Why is Canadian Oil Production Making a Comeback?

With an estimated 172 billion barrels of reserves, oil is one of Canada’s biggest assets. The North American nation was hit hard by the global slump in oil prices, but now analysts are predicting that Canada could be about to enjoy an oil production resurgence.

Last month, a pair of right-wing parties in Canada’s oil-rich Alberta province moved forward with an agreement that could see them merge. Together, the Progressive Conservative (PC) and Wildrose parties will form a unified front to counter the ruling New Democratic Party (NDP), and challenge its reign in the upcoming 2019 provincial election. Oil will be front of mind, with the political merger promising to help the nation recover from the huge US$7.57 billion deficit triggered by the oil price crisis.

Bolstering Alberta’s oil industry

If the merger goes ahead, it will almost certainly push policies aimed at slashing costs for the oil and gas industry. Jason Kenney and Brian Jean are the respective leaders of the PC and Wildrose parties, and have previously pledged to veto local environmental regulations that create barriers for the energy sector. This includes reversing initiatives like carbon tax laws, as well as reopening coal-fired plants.

While environmental activists have slammed the agreement, a fuel-friendly administration would be welcomed by many Albertans. Home to Canada’s lucrative oil sands crude reserve, Alberta is the biggest exporter of crude oil to the United States. The region’s economy was once powered by crude, and has been hit hard by both flailing oil prices, and a crude production boom in Texas and New Mexico. US shale has also been a big influencer, with giants like Royal Dutch Shell and ConocoPhillips transitioning away from the high production costs and low resale value of Alberta oil, and towards US shale.

Eco concerns on the table

Under joint rule by the PC and Wildrose parties, reviving Canada’s oil industry would be a top priority. The Canadian Energy Research Institute is predicting that even under current NDP leadership, production will rise by 595,000 barrels per day this year, and a further 203,000 per day in 2018. 

Of course, sustainability issues are already a major concern. While certain moves could bolster Canada’s oil industry, they could also backpedal the nation’s environmental progress. So, can the Great White North make a crude comeback without jeopardising its environmental responsibilities? Ultimately, it all comes down to politics which means that in the 2019 provincial election, Alberta itself will make the call.

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