What can we learn from Alberta’s oil sands bust?

Alberta oil sands. Photo: Shell

The oil price is a common feature of the evening news, panic rising in step with each fluctuation. However, the figures of $100 or $40 per barrel are only invoked to speculate on price changes at the gas pump; little is said about the actual consequences of these variations. In rarer cases, shifts in oil prices might be used to prop up geopolitical analyses — Russia is going broke, OPEC is in a tailspin, and so on. What almost always remains absent from media forays into oil economics is an attention to the social impacts wrought by these changes.

A recent exception came in the form of an expose from the New York Times, which investigates large-scale job loss in Alberta’s oil sands resulting from stagnant oil prices. The region has been particularly hard hit due to the economics of oil sands, which are more labor intensive than conventional oil and therefore require a higher price to be viable. According to the article, in the past year alone Alberta’s energy industry has lost over 35,000 jobs and the region is expected to post a US $4.5 billion deficit this year. As oil prices are expected to remain low in the mid-term and the energy sector is struggling to absorb the cost of its investments made with a forty-year timeline in mind, it could be argued that the oil sands are headed for a bust.

Boom-and-bust cycles are a common feature of extractive developments, whether mining or oil & gas, with oil sands actually representing a mixture of these sectors. In these cycles, there is a sudden rush for a resource, leading to enormous transformations, as has been seen in Alberta with close to US $200 billion being pumped into the region over the past 15 years. However, as soon as the boom is over, the area’s rapid development is quickly replaced by the ‘bust’ — a phase in which there are no longer any economic benefits, but the negative externalities of the ‘boom’ phase are severely felt.

Though some argue that the cycle’s impacts have been exaggerated, there is a high degree of consensus that extractive developments affect all aspects of a community — from the local economy, to the social and physical environment, to the natural environment, and even to the social relations existing within those communities. And even though communities tend to embrace resource booms for their promise of easy economic benefits, these are rarely fully realized.

The impending bust in Alberta is remarkable for one very particular reason: whereas the social consequences of busts have traditionally been seen as highly localized, this case offers a very different picture. The fall in activity and revenue, though obviously felt strongly locally, is also noticeable far beyond the region, as workers are no longer bringing home large paychecks. One reason for this is that oil-sand workers constitute a mostly mobile workforce that does not migrate for the long-term, implying that a bust can have outsized effects half a continent away, especially if a large number of workers are drawn from an area offering few other economic prospects.

Previous work on the social impacts of boom-and-bust cycles has generally been circumscribed to the local scale. On the one hand, they studied coal-centric communities, in which workers and their families coalesced around mines and established long-term households. On the other hand, even when examining oil extraction, they have generally limited their scope to the local scale and have not considered wider impacts.

The social impacts emerging from this situation deserve particular attention for two very important reasons:

  1. This represents a unique case of how a highly mobile workforce diffuses the impacts of a resource bust across scales.
  2. Unconventional oil & gas development is widespread across several regions of North America — from the Bakken in North Dakota to the Marcellus in Pennsylvania and neighboring states. These areas have seen similar booms and are now also bearing the brunt of depressed oil prices, which whittle away at their economic benefits. Given the scope and scale of these situations, understanding how the social impacts of their busts propagate could prove vital to putting in place the necessary policies to mitigate them.
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