Towards a post-oil Alberta
Last month, Centre for Climate and Energy Transformations (CET) at the University of Bergen, Norway and the International Institute for Applied Systems Analysis (IIASA), Vienna, Austria kick-started their ‘Contractions’ project with a two-day meeting of stakeholders in Bergen. One idea that emerged from that meeting was to study the impact on workers and communities of the recent decline in oil prices as a snapshot of what may happen to fossil fuel workers under stringent climate policies. In addition to Norway, another place we could study these effects would be in Alberta, an oil-rich province in Canada.
Alberta’s economy is strongly dependent on oil sands extraction for both export revenues and local jobs. Alberta’s oil sands, which have been commercially developed since the 1960s are estimated to be 166 billion barrels — the third largest oil reserves in the world, after Saudi Arabia and Venezuela. Since the commercial exploitation of oil sands, governments, companies, and individuals have all benefitted economically from the “black gold rush.” In early 2015, profits from the oil sands made up about 5% of Canada’s Gross domestic product (GDP).And Canada’s highest incomes are found in the heart of oil-sand-country where a median family income is about $US140,000.
Alberta’s real GDP contracted over 3.5% each in the years 2015 and 2016. This was considered as the worst two-year contractions in recorded history in Alberta. This meant provincial spending on social welfare also slightly declined. By the end of 2016, the drop in oil prices, compounded by the millions of dollars the government spent combatting the expensive Fort McMurray wildfire, sent the Province of Alberta spiraling into debt. Even when the oil prices recovered a little, Alberta’s economy was slow to rebound. Rachel Notley, the Premier of the province, stated in October 2016 that it would be “premature” to say the worst was behind the province.
The recent fall in oil prices has taken a significant toll on workers, local communities, and drained provincial governments’ coffers. The oil sands industry lost 52,500 direct jobs between 2015 and 2016 “along with thousands of indirect jobs.” During a visit to the Alberta oil sands region in July 2016 I interviewed union leaders and workers. Laid-off workers told me they struggled to find employment locally and the ones who had found new work had to settle for lower-skilled, lower-paid jobs. Following job losses, many workers could no longer afford the mortgages on their houses and simply left town, mailing their keys to the bank. The psychological pressure on laid-off workers and their communities is huge. Although it is difficult to pinpoint the exact reason, Alberta’s suicide rates were 30% higher in the early months of 2015 compared to the previous year.
In July 2016, for a book project, I visited the Alberta oil sands and interviewed several oil-sands union leaders and workers. The city of Fort McMurray had a deserted look during my visit in 2016. Several local businesses, such as restaurants, had closed – meaning induced jobs were also lost.
The fallout from the slump in the oil sands industry underlines how dependent Alberta, and by association, Canada, is on it for jobs and revenue. It also provides a glimpse of what a future contraction in oil prices could look like for an oil dependent province like Alberta.