Innisfil on Oil and Why It Matters

16,000 commuter vehicles in Innisfil take to the roads every day, emit more than 90,000 metric tonnes of C02, travel more than 240 million kilometres a year, consume over 14 million litres of gas costing more than $17 million. Those estimates are just a slice of Innisfil on oil.

The global Transition movement, which includes Transition groups in Barrie and Innisfil, encourage local initiatives to reduce community dependence on oil and build local resilience to economic and environmental shocks. Some people agree this is critical to ensure our economic and environmental health for future generations. Others are indifferent to the issues, like the Innsfil reader who complained to the local paper that Innisfil Beach Road would never be capable of being enlarged to four lanes. (seriously?!) And the head of People’s Credit Union who claimed they would be at a competitive disadvantage if its branch couldn’t keep a drive-through lane for an ATM. (You’ve got bigger service issues)

Maybe some people are deluded because our federal government has focused Canada’s economy on resource extraction, specifically extraction of oil for export, primarily to the United States and/or China, two countries that happen to be the largest fossil fuel consumers and the biggest political obstacles to reducing carbon emissions.

Not surprisingly, the American and Chinese corporations are vying for ownership of the Canadian resource and investment in the extraction companies. With one of the largest bitumen deposits (a.k.a. asphalt ,tar sands, oil sands) in the world, the federal government assures us we can exploit this substance for at least a century. Canada plans to triple total production from 2 million barrels a day to 6 million barrels a day. The focus is entirely on how to get this massive volume of fuel stock to off-shore refineries:

  • The Keystone XL pipeline would carry it 1,897 km to the Texas gulf coast where tax-exempt refineries would send the bulk of it (about 75%) to other world markets. It is expected to replace declining supplies from Mexico and Venezuela.
  • The Northern Gateway pipeline would extend about 1,170 km to Kitimat, BC where 200 super tankers (each 1,500 feet in length) fill up for Asian destinations.
  • Enbridge, has received approval to reverse the flow of an existing Line 9 pipeline from Sarnia to Montreal as perhaps part of a more ambitious plan to carry oil to an Atlantic refinery for domestic and export use – although Exxon intends to shut down an eastern refinery.

Searching for Benefits

The federal government says the pipeline project is a “national priority” to ensure our economic prosperity. A jobs report from CIBC was trumpeted in the newspaper under the banner, “Newly Created Jobs of Higher Quality”.  A closer look indicated that these were in “high-paying sectors such as petroleum and coal manufacturing, oil and gas extraction, heavy and civil engineering construction, and transportation equipment manufacturing.” Jobs growth in these sectors is twice as high as in “lower paying sectors”.

According to Al Monaco, President of Enbridge Inc., “Canadian oil piped south to the U.S. market is being sold for about $72 a barrel” while Canada continues to import oil at a world market price of about $102/barrel. Arguing in favour of new pipelines, he said “Canada is losing $60 million a day because the U.S. is almost the only outlet for oil exports.”

(Enbridge says new pipelines will unlock billions for Canada, Toronto Star, May 8, 2012)

An American study concluded that the XL Keystone pipeline would result in higher US gasoline prices, and a reduction in the US production of gasoline since gulf coast refineries produce more diesel fuel.  The report found that “the pipeline will increase the price of crude oil in the Midwest and Rocky Mountains by over $20 a barrel, increasing the cost of Canadian tar sands by as much as $27 billion annually.”

(Keystone XL Would Raise Gas Prices, Report Finds, Huffington Post, May 22,2012)

Essentially, our economic strategy consists of imposing an economic brake on the American oil-based economy, which will indirectly weigh on our domestic economy. At the same time, Canada will be a major contributor to greater global risk of natural and man-made disasters affecting economic, social and environmental well-being.

