Canada’s economic recovery can be achieved by focusing on renewable energy sources instead of the natural gas and oil industry.
Some suggest a green recovery means turning away from natural gas and oil to focus exclusively on renewable energy sources. Such an approach does not take into account continuing demand for these resources to provide energy the world needs, and the fact that Canada’s natural gas and oil industry is among our country’s most vital economic engines. Without it, a strong economic recovery is extremely unlikely. The good news is we can have a recovery and while investing in lowering greenhouse gas (GHG) emissions associated with oil and natural gas production.
Canada cannot make a strong post-pandemic recovery without a thriving natural gas and oil industry. The industry has a huge impact on nation-wide employment through a multi-million dollar supply chain, government revenues through royalties and taxes, and exports that contribute to Canada’s GDP. These benefits cannot be replaced by any other industry.
Mac Van Wielingen, founder of Canada’s largest energy-focused private equity firm ARC Financial, said in a recent podcast, “Canada’s energy resources constitute a productive asset that can offset the country’s current and growing deficit.”
Industry strength in turn requires market diversity, especially serving the ever-growing demand for energy in China, India and Asia — and that means more infrastructure such as pipelines (the safest means to move petroleum products) and marine shipping facilities. These major projects are also a key component of economic prosperity and opportunity for Indigenous people across Canada. Additionally, refineries in the U.S. Gulf Coast are showing increasing demand for Canada’s heavy oil as supplies of heavy crude from Mexico and Venezuela continue to diminish.
Replacing natural gas and oil with electricity takes a narrow view of energy end use and ignores regional differences for energy production and use (i.e. electricity in Western Canada is largely generated from natural gas, not hydro).
A green recovery will include renewable energy sources from solar to hydro, but these energy sources cannot replace natural gas and oil, either within Canada or globally. Renewables produce electricity but they don’t compete with liquid fuels and heavy crude for uses such as long-distance transport (air, trucking, rail, shipping), agriculture, manufacturing and heavy industry such as steel production, petrochemicals and manufacture of consumer goods from contact lenses to running shoes.
Unfortunately, regulatory uncertainty and adverse policy have damaged private investor confidence in the Canadian natural gas an oil industry, which in turn has hurt the industry and its ability to help drive Canada’s recovery. Delays and cancellations of major projects have made investors think twice about investing in Canada despite the strong expertise we have in safe and sustainable energy production.
Investments in Canada’s natural resources and associated cleantech will be essential to driving a strong economic recovery. Natural gas and oil are productive natural resource assets, driving Canada’s export-based economy. Renewables such as solar and wind are purely domestic energy sources that don’t generate export dollars or royalty revenues.
Global energy demand should be fulfilled with responsibly produced fuels such as oil and natural gas from Canada — which can displace more emissions-intensive fuels from other sources, thereby reducing net global greenhouse gas (GHG) emissions. Canada’s oil and natural gas industry is already technologically advanced, driving emissions reduction and improving environmental performance in other areas such as fresh water use. As such, the overall environment, social and governance (ESG) performance of Canada’s energy industry is world-class. As Mac Van Wielingen notes, “Resources will be produced in other jurisdictions that do not have the same quality of governance oversight and ESG standards that Canada has. Canada really can define responsible resource development. That’s our opportunity on a global basis.”
The bottom line:
With the federal debt at an all-time high and continuing to grow, it is more important than ever for Canada to have a strong recovery strategy, which includes leveraging the potential of the natural gas and oil industry to generate jobs and revenues. Additionally, there are many opportunities for the industry to contribute to low-carbon strategies, further advancing innovation and new technology, given the industry’s expertise and experience in this area.
The International Energy Agency’s World Energy Outlook 2020 shows the globe reaching record levels of demand for natural gas and oil, and needing these sources of energy for decades to come. With responsibly produced resources and world-leading ESG performance, Canada should be developing natural gas and oil to meet this growing global demand – while addressing greenhouse gas (GHG) emissions. And, developing our tremendous natural resources will put Canadians across the country back to work, stimulating a strong recovery and resilient economy.