Oilsands And Selective Upsides

This article was last updated on April 16, 2022

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If you’re a proponent of the oilsands, your central argument is obviously the economic upside. Listen to any sales job, and immediately you hear how the oilsands don’t just benefit Alberta, but the entire country, armed with incredible statistics to show how many jobs are tied to this development, equalization payments, etc. Perhaps this a central Canada-centric point of view, but if you factor in all the various dynamics at play, one wonders if this supposed benefit is really as enticing as advertised.

With the emergence of the oilsands, our dollar is more than ever simply an extension of oil prices, oil goes up, our dollar rises, oil drops, in tow as well, a very simple casual relationship that becomes more pronounced over time. Higher oil prices obviously benefit the oil patch- particularly relatively high cost oilsand production- but because the dollar is so closely tied to this price, there is an almost inverse reality at play that harms other economies. Present day Ontario highlights the disparity, a province that relies on manufacturing is heavily dependent on the standing of our dollar. When you factor in all the jobs lost due to reduced competitiveness as a function of our energy related dollar, the flowery statistics coming out of the oilpatch are somewhat disingenuous. “All the jobs” the oilsands bring to Ontario through supposed supply of equipment is offset by an artificially inflated dollar that is too closely tied to one commodity. In fact, I’m hard pressed to really see a net benefit overall for a place like Ontario, if anything erosion as a function of the counter “emergence” out west.

There seems to be this kneejerk economic argument attached to the oilsands, despite contradictory evidence that doesn’t support the optimism. For instance, this argument that a higher dollar has some inherent advantage for consumers- again the overly simplistic theoretical economist arguments apply- we should see cheaper products, that’s the payoff! Instead, and our Finance Minister agrees in “frustrated” fashion, the promised cheaper goods as a function of the dollar haven’t manifested, the disparity between the border pronounced, consistent, stubborn, with no signs of the promised benefits. As well, the notion of buying cheaper equipment from the Americans is a bit suspect, when one considers manufactures are closing up shop due to that very same dollar related dynamic, it’s a complicated picture trying to ascertain true benefit in totality.

The energy sector is crucial to the economies for many jurisdictions. However, in the “federal” sense, when one takes the country as a whole, the supposed “slam dunk” upside is less obvious. Yes, more equalization payments from one quarter, but offset by alarming “have not” status elsewhere, again an almost tug of war reality as it currently stands. Some provinces saddled with debt, others with surplus, some with no taxes, others with high taxes, the gulf is widening and one wonders how that will affect this federation moving forward, because the notions of equal opportunity and distribution of resources are in question. A “regional” perspective I know…

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