WHAT WILL HAPPEN TO CANADA?
Oil remains a vital resource for Canada’s economy and daily life. We are both the fourth largest producer and exporter of oil globally,
according to Natural Resources Canada. Oil is used not just for jet fuel, but also as an energy source, to heat our homes, and make a
wide variety of products in cosmetics, sporting goods, electronics, plastics, textiles, asohalt—and even solar panels! According to the
Canadian Association of Petroleum Producers (CAPP), Canada uses about 1.5 million barrels or oil a day—in other words, 2.5 percent
of global consumption. With prices going into the negatives with no clear answer if it will improve, some hope that this will be the time
Canada and many other countries opt for more renewable and cleaner energy sources.

One good thing has come from this historic price drop. Cheap gas! On April 27, CBC reports that gas prices in Metro Vancouver
hit less than $0.80 per litre for regular gas. Analysts say this price will stay low as oil industries struggle and some speculate that oil
prices may never come back from this. Spending less on gasoline may sound great to some people, but it's not without consequences.
Canadian provinces that rely on revenue from oil such as Alberta, Newfoundland, Saskatchewan, and Labrador will take a huge blow
from this, and so in turn will the Canadian economy. For now, the price of Canadian oil from Western Canadian Select (WCS) sits at
$1.54 as of last Friday, much better than it was on April 21 at -$3.83, and the -$40 of WTI, but that does not mean we won't be strongly
impacted by this historic event.

Some experts, according to CBC, say Canada’s oil production could fall by one million barrels a day. According to Huffington Post,
TD Bank has said that Alberta will see the biggest hit of unemployment of any province, averaging about 12 percent—double what it
was last year—as most of their jobs revolve around the oil industry. The Royal Bank of Canada (RBC) also predicts a major economic
recession for every province in Canada as a result of the oil price drop.

 

WHAT IS THE FUTURE OF CANADA'S OIL
INDUSTRY?

The consensus on whether this will negatively impact the future of
the oil industry is so far undetermined. Some say this spells disaster
for oil energy companies while the negative cost will make people
go for more greener and environmentally friendly sources. Currently,
Canada’s oil sands industry could face being sidelined as lower

cost oil production may take the economic edge and supply oil for
cheaper. Environmentalists are saying “no more” to bail outs for
Canada’s oil and gas industries. Others say that the demand for oil
will still go up despite this hiccup. A CNBC article from February
says that oil demand will peak by 2040 or sooner, and indeed many
leading oil companies expect oil demand to peak in the next decade.
Some are less hopeful.

According to CBC, Massachusetts economist Philip Verleger
has studied the oil industry since the ‘70s and calls for Canada to
transition away from oil, citing the changes COVID-19 has made to
transportation. He also says Canada faces big competition in this
industry as their oil reserves are hard to sell since they are more
expensive to move and process compared to other's reserves of oil.
“The Stone Age didn’t end because of a lack of stones,” he said.
“The oil age is not going to end because of a lack of oil. We are
going to leave a lot of oil in the ground.”

The need for transportation and petrochemicals such as natural
gas makes up more than half of total oil consumption, and since all
those things currently are in low demand, things aren't looking good
for our old friend big oil. As it stands, the future of the oil industry is
dependent on the response to this historic price drop.

 

Illustration bv Athena Little