Canada oil boom shifts on sands of time
Canada's five-year-long energy boom has ended, but how deep and how painful the resulting bust will be remains to be seen.
By The Economist
January 22, 2009
Look west from the office towers of the energy companies that dominate Calgary, and the view is spectacular: Rolling prairies rise to tree-clad foothills, with the jagged, snow-capped peaks of the Rockies on the horizon.
Looking down, however, is more unsettling. The city is dotted with motionless construction cranes poised over the pits of abandoned projects. A five-year energy boom here in the administrative heart of Canada's oil patch and in the tar sands far to the north has ended.
The only debate is how painful and persistent the bust will be -- not just for the biggest city in Canada's richest province, Alberta, but for the whole country.
Alberta, which produces two-thirds of Canada's oil and gas, has been here before. The wrenching oil slump of the 1980s still looms large in the public consciousness. Companies fled the province and thousands abandoned homes that they could no longer afford.
"The situation is much different this time," insists the energy minister, Mel Knight, whose Progressive Conservative Party has ruled the province since 1971. But not all of the differences are positive ones.
Knight believes that continuing demand from places such as China and India will mean that oil, and thus his province's economy, will recover faster this time. However, two decades ago there was nothing like the current global credit crunch.
Also, Alberta extracts 60 percent of its crude oil from its tar sands (those in the business think "oil sands" sounds nicer), a much bigger proportion than in the 1980s, and concern about the environment and carbon-based fuels is far stronger now.
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