Demand for crude oil will peak by 2036. How will a govt led by Jason Kenney prepare Alberta energy to compete in a rapidly changing market?

“Make no mistake – I will go to the wall for Alberta and the [energy] industry that has fueled our economic prosperity for generations,” Jason Kenney tweeted a few months ago, summing up his party’s energy policy in one sentence. It’s not enough. Peak oil demand is less than 20 years away, according to a new study from international consultancy Wood MacKenzie, and voters need to know how the UCP intends to reposition Alberta to prosper in that brave new future.

“The market used to worry about peak oil supply,” says the study, entitled The rise and fall of black gold. “Now the focus has shifted to peak oil demand as the industry witnesses a structural decline in demand for the developed world, and questions the appetite of the emerging world to grow at the insatiable rates experienced over the past fifteen years.”

Ed Rawle, Wood MacKenzie.

I interviewed the study’s lead author, Ed Rawle, who is a graduate of the London School of Economics and Wood MacKenzie’s chief economist of global research, responsible for the global team of economists that prepares the macroeconomic outlook to 2035. That interview will be part of a long-form investigation into peak oil demand forecasts form leading sources like BP and the International Energy Agency.

The important point for Alberta – and Canadian readers generally – is that the technology to displace oil has appeared on the horizon and the smart money is already thinking about how to prosper in a future that continues to use some oil, but not nearly the 100 million b/d of today.

That smart money includes the Alberta oil sands companies.

The reason five oil sands CEOs began meeting with the executive directors of five top environmental non-government agencies in early 2015 to hammer out an understanding about energy and climate policy that helped inform the Notley government’s Climate Leadership Plan is that they see the writing on the wall.

Does Jason Kenney? Hard to say.

The United Conservative Party leader is running a classic front runner’s campaign leading up to the May 2019 Alberta election. He enjoys a healthy lead in public opinion polls, his party recently won a couple of by-elections with overwhelming majorities, and focus groups suggest Calgary progressive voters are madder at Notley than conservatives, who hold a grudging respect for the NDP leader because of her feisty defence of the Trans Mountain Expansion pipeline project.

Kenney’s job is to attack, attack, attack – and don’t do anything to screw up the lead.

His strategy is to spin energy issues as Notley mistakes, as he did in this tweet from July 12: “The attacks from NDP ally Justin Trudeau continue unabated. Carbon tax, anti-pipeline C-69, BC tanker ban,

Jason Kenney, leader, United Conservative Party.

killing Energy East & Northern Gateway, and undermining private-sector Trans Mountain project with inaction. Yet the Alberta NDP is next to silent.”

But the UCP also has a responsibility to Albertans to explain how it would govern differently. If the Notley energy policies are wrong, what are better policies?

Kenney has been mostly mum on that front thus far.

His few energy policies include a promise to kill the province-wide carbon tax and getting rid of the Carbon Competitiveness Incentives Regulations – the carbon levy and output-based allocations that apply to the oil sands – and perhaps bring in a modified version of the old Progressive Conservative SGER (Specified Gas Emitters Regulation).

And, of course, he would be Captain Pipeline, battling the supposed anti-market access Trudeau Liberals and their evil Bill C69, which revamps how big natural resources projects like energy infrastructure are assessed and which industry has vociferously criticized.

If these were ordinary times, Kenney’s efforts might be enough, but these are not ordinary times, as the Wood MacKenzie study – and the consensus among the oil and gas super-majors about the new technologies preparing to transform the global energy sytem – attests.

Albertans know where the Notley government stands on this issue, as I’ve reported in many columns over the past three years.

Now they need to hear from Kenney and the UCP.

How would a conservative, market-oriented political party do energy policy differently?

Would it simply raid the recommendations of recent Canadian Association of Petroleum Producer (CAPP) studies?

That would be a grievous mistake.

CAPP can’t reconcile the different – and often conflicting – policy and regulatory needs of its various producers (oil sands, small conventional, dry gas, natural gas liquids, etc.) and as a consequence its positions on energy issues have degenerated into a muddled and contradictory hodgepodge no government can make sense of.

But Albertans deserve energy policy alternatives and voters, for their part, need to understand how critical next year’s election is for the future of the provincial energy sector (read, the Alberta economy, government revenues, and public services).

If Ed Rawle and Wood MacKenzie are correct, Alberta has 18 years until oil demand begins to decline. Will Alberta producers be able to compete or will they slowly be squeezed from the market because they failed to become cost-competitive and carbon-competitive?

The downturn that began in late 2014 and the recovery that began last year is not just another commodity cycle. Structural change wrought by new technologies – literally thousands of them are at the bottom of the S-curve and slowly making inroads into energy markets – is upon us and there is no turning back.

That is Ed Rawle’s message. And Alberta must take heed because if it procrastinates for even a decade, it could find itself behind its competitors in the race to maintain its share of a dwindling market.

So, even though carbon pricing is market-based policy according to every economist I’ve spoken to about carbon taxes, if Kenney and the UCP have a better market-based plan then he should spell it out for Albertans ahead of what may be the most important election in Alberta’s history.