Building a new oil refinery with a price tag of $8 billion was never going to be an easy task, but saying goodbye to a project where millions have been already spent must be quite difficult. Collateral damage may include employees losing work and the investments made by individuals in the community expecting a boom.
There is always a risk of becoming emotionally invested in a concept, whether it’s private or public sector managers.
According to news reports, Irving Oil now sees declining customer demand for gasoline “from 2015 out for the next 25 years.” They didn’t divulge the reason for the decline, despite an expanding U.S. population. One likely cause is the reinvigorated corporate average fuel economy standards (CAFE) in the U.S. gas market and hence in Canada. The new refinery would have added capacity into a declining market.
But looking beneath the surface, rising oil prices in 2007 and 2008 made it clear that we are reaching a tipping point in world oil supply. About 40 of the world’s 54 oil producing countries have passed peak production and are declining. Reduced supply means fewer refineries, as I noted in a previous column from 2007.
Has the present government become so emotionally attached to its self-sufficiency agenda and “energy hub” job strategy that they reject the reality of an oil production decline in coming years with its consequential economic chaos? Or is it just saving face until the next election?
Self-sufficiency, as proposed by Shawn Graham, was fatally flawed from the beginning.
It was based on growing a larger population, a strong industrial economy and sufficient cheap energy, all of which are unlikely in the next decade.
With the passing of the refinery project, the “energy hub” seems an empty shell.
There is talk of an Irving wind power export project, which is like assembling Lego blocks made elsewhere – few construction jobs, and few or no permanent jobs. A related concern: do we want to use the best wind sites for export power rather than local use? A proposed natural gas plant is comparable, giving some short-term construction work but few permanent jobs.
The fallout from the refinery decision means expected tax revenue will not materialize.
Based on reduced revenue expectations, one would hope that the expenditures of government (both capital and ordinary) would be reviewed. As an example, New Brunswick’s latest budget proposes spending $160 million on new technical schools and programs, which were partially intended for training of refinery construction trades.
Demographic forecasts of a 20-per-cent reduction in student population in coming years and with more distance education, would see significant spare capacity in existing“bricks and mortar”institutions.
Does this expenditure still make sense? Perhaps lowering tuition would keep the institutions filled in coming years.
Having misunderstood the threat of an impending energy crisis, it’s time for Premier Graham to return to the basics of government.“Government intelligence” could produce an energy policy that meets our needs.
Should new homes have to meet an energy code? Is Efficiency NB making a serious impact on heating costs for existing homeowners? I recently talked to a hard-working woman in the process of being cut off from electricity. Due to misfortune and remarkably high bills, she couldn’t catch up from the high winter costs. This is real life for the less fortunate among us.
What is the role of wood in New Brunswick for heating homes? Why can’t NB Power reduce its winter peak? Should NB Power be consolidated and work on improving operational efficiency and reducing costs? Should new appliances sold have to meet energy efficiency standards? Since we are facing an impending crisis of very high gasoline prices and energy shortages in the near future, should we be setting a floor price for gas to encourage the purchase of high-efficiency vehicles? Would incentives help us? What about mandatory standards for vehicle mileage or speed limits?
These are but a few of the questions that I would ask the premier. Will he change course? What will be his legacy? His three years of power have shown little progress in setting a new course on energy. Considerable time was occupied in the energy department marketing the “energy hub” idea. Being a strategy for job generation, it should have been handled by Business New Brunswick.
Who are the losers with three years of an energy policy abyss? The people of New Brunswick, who won’t be prepared for hard times.
But it could be worse, I suppose. Mexico is again facing large decreases in government revenue, as their oil exports declined 14 per cent during the first half of 2009. That decrease of 200,000 barrels a day amounts to $4 billion less revenue for Pemex, the state oil company.