Canadian Government Wasting Taxpayers Money On The Oil Sands

Tony Clement in front of the Chevy Volt
Tony Clement in front of the Chevy Volt

On January the 12th, 2011, Industry Minister Tony Clement had his picture taken at the Detroit Auto Show with General Motors of Canada President Kevin Williams charging a Chevy Volt. The Chevy Volt, along with the Nissan Leaf and other electric and hybrid electric vehicles are going to be game changers. I’m willing to stick my neck out, and predict that by the 2015 model year, half of all vehicles sold in North America will be electric, or Plug-In hybrid electric.

Unfortunately neither Tony, nor any other Canadian politicians seem to realize what this means…


We’ve seen a lot of gasoline filling stations close over the last 40 years, as the old companies have tried to maximize profits. Fewer stations mean less costs to them, both operating, and delivering fuel.

Now assume I’m right, and that 50% of the vehicles sold in the 2015 model year are electric. Typically older vehicles are driven less. People who put high yearly mileages on their vehicles usually try to drive newer vehicles for reliability reasons. Most owners of vehicles that are five years old or older, use the vehicles as second cars.

Also electrics are very attractive to high mileage drivers because of reduced fuel costs. This means that the highest mileage drivers will be among the first to move to electrics.

The move to electrics will put pressure on the oil companies. They will not be able to afford to keep as many stations open. It will probably bankrupt many of the remaining independent filling stations. By 2015 we should see the number of filling stations drop by a third. By 2020, the number of filling stations will drop further, probably to a tenth or less.

The drop in the number of fuel stations by 2015 will put pressure on the remaining owners of hydrocarbon fueled vehicles to switch to electrics, as fuel will become harder to locate. As more people switch, and more filling stations close, the pressure to move to electric will grow, a perfect example of a positive feedback loop.

What Does This Mean For The Oil Sands?

About ten years ago a study showed that for the Oil Sands to be profitable, oil would have to rise above $60.00 U.S. per barrel. At the time, that price level seemed ludicrous.

Now $60.00 per barrel seems ludicrously low, and still the Oil Sands are not really profitable. In fact they probably will never be profitable. Sales of the Chevy Volt and Nissan Leaf started late in 2010. From what I’ve heard (I am unable to find official sales numbers online as of yet) the dealerships are having a hard time keeping them in stock. In fact it looks like Electrics are going to take market share far quicker than Hybrid vehicles did. While some manufacturers like Toyota have done will with the Prius, others haven’t been as successful.

However the hybrids on the market don’t offer as large an advantage as electrics do. Electrics require far less maintenance than hybrids. While initial purchase costs are higher, running costs are far lower. And of course fuel sales will soon start to show a drop off, as consumers see the advantages.

The entire rational of Oil Sands development is that as existing, known reserves of liquid petroleum are used up, the Oil Sands would allow continued use of our existing fuel delivery infrastructure.

The problem for the Oil Sands is that the need for hydrocarbon fuels is near it’s peak, and as adoption of Electric Vehicles picks up, will start to fall. The fall in hydrocarbon fuel usage will accelerate as the infrastructure, most especially filling stations, starts to shrink.

What Does This Mean?

It means that every cent that the Canadian Government invests from this point onward into Oil Sands development is wasted. Currently Canada is running a fiscal deficit. That deficit could be cut significantly by by withdrawing Oil Sands funding.

The Government of Alberta can be expected to oppose this. Oil is Alberta’s biggest resource, and pushing Oil Sands development is in the best interests of the provincial government.

But Canada isn’t Alberta. We as a country cannot afford to throw money into a resource that we no longer need.


Wayne Borean

Sunday January 23, 2011


4 thoughts on “Canadian Government Wasting Taxpayers Money On The Oil Sands

    1. The biggest problem is that the oil sands really aren’t needed when you add the numbers up. It’s just a way of transferring taxpayers money to corporate shareholders in my opinion. Which is great for the corporate shareholders, but a total rip off for taxpayers.


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