Washington, DC, May 10, 2016 --  

Canada is embracing new oil production even as Saudi Arabia turns away.

The 80,000 people evacuated from the huge Ft. McMurray forest fire can blame unusually dry conditions and strong winds for their misery.¹ But it's the controversy over the nearby Alberta oil sands that has fanned the rhetorical flames over the crisis.

Canada's urban elites, joined by their American blue state compatriots, have bitterly opposed Canada's oil sands project as an environmental travesty, and have blamed human-induced climate change for the forest fire. The unusually high temperatures over the past year, combined with low rain and snowfall are easy to blame on climate change.

But critics' smug "you get what you deserve" attitude, is horribly unfair. There is no reason to believe that climate change specifically caused this one fire. There is even less reason to think the world's atmospheric carbon levels are significantly different as a result of the exploitation of the oil sands than if the local oil produced had come from other areas. Bottom line: the fires raging around the town would have happened even if the oil sands had never been touched.

Yet the evacuations are far worse than they would have been without the area's oil boom. As the main hub for Alberta's oil sands project, the population of the city has been booming along with oil production. Ft. McMurray has almost doubled in the past two decades, with most of the increase coming as oil production ramped up.

The money Canada's oil sands have generated has corrupted locals and national politicians alike. The country's left-leaning prime minister Justin Trudeau, famous for pulling Canada's forces out of the fight against the Islamic State, and pledging to end the pro-oil policies of his conservative predecessor, has become a big defender of the oil sands project. Canadian politicians, mirroring the sentiments of conservative Americans, argue that if the oil sands are not tapped, production will simply go to other countries like Saudi Arabia.

This is undoubtedly true. Saudi Arabia has responded to newly competitive fields like Canada's oil sands and America's shale formations by boosting production to drive prices down and force higher-cost competitors out of the business. Meanwhile, Crown Prince Mohammed bin Salman has announced ambitious (if unrealistic) plans to woo the nation's economy off of oil in the next two decades.²

The fact that Canada is clinging to oil revenue at the the same time that Saudi Arabia is trying to get away from it may sound contradictory, but it's unsurprising given the relationship of oil to each nation's economy. Canada has a diverse economy for which oil revenues are simply a nice to have. Easy money from oil is like winning the lottery -- everybody knows it's a dirty habit, and not a sustainable form of income, but it's very difficult to turn down.

Saudi Arabia, on the other hand, has been totally dependent on oil for its entire history as an independent nation. Recent declines prices have spooked the kingdom into diversification efforts it should have undertaken many decades ago. Plans to sell shares in Saudi Aramco, the state-owned oil company, would create the largest publicly traded company in the world, and generate money that could be used for diversification projects. Whether sinking billions into diversification projects will prove successful is highly questionable -- Saudi Arabia isn't exactly known for its economic dynamism.

But the sheer fact that the Saudi Crown Prince has joined North America's oil-hating elites in looking toward a post-oil world is telling. That world will undoubtedly come. But despite all the hype about electric cars and solar cells, the post-oil world won't come any time soon. The world remains an extremely energy hungry place, with billions of people in developing countries rapidly increasing energy consumption as living standards improve. Even if electric cars replaced all internal combustion engines tomorrow, some energy source would be needed to charge the batteries. And as long as oil remains under the sands of Saudi deserts or in the sands of northern Alberta, there will be a price markets are willing to pay to extract and burn it.

Critics are right to point out tapping the oil sands is environmentally destructive. Unlike Saudi oilfields that simply require pumping liquid from underground reservoirs, Canada's oil sands require clearing forests, strip mining massive areas of petroleum-laden soil, and burning petroleum to produce steam to unbind the sticky oil from the sand. Landscapes are devastated and much carbon is released into the atmosphere from all the energy expended in the process.

But make no mistake: the fire in northern Alberta is not divine punishment for the province's dirty oil habit. It was not caused by environmentally destructive behavior. Those who smugly criticize the beneficiaries of the Albertan oil boom while burning fossil fuels in their own lives are as hypocritical as they are uncharitable.

Related Web Columns:

A Weak Case Against Filthy Oil, October 18, 2011

The End of Oil, June 13, 2006

Notes:

1. Washington Post, A Canadian Oil-Sands Town is on Fire; 80,000 Residents Must Evacuate, May 4, 2016

2. New York Times, Saudi Prince Shares Plan to Cut Oil Dependency and Energize the Economy, April 25, 2016