At one time, people warned about the prospect of “peak oil” followed by a catastrophic decline in supply and increase in price. Now it seems more likely that oil will simply price itself out of successive national markets barring any other unforeseen environmental or climate disaster:

“Maugeri’s analysis of projects in 23 countries suggests that global oil supplies are likely to rise by a net 17m barrels per day (to 110m) by 2020. This, he says, is “the largest potential addition to the world’s oil supply capacity since the 1980s”. The investments required to make this boom happen depend on a long-term price of $70 a barrel – the current cost of Brent crude is $95. Money is now flooding into new oil: a trillion dollars has been spent in the past two years; a record $600bn is lined up for 2012.”

(We were wrong on peak oil. There’s enough to fry us all, The Guardian, 04/07/2012)

Does Anybody Want the Stuff?

What are the future prospects? Experience in the UK shows what our future generations will have to deal with. Sir David King, director of Oxford’s Smith School of Enterprise and the Environment told the UK House of Commons’ Energy and Climate Change Committee that “Britain needs to de-fossilise its ground transport sector”:

Oil price is the current elephant in the room,” he said. “For example, Italy’s national deficit at present is 38 billon euro per year and 34 billion euro of that is due to the cost of importing oil at $100 plus since 2000. That was when Italy’s budget was last in balance. In the UK, of course, we’ve been shielded against this factor by our discovery of North Sea oil which, at its peak in 1999, amounted to 3.1m barrels a day.” With output from the North Sea now down at around 1.4m barrels a day, against a need of 1.6m/1.7m barrels, the good times are almost over.

“I believe, however, that by 2020 we can achieve a graduated independence of oil imports if we transfer our ground transport sector onto the electricity grid,” he continued. “That would save the British economy in the region of £30-50 billion a year. “

To de-fossilise our ground transport sector is an essential step as we cannot afford to import the oil we would otherwise need to keep our economy going. There is little choice, therefore, but to end our dependence on oil.”

(ECCC told its time to start replacing North Sea oil, www.edie.net, May 17, 2012)

China, of course, is described as Canada’s major overseas customer for crude. But with faltering global trade, a new focus is put on stimulating China’s enormous domestic market. Some question whether this is this realistic:

“The investment boom and the globalization dividend of the last two decades allowed the [Chinese Communist] party to have its cake and eat it too — maintaining its rule on the basis of economic prosperity, while failing to establish the institutions critical to sustaining such prosperity. Today, this is no longer possible.

So in a sense, the Chinese bubble — as much an intellectual and political bubble as an economic one — has burst. As China’s economic deceleration exposes its structural vulnerabilities and flawed policies, the much-hyped notion of “Chinese exceptionalism” — that China can continue to grow without the rule of law and the other essential institutions that a modern market economy presupposes — is proving to be nothing but a delusion.”

(China’s political climate is hostile to the vital next stage of economic growth, Toronto Star, July 13, 2012)

Global economic conditions beyond our control also dictate our current economic prospects. It seems the world may not exactly be lining up to buy our oil sands crude.

“In a one-page statement on his latest interest-rate decision Tuesday, Governor Mark Carney mentioned oil or commodity prices four times. To many economists and analysts, this was a clear hint of growing concern as oil prices, while still historically high, inch downward to $80 (U.S.) a barrel – considered an unofficial breaking point at which investment in energy projects could stall, putting jobs at risk.”

(Carney warns falling oil price could grease economy’s slide – The Globe and Mail, July 17, 2012)

So overall our national priority hinges on:

  • an exhaustable, non-renewable extraction industry under foreign ownership
  • a regional and sectoral employment policy exposed to a boom & bust cycle
  • a global pricing structure beyond our control
  • increased global risk to human and environmental health
  • a growing trend away from an oil based economy

Does that sound workable? Reasonable? As you pump gas at $1.25 to 1.30/litre, remember its for your own economic prosperity, right? In Innisfil, and across Canada, it’s up to each of us to make decisions and take actions, big or small, in the best interest of our planet as well as ourselves. Or did you want to leave that to your grandchildren?

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