The Ottawa based Centre for the Study of Living Standards (CSLS) an economic policy research group released a research report on November 10, 2008 “The Valuation of the Alberta Oil Sands”. The CSLS report concludes that the Alberta Oil Sands make up 18% of Canada’s total tangible wealth. There has been very little commentary on the report to date.
The CSLS report is a very important study for a number of reasons. It establishes a number of criteria for estimating Canada’s primary energy reserves, it makes preliminary connections between development costs and social costs of carbon (SCC) and forms the basis for estimating and developing a program of public ownership of all primary resource and industry. It is the latter point that is essential for organized labour and the development of national industrial development program. The report, with careful study, illustrates the obvious necessity of bringing energy under public control as the material basis for the well being of Canadians.
CSLS concludes that previous estimates completed by Stats Canada were flawed. Stats Canada placed Canada’s total tangible wealth (TTW) to be $6.9 trillion. CSLS estimates that Canada’s TTW is now estimated to be $8.0 trillion. The authors of the CSLS report take issue with Stats Canada’s estimate of 22 billion barrels of reserves and place the total estimate to be almost 173 billion. The CSLS estimate is more in line with other international energy agencies that place total exploitable reserves with current technology at about 178 billion barrels. A full study of the report is essential for those that are serious about gaining a deeper understanding of the importance of the Alberta Oil Sands to the future of Canada.
What is striking and hits one immediately is that almost 20% of Canadian TTW is locked away in dirt! It is no wonder then that all focus is on the development of the oil sands. The CSLS authors conclude that per-capita wealth of Canadians increased by $34,591 to $243,950 or 16% above Stats Canada previous estimates.
Stats Canada’s national wealth accounts categorize tangible assets into produced and non-produced groups. Labour is an added component of the produced category whereas labour has not yet been applied to the non-produced category.
Produced assets include residential and non-residential structures, machinery and equipment, consumer durable goods, and businesses’ inventories. This category of assets has an embedded labour component or, in other words its value has been realized through work.
Non-produced assets include natural resources such as the oil sands, forests, minerals, and other naturally-occurring assets, in addition to land. These are commodities. Commodities have use-values that form the basis of all national wealth and which value can only be realized by the application of labour-power.
Total non-produced assets of Canadian TTW are estimated by Stats Canada to be $2.95 trillion. The CSLS estimate when the revaluation of oil sands is included is just under $4.1 trillion. What is more astounding is that the oil sands make up 61% of all natural resource wealth of Canada and 3.5 times the wealth of all manufacturing fixed capital assets in Canada. According to the CSLS report:
“The oil sands are a very important component of Canada’s wealth. According to official estimates, total tangible wealth in Canada in 2007 was $6.9 trillion. Using our preferred estimate, oil sands’ wealth is almost as important as wealth derived from land and is almost 7 times as important as wealth from all minerals. The oil sands are valued at almost the same level as residential structures and accounted in 2007 for 3.5 times more wealth than Canada’s capital stock in machinery and equipment. In other words, the oil sands, if valued appropriately, are a non-negligible portion of Canada’s tangible wealth.”
This report makes a farce of the Harper brain trust warning that Canada must find ways to “weather the storm” of economic crises, that Canada cannot afford national development programs in this crisis, etc., is a sham. Further, the curtailment of projects in Alberta by the oil monopolies claiming that the global crisis has changed the economic conditions for the development of the oil sands is suspect.
Alberta Oil Magazine.com carried a report on September 16, 2008 entitled, “Why Alberta Can’t Have It All”. The report by the on-line magazine reported on the cost differentials between bitumen processed by Alberta upgraders and costs related to the US Midwest production facilities where the majority of pipeline construction in this province is headed. The basis of the report was a presentation by Cliff Cook, senior vice-president of supply distribution and planning at Houston-based Marathon Oil Co., during an oil sands investment forum held in Calgary by TD Securities Inc. during the summer.
Cook’s presentation, “Midwest Solution versus Alberta Solution” concluded that, “Covering all the costs leaves the modified U.S. refinery with a profit margin of $3.74 per barrel of bitumen processed. That is 12.8 times more than the Alberta upgrader earns by barely running in the black at a margin of 29 cents per barrel.”
Taken in context of the CSLS findings it is no wonder why the flight of capital to lower cost jurisdictions is talking place – profits are 12.8 times higher in the US than in Alberta. Further the fact that 61% of Canadian natural wealth is locked in the oil sands means that US monopoly will be looking to get out of the made-in-US crisis on the backs of Canadian workers.
Questions of environmental protection issues seem trivial when 18% of Canadian TTW is under threat by US oil monopolies. There will be no material base left to make the transformation to a “green economy” if the sell-out by Harper is not halted.
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