The Pipe Dream: Why Canada’s New Pipeline Deal May Be a Costly Misstep

The recent agreement between Alberta and the federal government to build a new oil pipeline to the West Coast has raised more than a few eyebrows. On its surface, it seems like a straightforward attempt to increase Canadian oil exports to new markets in Asia. However, scratch beneath the surface, and a very different story emerges – one of desperation, outdated thinking, and a growing mismatch between Canada’s energy policies and global market realities.

Alberta Premier Danielle Smith has made no secret of her desire to see Canada’s oil exports increase. Her province’s economy is heavily reliant on the oil industry, and any move that threatens to reduce its dominance could have serious consequences for local jobs and GDP growth. However, in pushing for this pipeline deal, Smith and her counterparts in Ottawa seem to be ignoring a crucial trend – one driven by changing consumer preferences, technological advancements, and international pressure to tackle climate change.

Energy transition is happening rapidly, particularly in Asia. China is rapidly adopting electric vehicles at an unprecedented rate: exports of Chinese EVs reached an all-time high this May, with sales up 49% from just one year ago. Southeast Asian countries are also importing these vehicles in record numbers as the region turns towards electrified transport. In China itself, more than half of new cars sold now are electric, and most EVs are cheaper than their gasoline equivalent.

Some regions, like India and Africa, will continue to see oil demand rise. However, globally, oil demand is set to peak around 2030 before gradually declining as the world shifts towards cleaner energy sources and more efficient transportation systems. In China, the International Energy Agency says that demand for oil as a fuel has already hit a plateau due to the ongoing EV and clean energy boom.

The implications of this trend are clear: the pipeline may be built at exactly the wrong time. With global oil demand poised to decline in just a few years’ time, investors may start questioning whether the project is worth their while – particularly if they’re not guaranteed a long-term return on investment.

Moreover, the deal will have significant consequences for local taxpayers and the environment. Any new pipeline would require new oilsands mines to be built in previously undeveloped areas – known as greenfield development. However, given the industry’s track record on efficiency measures, it’s unclear whether companies would break ground on new projects anytime soon.

In fact, one has to wonder how Alberta and Canada will convince them to take on this level of risk when the world is moving away from using oil for transportation. One possible solution – and a costly one at that – is subsidies. As Chris Severson-Baker of the Pembina Institute notes, “One way or another it costs Alberta taxpayers and Canadian taxpayers’ money in order to get oilsands operations to do something that is simply not part of their corporate strategy right now.”

In short, Canada’s new pipeline deal may be a costly misstep – one that fails to take into account the rapidly changing global energy landscape. As policymakers move forward with this project, it’s essential they remember that the world is moving away from oil, and that we must adapt accordingly. Anything less would be nothing short of reckless.

The question now is: what happens next? Will Alberta and Ottawa continue to push ahead with this pipeline deal despite the risks, or will they take a step back to reassess their priorities? The world is watching, and the stakes have never been higher.