Course:EOSC311/2022/The Importance and Impact of the Oil Industry in Canada

The oil industry although controversial plays a large and necessary role in Canada’s economy. On this UBC Wiki page I will outline why the oil industry is so important to Canada, why it is considered controversial, how it is preventing Canada from hitting climate targets/goals, some of the things that are preventing the stoppage of oil usage, and some of the effects an abrupt stop to oil usage would have on the Canadian economy as well as Canada as a whole.

Statement of Connection

I chose to focus on the importance and impact of the Canadian Oil Industry for my term project as I feel it is very relevant to issues in today's society. The topic of the geology and oil caught my attention the very first week of class and it was something I found very interesting to continue to research. I also chose this topic as I felt that I could well relate it to my studies. I am currently enrolled in the dual degree Masters of Management program and I think the oil industry and its impacts are very relevant in terms of the economy and business. Especially now with climate change, the recovering economy, and the other issues surrounding the industry many sectors of government and businesses are feeling pressure. All the choices regarding change in this industry will have an outcome on many other sectors, greenhouse gas emissions, and of course the economy. In regards to the oil industry, it seems that there are mainly 2 different opinions with not much overlap between them. My main goal when working through this project was to take into consideration and understand both views while relating the material to my studies as well as EOSC 311 course content.

Where is Oil Found in Canada?

In 1857, oil was first discovered in Canada. The discovery took place in Southwestern Ontario. Since then, the oil industry has grown vastly. Canada currently ranks third in the world’s largest proven oil reserves as well as fifth in largest oil producing country.  There are a large number of proven oil reserves in Canada. This means that there is great confidence in the fact that the petroleum in those reserves can be recovered successfully. There are 168 billion barrels worth of proven oil reserves in Canada and 164 billion of those barrels are in the form of oil sands. Oil sands are seen as a more unconventional petroleum deposit as this portion of the industry more high-tech and knowledge based.  Hydrocarbons are a crucial part of oil formation and Canada has around 40 basins that are capable of containing hydrocarbons. Venezuela and Saudi Arabia are the only other countries to surpass Canada in proven oil reserves. In 2018, Canada produced and supplied approximately 4.6 billion barrels of crude oil daily to international markets. Some of the major basin producing areas in Canada include the Western Canada Sedimentary Basin in Alberta, Southern Saskatchewan, Northeastern British Columbia, Southwestern Manitoba, and the Western North West Territories.

This map outlines the major sedimentary oil basins, the major oil producing fields, and the major gas producing fields across Canada

Why is the Oil Industry Important in Canada?

Canada is the world’s 4^th largest exporter of oil and oil contributes significantly to the Canadian economy yearly. A few of the main places Canada exports its oil to are The Unites States of America, Europe, Asia, and the Caribbean. The majority of Canada’s exports end up going to the U.S. The oil industry also has a substantial impact on the GDP and creates many jobs for across Canada. In 2020, the oil industry provided $105 billion to Canada’s GDP and created nearly 400,000 jobs across the country. Aside from the contribution oil makes to the GDP, it also provides an annual revenue to the government which in turn helps pay for things such as hospitals, schools, and new roads/road improvements. The Canadian Energy Centre predicts that in 2022, for each $100 million increase in Canadian oil exports there will be approximately $86 million added to the Canada’s nominal GDP. The increase in GDP would also be accompanied by an increase in jobs available. The Canadian Energy Centre also predicts that for each $100 million increase in Canadian oil exports, approximately 298 jobs would be created.

Although controversial, oil does have a positive impact in Canada when considering the jobs it creates, the revenues it creates, and how it effects the overall GDP. The oil industry also allows Canada to build business relationships with other countries including those in Europe, Asia, the Caribbean, and the U.S.

How is the Oil Industry Controversial in Canada?

The oil industry can be controversial in the eyes of many Canadians. Mainly in regards to climate change initiatives, environmental issues, issues regarding the land the oil reserves sit on, world issues, and unfortunate incidents such as oil spills and gas leaks.

Climate Change Initiatives and Funding From Financial Institutions

Over the past few years, many large companies have rolled out climate change initiatives that they plan to follow to do their part to help stop climate change. It is not the initiatives themselves that individuals find controversial, but the actions companies partake in after publishing these initiatives. For example, there are many large companies that claim to be green and implement climate initiatives all while still investing in oil mining companies. Many of Canada’s large banks such as RBC, TD, Scotiabank, and BMO have all been found to finance fossil fuels. Together they all provide an approximate. $165 billion to fossil fuel clients.

