Whom to Believe

by Chris Randall

It is appropriate that Donald Trump should be an ardent supporter of the fossil fuel industry. After all, who better than North America’s premier fantasist to promote an industry that has consistently indulged in such fantastic claims regarding its economic benefits? Unfortunately, Trump is not the only politician to be swept up by the press statement and reports issued by the oil companies. Once you begin to dig a little deeper into many of the claims made by these companies, you begin to wonder whether the politicians or the media ever read more that the summary of these reports. They forget that as with most things in life, the devil is often in the detail.

Take for example the recent press release regarding the discovery of a new oilfield in Texas – the Wolfcamp Shale  . The report made it sound as though the find was a massive one – a ‘game- changer’, for want of a better word. However, it turns out, that even though the US Geological Survey estimates there are some 20 million barrels of oil recoverable from the field, there isn’t as much to celebrate after all. Firstly, it is only an estimate based on knowledge of the geological conditions in that part of Texas, and secondly, although this quantity of oil may be available, the cost of getting it from the ground will be so high no one would want to take the risk at current oil prices. At least two independent analysts have estimated that it would cost $500 billion more to extract the oil than could be made by selling it. Oil prices will undoubtedly rise at some point but if they ever get high enough to make a profit from this field it is likely that the world would be dumped back into recession. Do you remember what happened the last time oil got up to $150 per barrel?

Estimates of the economic benefits of Canadian pipelines also seem to have been sprinkled with fairy dust. Somehow the Premier of Alberta seems to think that the new Kinder Morgan pipeline is going to result in huge economic benefit to Canada but will not lead to an increase in tar sands production. Kinder Morgan paid only 1% tax on its earnings, so it is unlikely that they will be funding Alberta’s recovery anytime soon. Increased revenues are expected to come from raising the selling price of Canadian oil closer to the level of West Texas Intermediate. Unfortunately, a 2015 internal Federal report casts doubt on these hopes for cash. Oil from the tar sands is much heavier than Texas oil and requires more processing. Furthermore transporting heavy oil by pipeline will always be expensive. More money can only come from increased sales, which would mean a massive expansion in tar sands production. Increased production would completely cancel out any reduction in GHGs from a possible carbon tax, and dreams of massive revenues are likely to stay a fantasy.

If politicians with their entourage of advisors and analysts can be swept along by the claims of the fossil fuel industry how much easier is it then to fool the public? Just look at the election south of the border for your answer. If we are not to confuse outlandish claims with the truth we need to be prepared to do our homework. This includes questioning those who claim to be working for our benefit. “For our benefit” is the claim, but whom are they really working for.