By guest contributor Derek Leahy
The recent shelving of the Joslyn mine oilsands project in Alberta is a reminder of the fragile economics of the oilsands. No economic formula could be found to make the $11 billion project work and it has been put on hold indefinitely.
Oil major Total E&P, the biggest partner in the project, said the Joslyn mine project “cannot be (financially) sustainable in the long term.” Interestingly, Total did not blame lack of new pipelines for squeezing profit margins either.
“You run the risk in developing fossil fuels that one day will either become fully depleted or too expensive to extract,” Philip Gass, a policy analyst at the International Institute of Sustainable Development, said from Winnipeg.
It would be difficult to deny Canada has economically benefited from developing the oilsands, a particularly difficult and expensive fossil fuel to mine and refine into light fuels — but failing to diversify the Canadian economy beyond an oil and gas ‘energy superpower’ makes for a very uncertain economic future for Canada.
“Canada could find itself an energy superpower overspecialized in the ‘old economy’ (resource extraction) in a world rapidly trying to cut carbon emissions and avoid catastrophic climate change,” Andrew Jackson, a senior policy advisor with the Broadbent Institute, told me.
“Putting all your eggs in one basket is never a good economic strategy,” Jackson said.
Benefits of energy development remain largely locked in the sector
The idea that all Canadians benefit from a surging oil and gas industry is slowly turning into a farce. An International Monetary Fund (IMF) report earlier this year finds every dollar invested in the energy sector in Alberta grows Canadian gross domestic product — an economic vitality indicator — by 90 cents. Of this growth, 82 cents remains in Alberta, mostly in the energy sector (67 cents).
“There appears to be an important scope to increase inter-industry linkages across Canada that would lead to wider sharing of benefits from the energy sector,” concludes the IMFreport released in January.
Increasing inter-industry linkages or value-added jobs does not appear to be priority of the federal government. New oil pipeline projects are almost all geared to shipping Canadian oil and oilsands bitumen to refineries in the U.S. or overseas, not in Canada. Most of the heavy equipment for oilsands extraction comes from the U.S.
“The spin-off effects of the energy boom are not being felt in Ontario and Quebec, where most Canadians are,” Jackson says.
The federal government’s low corporate tax rate and the exemption of provincial resource royalties from the Canadian system of wealth redistribution (which ensures all Canadians receive the same public services) further locks the economic benefits of the energy sector within the sector and resource-rich provinces.
Energy sector is not a big jobs creator
“The oil and gas sector is capital intensive, not labour intensive. Manufacturing could employ more people,” David Macdonald, a senior economist with the Canadian Centre for Policy Alternatives, says.
The same IMF report on the Canadian energy sector indicates that of the 752,000 jobs created in Canada between 2007 and 2012, the oil and gas sector can only take credit for less than 13,000, or 1.7 per cent, of them.
Job creation is not exactly Canada’s strong suit at the moment.
“The employment rate in Canada, that is the percentage of Canadians over fifteen years of age who are working, is sixty one per cent. This is the same level the employment rate was at during the worst of the recent financial crisis,” Macdonald told me.
The official unemployment rate (seven per cent) in Canada has returned to pre-recession levels, but Macdonald points out that Statistics Canada does not count Canadians who are not actively searching for employment as unemployed.
“Eighty per cent of the so-called ‘recovered jobs’ since the recession are Canadians who have simply given up looking for work,” Macdonald says from Ottawa.
Part-time/temporary job creation on the rise
Ninety-five percent of all net jobs created in Canada in 2013 were part-time according to the Canadian Chamber of Commerce. Part-time workers and the self-employed, who earn on average 20 per cent less than their employed counterparts according to CIBC, now make up 30 per cent of the Canadian work force.
Canada has created more full-time than part-time jobs since the recession but the rate ofpart-time job creation has grown faster than full-time. Fifty-three per cent of Canadians between the ages of 25 and 44 who found work since the recession could only find temporary jobs. The rate of Canadian part-time workers who want full-time work but cannot find it has grown 37 per cent during the same period.
“Since 2011 the number of underemployed workers has exceeded the number of unemployed workers — in 2013 there were 1.35 million unemployed workers and 1.43 million additional underemployed workers. And that is before we even begin to take into account skills-related underemployment. This is an issue that needs to be taken seriously,” a Canadian Labour Congress report concludes.
Fourteen per cent of working Canadians are underemployed or unable to get enough work to meet their financial needs, a 28 per cent increase since 2008.
Canada needs to create well-paying, long-lasting jobs
“Whether you are talking about green jobs or brown jobs (fossil fuels extraction) you want to create jobs that are fair, well-paying and long lasting,” Gass of the International Institute of Sustainable Development told me.
“We would like to see federal policy facilitate the creation of more specialized manufacturing jobs and encourage unionization in the work place. Unions tend to create better paying full time jobs,” Macdonald says.
A report released last month by the Parkland Institute examining unions in Alberta (the province most hostile to unions) found in terms of economic performance, wage growth is lower in Alberta compared to other provinces with higher unionization rates, despite Alberta’s oilsands boom.
“There is $600 billion sitting on companies shelves in Canada that is not being reinvested in the economy. Companies only invest where there is an expectation for growth. At the moment it appears the expectations are low,” Jackson says from Ottawa.
Corporations operating in Canada are not the only ones with low expectations for growth. When polled earlier this year by the Broadbent Institute, Canadians between 20 and 30 believed they will face a future of precarious employment and the income gap will grow during their lifetimes despite Canada’s energy boom. Baby boomers (50 to 60 years of age) in the same poll stated they think their children are more likely to slip down an economic class than move up.
“With interest rates at all time lows I would like to see public investment into mass transit, passenger rail, etcetera ramped up. Public investment can pave the way for private investment,” Jackson said.
Unfortunately the current priorities of the federal government — tax cuts, tax breaks, battling unions and cuts to public spending — are taking Canada in just the opposite direction.
Image Credit: Cheryl via Flickr
This was first published on Desmog Canada.
Derek grew up in the sleepy little town of Brooklin, Ontario in Canada. After his experience as a backpacker in Copenhagen, Denmark during the UN Climate Change Summit in 2009, Derek decided it was time he stood up for the planet. Shortly thereafter he created International Stop the Tar Sands Day (international rallies to raise awareness about the destructiveness of the tar sands) and plans on continuing to raise awareness about the tar sands and the need to act upon climate change this decade in the years to come. Derek grew up in the sleepy little town of Brooklin, Ontario in Canada. After his experience as a backpacker in Copenhagen, Denmark during the UN Climate Change Summit in 2009, Derek decided it was time he stood up for the planet. Shortly thereafter he created International Stop the Tar Sands Day (international rallies to raise awareness about the destructiveness of the tar sands) and plans on continuing to raise awareness about the tar sands and the need to act upon climate change this decade in the years to come.
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