This image showcases the top 20 global funders of fossil fuels. All of Canada's big 5 banks are among the top 20 (RBC, TD, BMO, CIBC, and Scotiabank).

Environmental Impacts

Aside from large companies publishing climate change initiatives while financing an industry that is seen to negatively impact climate, there are more fundamental issues in the industry that cause controversy in regards to climate. As mentioned in “Where is Oil Found in Canada”, the majority of Canada’s proven oil reserves are found in the form of oil sands. The sector dedicated to developing oil sands is constantly seeking innovation. Approximately 20% of Canada’s oil sand deposits are within 70 metres of the surface. This means that they can be developed using surface mining. The remaining 80% are not as easy to access, meaning that they require drilling methods and “In situ” methods of development. The current process in which the oil sands are developed is controversial as there are massive amounts of water and energy used. In turn there are large amounts of air and water pollution. Bitumen, which is extracted from the oil sands is heavy and quite difficult to extract. Energy amounts rivalling what a small city may use daily are generally used to push it up to the surface. Once at the surface, even more water and energy are used to refine it closer to the final product. The amount of greenhouse gases emitted per barrel of oil sands developed can be approximately 30% higher than conventional oil.

This image shows and overhead view of the tar sands near Fort McMurray, Alberta

Indigenous Land and Rights

There are more controversial impacts of the oil sands that extend past the climate impacts. Industrial development and wildfires in oil sands regions have displaced or cleared nearly 2 million acres of boreal forests. This has caused the habitats for caribou, birds, and other animals at great risk. The oil sands have also been controversial in regards to Indigenous peoples rights. The oil sands have intruded on traditional Indigenous land ultimately contaminating and damaging the environment, wildlife, and culture that the communities depend on. The Government of Canada estimates that approximately 23,000 Indigenous peoples from 18 First Nations and 6 Métis settlements live on oil sands regions in Alberta. That statistic outlines just one province in Canada. Many Indigenous communities have expressed concern over the consequences of developing the oil sands they live on.

World Issues

World issues can also be a source of controversy in regards to the oil industry. Past events and ongoing events, such as the current war between Russia and Ukraine have sparked opinion on both sides of the oil industry arguments. For some, the war can is seen as a call for Canada to step up its fossil fuel sector production. This would include growing the Canadian oil developments and exports. The Canadian Association of Petroleum Producers has recently called for the federal government to make a commitment to growing and developing Canada’s oil production and exports. The predicted outcome of the growth and development this side of the argument believes in would result in a projected way to ensure energy security and country of supply. Both of these have been seen as a low priority issues the past decade. The other side of the argument includes Canadian environmentalists which claim that the war could potentially accelerate the end of oil usage. Greenpeace’s Keith Stewart, believes that the European Union may increase the priority towards renewables and electric vehicles to stop the usage of Russian oil. Stewart believes that a faster end to oil usage will result in positive impacts not just towards climate, but for global security as well.

Both of these takes contribute to controversy in the Canadian oil industry as well as the oil industry globally. There are pros and cons to each side and one may argue for either side that it is not reasonable or possible to take part in the actions associated. Canadians are feeling the effects of the war between Russian invasion in Ukraine. Energy prices have increased vastly and rapidly causing much stress for Canadians that are already coming out of 3 tough years financially as a result of the COVID-19 pandemic.

The immensely increased gas prices can’t be entirely blamed on the Russia invasion into Ukraine, but can also be partially explained by an increase demand of more Canadians returning to their schedules pre-COVID-19. With more Canadians heading back to the office, commuting to and from work or school, and with many restrictions lifted there is simply more demand. During the pandemic, the demand significantly decreased, causing production capacities to also decrease. These increases cause stress and contribute to controversy as Canadians are forced to spend more on fuel and other products that have been affected by inflation and/or outcomes of world events. These increases unfortunately are not accompanied by an increase in wage or salary meaning there will be more of it spent than saved, invested, or for other use. In a way, this can be seen as a decrease in quality of life which can lessen the strength of Canada’s economic activity.

Oil Spills and Gas Leaks

Oil spills and gas leaks are another source that sparks controversy within the oil industry. Oil spills and gas leaks have an immensely negative impact on the environment and in most cases, they are extremely difficult to clean up. Oil spills greatly pollute the environment and water sources surrounding the spill. Animal habitats as well as nearby communities can be negatively impacted by oil spills and gas leaks. The difficult clean up can also cause further air pollution.

This photo is from 2010 when the TransMountain Pipeline spilt nearly 50,000 gallons of oil on Indigenous land.

