2023-05-10 16:57:17
The cross : Due to the fires in Alberta in Canada, several oil producers have suspended their activities. Are there risks for global sourcing?
Anne of Crete Most likely not. Canada is the world’s fourth largest oil producer after the United States, Saudi Arabia and Russia, with 9% of production (2021 figures). Alberta is Canada’s main hydrocarbon-producing region. The suspension is equivalent to 30 or 40% of the country’s production. This should not affect global oil supply in the near term. These companies have stocks to compensate for this kind of event, and these are only temporary stops, as a precaution. No infrastructure was damaged and production will be able to restart as soon as the fires are brought under control.
What explains the concern of the oil markets?
A. C. : They are hypersensitive to this kind of phenomenon. They anticipate a decrease in supply and raise prices for fear that this decrease will be prolonged. But this remains a short-term phenomenon. If the recent increase in prices has been noticed, it is mainly because oil prices have been relatively stable in recent weeks. As long as the rise remains below 5% there is no reason to worry.
However, this is not the first time that fires have affected oil production in this region…
A. C. : In effect. An episode of major fires had already hit Canada in 2016, ravaging the equivalent of ten times the area of Paris. Oil sands production, which is very important in this region, was considerably affected. Despite this precedent, there has been no awareness. No drought prevention or warning policy has been put in place. It’s disappointing.
Should we fear that these extreme climatic phenomena will become a major risk for energy production?
A. C. : These extreme episodes are a reality all over the world, with an almost annual frequency. This is the case in California, Canada but also in Europe. Alberta experienced a spring similar to ours, hot and dry, very favorable to fire outbreaks. These climatic events have direct consequences on all energy production circuits, not just oil. Today, they are called “physical risks”, whereas they are important symptoms of climate change. Unpredictable and uncontrollable, they are called to multiply.
Is Alberta a region particularly exposed to these risks?
A. C. : They particularly affect sites located in areas highly exposed to the vagaries of climate change. This is the case for oil sands production in Alberta, where the fire season is getting longer and earlier. The Canadian oil sands carry a double contradiction because they are unconventional hydrocarbons, otherwise more carbon and methane emitters. In climate finance, we speak of “double materiality”: they contribute to climate change while being themselves deeply affected by this phenomenon.
What is being done to prepare the energy sector for these new challenges?
A. C. : Nothing concrete is in place. The production of unconventional hydrocarbons is not reduced despite the increased risks. They will become stranded assets, i.e. assets that have lost their value. A reality that pushes financial players to reduce their investments in this sector, to limit losses. If no precise policy is adopted on the subject, then the transition of the energy sector will take place according to the concerns of financial players.
The most effective would be to ensure that these hydrocarbons are no longer needed. Anticipate so as not to suffer. But there is still a long way to go.
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