What does Alberta Future Look like?

In 2018, an Alberta Government Department – called Alberta Economic and Development and Trade developed a pamphlet. Entitled the “2017 Highlights of the Alberta Economy”, it noted that Alberta had “one of the world’s most productive agricultural economies, with a total farm area of 50.3 million acres or 20.3 million hectares”.

 

But it doesn’t stop there. The document goes on to talk about the components of Alberta’s economy. It notes that while, “the oil and gas sector remains Alberta’s largest industry, accounting for 17 per cent of its GDP, the province’s GDP shares of other sectors, such as construction, real estate, finance and insurance, and business and commercial services grew significantly between 1986 and 2016”.

 

With that all being said, Alberta’s five top exports are pretty predictable: Crude Petroleum ($43.3 billion), Petrochemicals ($7.9 billion), Gas and gas liquids ($7.4 billion), Crops & Livestock ($5.1 billion) and Processed Food & Beverages ($4.7 billion). Or put differently, more than three quarters of our exports are still Oil, Gas and Beef exports. Given that exports drive our economy, it makes sense to keep track of any important changes within those industries or changes that affect those industries. The reason for this is simple: we want each of the dollars – $78.9 Billion Dollars in 2016 – that exports bring us, so that we can continue to have a strong economy: an economy that has a direct impact on all Albertans.

 

For example, imagine if one of those two industries were to shrink, on a net basis in the next 20 years? It might seem like an unimaginable prospect. The Oil Industry has been a part of the modern economy for over 100 years and beef even longer. Consequently, how would it be possible to see decreases in the desire to buy Alberta Energy and/or Beef products when India and China are modernizing their economies and demanding more energy and agricultural products? Where would the threat be?

 

Even asking the question might seem to be a dumb idea or a crazy juxtaposition. However, the case for such an idea is being made by corporate forces. So before I am called anything from idiotic or stupid to incompetent or insane; please let me explain. In February 2018, the BBC.co.uk reported on a statement from BP (British Petroleum). It indicated that BP felt that the “world’s oil consumption will peak in late 2030s”. However, they are not alone.

 

While many industry players or consultants say that there will be a need for more energy over the next 40 years; all of them are also looking at reductions in the need for Oil. A Bloomberg New Energy Finance analysis has recently argued that electric cars “may be cheaper than their petroleum counterparts by 2025 if the cost of lithium-ion batteries continues to fall”. (Electric Cars May Be Cheaper Than Gas Guzzlers in Seven Years, by Jeremy Hodges, March 22, 2018, 2:01 AM MDT, Bloomberg.com). Consequently, it is easy to understand why Bloomberg New Energy Finance argues that “2.23 million barrels per day will be displaced from the market by electric vehicles by the end of the next decade”. While, the International Energy Agency estimates that about 2.57 million barrels of oil per day won’t be needed by 2030. (Electric Vehicles on the Road Are Set to Triple in Two Years by Anna Hirtenstein, May 30, 2018, 1:00 AM MDT Updated on May 30, 2018, 5:59 AM MDT, Bloomberg.com)

 

Then there is McKinsey. They are a large and respected corporate consultancy; and, their Global Energy Insights team has already noted that by 2035, “it will take almost 40 percent less fuel to propel a fossil-fueled car a mile than it does now”. Given that there is no new demand for fossil fuels in sight, one can do the math: based on McKinsey’s insights, in the near future, there will be less demand or need for oil.

 

So let’s just review. One accepted corporate resource says that by 2035, cars will use 40% less fuel than they do today; while another corporate resource says that e-cars will be cheaper. An economist will tell you that this means market change. Coupled with government action in many countries, it is safe to say that people will switch to e-cars and away from cars which are driven by oil and an internal combustion engine. Accordingly, it is not surprising, in light of this information, that StatOil – the Norwegian State Owned Oil Company – has been switching their focus from drilling for off-shore oil to developing off-shore, green-energy wind farms. One would think that such a crisis would be enough to get the Alberta “Leg” (i.e. Alberta Legislature) off of its collective duff. Yet, one would be very wrong.

 

However, this is not the only crisis that is coming to Alberta. Alberta has its history in farming and ranching. We all know that. However, what many of us don’t realize is that while the Alberta Economy grew from $59.6 billion to $314.9 billion (in 2016 dollars), from 1986 to 2016; the Agriculture and Farming component has moved from being 4.6% of Alberta’s economy to 1.6% of it. This is not to say that Agriculture has been shrinking. As an example, exports of crops and livestock rose 64 per cent between 2006 and 2016, while processed food exports increased by 80 per cent. What has happened though is that the rest of Alberta’s economy has grown at a much faster clip. With all that being said, today, meat and agricultural products are still Alberta’s second largest export.

 

But what if that too were to change? Enter Clean Meat. Now, it has been called cultured meat, lab-grown meat, synthetic meat or in vitro meat. However, for the purposes of this discussion, I will call it Clean Meat. Clean Meat is a pretty cool idea. It takes the stem cells of an animal – without genetic manipulation – and “coaxes” them to grow and divide outside of animal. Now, what is extremely interesting is that those stems cells can be “coaxed” into becoming muscle or organ meat.

 

Over time, scientists have figured out ways to allow the cells to continue to divide and grow and become sufficient to make a meatball or a small hamburger. In 2013, it cost about $325,000 to make this stuff in a lab. However, today, price parity with farmed meat is around the corner and there are a few start-ups that are talking about having a synthetic or “clean meat” product in grocery stores by 2020.

 

So let me just reset for a second time. Electric Cars are going to shrink demand for Oil, while Clean Meat has the same potential in our agricultural sector. In 20 years, we would begin to see newer, cheaper alternatives to Oil, Natural Gas and Beef which could permanently shrink demand for our five largest export sectors. So why aren’t politicians in Edmonton more concerned? I cannot fathom why they are not.

 

Some might argue that I am alarmist but I would disagree; because, I remember Alberta’s History. We often forget that the Oil Sands Industry did not evolve overnight. We often overlook the amount of Government Assistance that was poured into our Fossil Fuel Industry. Syncrude, as an example, was founded in December 1964; however, by early 1970s, it found itself to be in a lot of trouble: so much trouble that many of its private sector players were going to withdraw. To stabilize the project, the Government of Alberta bought up 10% of the project, while the Trudeau Government bought up 15% and the Ontario’s Bill Davis Government bought up an additional 5%. That is right; two provincial Progressive Conservative Governments and a Federal Liberal Government had to invest in Syncrude to allow it to become profitable. History calls this deal the Winnipeg Agreement. However, it is as important to Alberta’s History as was Prime Minister Harper’s investment into two bankrupt, Ontario-based automobile companies: General Motors Canada and Chrysler Canada.

 

In many ways, the Winnipeg Agreement could have been more important because the Syncrude Projects was only the second Oil Sands Project of its kind. Today we bask in the glory of that Government Investment, but let’s not forget that it took over 30 years to see the benefit of that investment. If we know that by 2030, 2040 or 2050, we will be seeing irrevocable changes in Alberta’s economy, it is up to the “Leg” to act today so that we can maintain the strong trajectory that Alberta is on. Sadly, action has not come yet. However, let’s hope that some action comes before it is too late.

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