Overall

Overall, there are many different reasons the oil industry can be seen as controversial in Canada. As always there are two sides to every argument and that can be seen in many of details or events that bring oil industry controversy to surface in Canada. The oil industry is seen as controversial in many other countries globally, for similar reasons as well as reasons unique to the region.

Combatting Challenges and Controversy in the Industry

Most of the issues listed above that source the controversy in the Canadian oil industry have offsetting solutions. Many of the challenges Canada faces are repetitive of those events and occurrences that cause controversy within the industry. There is published information from the Government of Canada and the Canadian Association of Petroleum Producers stating the ways in which these challenges and issues of controversy are trying to be solved. Much of the information is in regards to environmental impact, climate change, Indigenous peoples land and rights, world issues, and oil spill technology.

As written in the innovation section of the Canadian Association of Petroleum Producers website, the oil industry is actively seeking ways to reduce environmental impact through project design, operational excellence, and new advances in technology. These three things combined will help Canada meet climate change commitments without entirely wiping out oil usage.

Understanding and minimizing these undesirable outcomes is crucial for overall environmental management and stewardship of Canada’s resources. Recently it has been becoming more of a priority to include the communities in the development and implementation of strategies when developing the oil sands. This allows informed decisions to be made that take in to consideration the needs of today’s generation as well as future generations of the community. In the Fort Nelson First Nation in British Columbia, Chief Sharlene Gale has taken steps to ensure the needs, values, and goals of her community are take into consideration and met when projects involve the Nation’s land. Chief Sharlene Gale is the chair of the First Nations Major Projects Coalition and strongly believes “that First Nations need to have the opportunity to have equity in major project infrastructure and access to meaningful financing for these projects happening in their territories”. Chief Sharlene Gale wants to ensure all projects and development of resources in their territory are of benefit to the community members. Working closely with Indigenous community leaders is crucial to respect the land, communities, and future generations of those communities. Having these conversations with the community the land belongs to is a relatively simple step prior to beginning projects on their land. These conversations can provide an opportunity for the community to share knowledge, environmental practices, as well as other steps that can be taken to ensure the needs of the community will be met and that the project will provide benefit to current and future generations.

In regards to world issues, such as the Russia invasion in Ukraine, Canada’s natural resource minister, Johnathan Wilkinson, has stated that many countries are committed to helping displace Russian oil. Canada itself has committed to exporting an approximate 200,000 extra barrels of oil and 100,000 extra barrels of gas. This is the maximum that Canada can promise as many of the existing pipelines are already running near capacity. Canada has also joined many countries in banning Russian oil. Wilkinson also recognizes that energy security and fighting climate are linked. These steps may not seem impactful or moving in the right direction to some, but as mentioned in the “How is the oil industry controversial in Canada?” there are two powerful sides to the argument surrounding Canada growing and developing its oil exports.

In March 2022, The Government of Canada announced it was launching the Impact Canada Oil Spill Response Challenge. The Impact Canada Oil Spill Response Challenge encourages and provides opportunity for innovators to create quickly deployable solutions that will be able to detect oil spills and will increase the oil spill recovery rates in Canadian context. This Impact Response Challenge encourages change and development that will likely have a positive impact on the oil industry in Canada by avoiding future oil spills and gas leaks.

How the Oil Industry is Preventing Canada from Hitting Climate Targets

Greenhouse Gas Emissions

There are multiple issues linked to the Canadian oil industry that have prevented and are currently preventing Canada from reaching climate targets. Canada’s greenhouse gas emissions have nearly doubled since 1990. Currently, the oil and gas industry is responsible for approximately 27% of Canada’s greenhouse gas emissions. That would ultimately mean that the oil and gas sector represents approximately 80% of the increase in emissions since 1990. Emissions are predicted to grow with predictions of 116 million tonnes per year by 2030. The plans in place to increase production are predicted to also increase revenue and create more jobs, but a main concern is still the increase in emissions.  

Denial and Misinformation

Denial is also preventing Canada from reaching its climate targets. The province with the highest skepticism surrounding climate change is Alberta, which is also the home to the oil sands. It is harder to begin change in fossil fuel reliant communities, as many feel threatened and regarding job security and income. There was a study conducted to measure the distrust in science in communities in Alberta, the findings were that many admitted they lacked knowledge on the topic of climate change but many others still stated that “the science was unsettled and felt that scientists were working on the issue”. Even the slightest amount of distrust can spread, and over the past few years misinformation has been spreading more than ever. Misinformation is a root cause of denial and conspiracy and can cause many setbacks in making forward progress. Overall, increasing the production of oil without upgrading technology or significantly changing the ways in which oil is produced along with denial create a barrier between Canada and its climate targets.

