There is a familiar and unsettling pattern developing in the discourse following last week’s Canada-Alberta Memorandum of Understanding on energy. The centrepiece of the MOU – a bitumen pipeline from the oil sands to British Columbia’s north coast – has been greeted with some doubt about whether it will ever be built.
There are many valid reasons for such skepticism, but it is concerning that most of the discussion glosses over factors like market demand, costs and the energy transition. Instead, it is too often First Nations, environmentalists and the British Columbia government who are seen as the main obstacles to a pipeline, a project that is being presented as crucial to national unity and survival.
Typical of this narrative is a column which appeared this week in PostMedia’s Halifax outlet, the Chronicle-Herald. Under the headline “Chances slim for new pipeline to Pacific,” Edmonton Sun columnist Lorne Gunter lays out what he sees as pipeline barriers – B.C.’s NDP government, West Coast First Nations, as well as the requirement for emission reductions through industrial carbon pricing and carbon capture infrastructure. And he’s especially miffed by the ban on heavy oil tankers in the treacherous Hecate Strait, a ban which he sees as the main reason no private entity has expressed interest in building a pipeline.
“Alaskan tankers plow up and down the West Coast all the time,” Gunter writes. “The West Coast ban was only ever aimed at Alberta oil. As unfair as that may be, though, Carney can say three, four, six years from now, ‘Sorry, Alberta, we’d love to lift the tanker ban, but this or that First Nation has refused to agree.’“
By citing Alaskan tankers the Sun columnist errs by omitting the fact that, as Elizabeth May has pointed out, those tankers don’t “plow up and down” through Hecate Strait, which runs between the mainland and Haida Gwaii. They sail through open seas to the west of Haida Gwaii, carrying conventional oil, not the bitumen which would cause worse damage in the event of a spill.
That isn’t his only error of omission, or the most consequential. Like most of his media colleagues Gunter avoids any mention of the possibility that the pipeline is a risky proposition economically, even if you are among those who want to minimize the impact of climate change. As discussed here there is reason to question the economics of the project. Nevertheless, the assumption seems to be that if all of the political hurdles can be overcome, there will be a ready market for bitumen, primarily in Asia. However, that premise needs to be questioned on several grounds.
Stagnant demand
First off, world demand. When I wrote about that subject six months ago there seemed to be strong evidence that after peaking in 2030 world demand for oil would drop sharply over the next 25 years. That was according to the International Energy Agency (IEA), which has since changed its tune somewhat. Based mainly on the fact that oil consumption has unexpectedly been going up in recent years, the IEA last month came out with a new scenario. It takes into account both the recent increase in consumption and current policies, including the Trump administration’s disastrous “Drill Baby Drill” initiatives, and suggests that demand will continue to grow until at least 2050, albeit at an annual average of just 0.5 percent.
The notion that oil demand may grow forever appealed greatly to Danielle Smith and other pipeline supporters, who didn’t seem deterred by the modest size of the increase, or the IEA’s estimate that the trajectory will lead to temperatures a scorching 3°C above pre-industrial levels by 2100. Pipeline boosters may also have stopped reading the IEA report before coming to the part introducing two other scenarios, the Stated Policies (STEPS) scenario and Net Zero by 2050.
The IEA’s Stated Policies (STEPS) scenario assumes that governments around the world will implement the energy policies to which they have committed. If that happens, demand will peak in 2030 and decline by three percent by 2050 – leading to a 2.5°C increase in the earth’s temperature by 2100.
The IEA has come in for criticism from the oil hardliners for being too supportive of renewable energy, but there are other sources taking the view that IEA used to hold, including bp Energy, the oil company formerly known as British Petroleum. In a September 2025 report, bp was more bearish than the IEA on demand under the current trajectory, seeing a decline in demand beginning in 2030 and reaching nearly seven percent below 2025 consumption levels by 2035.
Like the IEA, bp Energy questions the notion that Asian countries – and especially China – are thirsting for imported oil. China has been responsible for almost half the growth of global oil demand over the last decade, but that demand is set to plateau, due mainly to growth of electric cars. Japan and Korea are also expected to reduce oil consumption, meaning that growth in demand from Asia will have to come from India and Southeast Asian countries – none of which are keen to spend limited resources importing expensive oil. The bp analysis is thus a double whammy to the hopes for a pipeline – slowing global demand, especially in China, the country seen by pipeline backers as a prime customer.
Prices low?
Global demand will be closely monitored in the months ahead, as will prices. Most forecasts predict world prices will fall over the next few years into the mid US$50 range. According to the Alberta Energy Regulator (AER), prices for Alberta crude – known as Western Canada Select – are projected to be US$56 next year, rising to just US$63.50 by 2034.
Low prices are the reason oil consumption has gone up recently, and low prices in the future would continue that trend. But when it comes to the economics of a new pipeline, Andrew Leach, energy and environment economist at the University of Alberta, says increased demand resulting from lower prices is not good news for higher-cost producers like those in Alberta.
“It’s prices that matter to oilsands projects, not global consumption,” he writes in a paper published by the Institute for Research on Public Policy. “With prices projected to be weak for years to come, the case for new oilsands production – and a new oil pipeline – is harder to make.”
Oilsands producers have reduced their costs in recent years – often by replacing human beings with machines – but increasing production by 25 percent or more to fill a new pipeline would be expensive. Alberta’s energy regulator suggests the least costly expansion option would run around US$47 a barrel, the most expensive coming in at around US$80. Tolls to pay for the estimated C$30-40 billion pipeline to the B.C. coast and shipping charges from there to Asia would be on top of that.
Andrew Leach’s paper points out that the oil sands flourished in the first decade of this century because the U.S. needed our oil and was prepared to pay a premium because the product was close by. That changed with the fracking boom that began around 2010, increasing U.S. production from five million to 13 million barrels per day.
“We used to benefit from a market willing to pay a premium for oil next door. Our markets are now much further away and willing to pay no more for Alberta oil than for any other,” Leach writes. ” The commercial case for a pipeline will be challenged by forecasts of low oil prices.”
Net Zero
The IEA’s third scenario is Net Zero by 2050, which is something Canada and Alberta commit to under the MOU with these words – “Canada and Alberta remain committed to achieving net zero greenhouse gas emissions by 2050.”
According to the IEA, achieving global net zero – and a chance to get emissions back to the 1.5°C goal of the landmark Paris climate accord – means world oil consumption needs to drop by 33 percent by 2035, on the way to a 77 percent drop by 2050. What that suggests is that even if Canada is able to de-carbonize oil production through some marvellous technology, there will be many fewer buyers in 2035 and almost no buyers in a net zero world by 2050 world.
So Canada and Alberta have committed to net zero in order to promote a pipeline – usually a 50-year investment – that would be barely 20 years old when it is potentially rendered obsolete by the net zero world they helped to create. Perhaps the Memorandum of Understanding should have a sub-title – Alice in Wonderland meets Oil World.
Rachel Maddow has a line in her 2019 book Blowout that aptly describes the machinations surrounding last week’s MOU. Maddow reflects on how the oil and gas industry reorders “short-term geopolitics in a strong-but-dumb survival contest that renders everything we think of as politics as just theatre.”
Let’s hope that as the theatrical performance progresses the players will refrain from divisive scapegoating and present all of the facts. The Chronicle-Herald got the headline right – “Chances Slim for new pipeline to Pacific” – but the writer got the main causes wrong.
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