alberta's budget makes no sense at all, and on top of the oil spill propaganda the Alberta government is going to work extra hard to convince people that putting all of their eggs in the oilsands basket isn't actually costing them money. Of course the oilsands with their 3:1 EROEI ratio, massive subsidies, and huge environmental footprint are costing Canadians money. It's not just about direct subsidies either, take for instance the fact that companies can write off the gas they use to transport the very large equipment up to the oilsands. Or the numerous other "supportive" industries which are not themselves oilsands companies but of which the oilsands could not operate without. Make no mistake, we are paying them.
I've made this call many times on this blog and my Hellberta blog. This concept has been a key aspect in my forecasting and it is now coming out to bare in the light.
Resource use, and income, brings us back to energy. Energy, currently, is the key to life. The reality behind Alberta's economic and industrial decisions is that we consume the most power in Canada to support our so-called "energy production". This arrangement is simply unsustainable and is the achilles heel of Alberta's one-trick economy.
Alberta, during the earlier years of oilsands production benefited from a cheap cost of oil, combined with a slow (and steadily speeding up) oil price. This meant that the oilsands could use the cheaper standard price of oil for the initial infrastructure and by the time oil was producing it would be worth more. This gradual increase in oil price would also account for the extra cost in operating an "extreme energy" extraction project. (For more on "extreme energy" and the global economy, see here.)
This pattern in oil has changed, with a hard ceiling near $100 reached, which when oil goes over this price becomes contentious and a burden on consumer economic spending. Once this occurs, oil (and many other economic indicators) get knocked back down, to around $80 or so, the floor on our "extreme energy" production price. Anything below $80 now is a huge warning, and if it drops below $70 then many extreme energy projects can not continue operating and many future projects are put on hold.
It should be clear to most analysts now that the bull run in oil is over. The price will surely osculate wildy, no doubt, but the uni-directional price inflation is over, it's now bi-directional.
Similarly with the water issue, one also has to wonder how if Alberta can't handle a really hot day, how exactly do we intend to handle a 333% increase in oilsands production and can we actually afford it?
So? Can We? Alison Redford.. over to you.
Click here to recommend this post on progressivebloggers.ca and help other people find this information.
Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading.