The perils of Canada’s ‘bitumen cliff’ – by Shawn McCarthy (Globe and Mail – February 21, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

OTTAWA — While Alberta Premier Alison Redford frets about the “bitumen bubble” that is robbing her province of badly needed revenue, economists on the left have another concern: the “bitumen cliff” which, they insist, the Canadian economy is headed toward.

The economists are treading on politically fraught ground. Former Ontario premier Dalton McGuinty beat a hasty retreat last year after questioning the national benefits of oil sands expansion, while New Democratic Party Leader Tom Mulcair has been sounding oil-sands-friendlier, albeit with caveats, after warning about the dangers of oil-fuelled “Dutch disease” when he took the helm of the opposition party.

In a report to be released Thursday by the Canadian Centre for Policy Alternatives and the Polaris Institute, the four economists, including Canadian Auto Workers stalwart Jim Stanford, echo one of the country’s great economic historians, Harold Innis, to warn against Canada becoming overly dependent on the extraction and export of raw resources – in this case, oil sands bitumen.

“As staples are exported in raw form to more industrialized trading partners, Canada is left to buy back processed, value-added products and services at a much higher cost,” the economists write. “The combined outcome is a self-reinforcing staples trap [a phrase borrowed from Prof. Innis], whereby the faster Canada exports its latest staple, the less diversified and capable the economy becomes and hence all the more dependent on finding more staples to export.”

On top of that, the current staple, bitumen, causes environmental problems because it is among the most carbon-intensive sources of energy and thus contributes to climate change, the report argues. As a result, Canada is becoming increasingly dependent on an unsustainable source of wealth, with the potential for consumer backlash readily apparent in the protests against the proposed Keystone XL pipeline that would carry oil sands crude to the U.S. Gulf Coast.

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