What is Preventing Canada from Stopping Oil Usage?

One of the main causes that is preventing Canada from stopping oil usage is the economic benefits including GDP, government revenue, and the creation of jobs. Oil companies are taking steps and investing in creating new methods and technology that aim to help reduce greenhouse gas emissions and negative environmental impacts. In terms of economic benefit, it is predicted that over the next 10 years the industry will provide an approximate $250 billion in economic impact. With this it is also estimated that the taxes paid to the federal and provincial governments will total near $11 billion. Though employment has dropped from the industry peak in 2012, there are still increases seen on a month-to-month basis. From April 2022 to May 2022, there has been an increase of 0.11% or 204 jobs in the oil and gas industry. Although increases like these may seem small and not worth it, the oil and gas industry has consistently provided valuable job opportunities for immigrants, visible minorities, Indigenous peoples, and women. In 2019, 41% of workers in the oil and gas industry were immigrants, 26% belonged to a visible minority, 6% identified as Indigenous, and 36% were female. The oil and gas industry employs a wide variety of people in terms of background, education, and departments. Jobs in the industry can vary from investment specialists, accountants, office staff, and process operators just to name a few. Stopping or slowing the use of oil would eliminate and place many people out of work and take a large cut out of Canada’s GDP. It would also likely cause some tension between countries Canada has built relationships with through the industry.

What Impacts Would an Abrupt End to Oil Usage Cause?

As emphasized throughout this Wiki page, Canada’s oil industry provides a large amount towards annual revenues, jobs and the GDP. Abruptly ending oil usage in Canada would have many positive and negative effects. For positives, there would likely be relatively fast and noticeable changes to the environment. As seen in the beginning of the COVID-19 pandemic, when emissions were much lower the smog began to lift and many rivers, canals, etc. ran clearer around the globe. The more difficult to adapt to changes would include those related to monetary loss, job displacement, and quickly having to adapt without certain products.

First, if Canada abruptly stopped producing and exporting oil and natural gas products, they would likely fall into a trade deficit. Exports provide income to an economy and assist in economic growth all while contributing to standard of living. Essentially, exporting is a cycle. Exporting oil and gas causes a flow of money into Canada, which in turn creates jobs, government revenues, and enables industries associated with the energy sector to grow, which ultimately creates more jobs and government revenues. Abruptly stopping one of Canadas main exports would essentially stop a flow of money into Canada and redirect it to other countries. The oil industry is essential, especially in not just in post-pandemic recovery but also in terms of quality of life in Canada and around the globe. Abruptly ending the development of these resources would disrupt Canada’s ability to finance healthcare services, education, infrastructure, and social programs all while also hindering economic recovery.

Canadians would need to adapt very quickly and to very different lifestyles. Petroleum is used in so many products including many household items. Some include; plastics, chemical products, clothing, ink, cameras, turf fields, roofing, glue, telephones, and many more. Without the production of oil these products would need to adapt as well or Canadians would need to adapt to live without them. Many of these are used quite often on a daily basis and would likely cause significant disruption in one’s daily life if not around ready to use or within easy access. Canadians would also need to learn to live entirely off of renewable energy sources which may be difficult for many people that have grown up relying on many fossil fuel sources.

Overall, an abrupt end to oil usage would cause much turmoil in the lives of Canadians and among the Canadian economy. From undesirable economic impacts, loss of jobs, loss of everyday products, and sudden adaptation to new energy sources it would likely cause much stress and chaos. Although, there would be some positive aspects, these would also likely be realistic to achieve by taking a slower approach and not entirely eliminating the oil industry. Sustainably produced and exported oil would be able to meet energy demands, serve international markets, provide income, and provide jobs, all while having very similar if not the same positive environmental impacts.

This image outlines some of the common uses for oil and gas in everyday life.

Conclusion

Oil is used in many more things than many believe. Oil is used in everyday life, not just as an energy source or fuel, but in things we don't even realize. There are many positives and negatives to the oil industry in Canada. There are also many controversial issues that are currently challenging the industry and forcing change. Climate change is a real issue and there are steps that can be taken in the oil industry to lessen the industry's contribution. It may be unreasonable to completely cut off oil usage as there are still quite a few positive benefits it brings to the economy, the job industry, and Canada's relationships with other countries. Overall, the industry is valuable to Canada and its economy but it also needs new innovative ways to produce and export Canadian oil that lessen the negative environmental and climate effects.

References

This Earth Science resource was created by Course:EOSC311.