An election that counts

Yes, because I’m a political junkie and intellectual masochist, I’ll be watching the primary election returns from Ohio and Texas tonight.  But this morning I’m pondering the results from an election yesterday… one that says a lot about our future in fossil fuels.

Voters in Alberta, the Canadian province that’s home to the massive oil sands, went to the polls in provincial elections.  The overall outcome was not in doubt; the Progressive Conservative party (love the oxymoronic name) has controlled the legislature for close to 40 years.  But going into yesterday, the consensus was that its overwhelming majority would be pared back somewhat — signaling a slowing in the pace of oil sands development.

And make no mistake: That was the big issue in this election.  As the Financial Times explained yesterday in a preview piece:

Alberta’s government, its oil industry and its 3.2m residents are struggling to adjust to the oilsands boom.

Rampant
demand for goods and services has triggered housing and labour
shortages, propelling inflation. A fast-expanding population has put
pressure on schools, hospitals and roads – on which spending was cut
back in the 1990s when the Tories’ priority was balancing the budget.

The
oil industry privately acknowledges that it has done a poor job of
defending itself against charges that breakneck development is ravaging
the environment.

“We now have people from a whole variety of
perspectives questioning the rate of growth in the oilsands,” says
Roger Gibbins, chief executive of the Canada West Foundation, a
think-tank.

The consensus among Canadian punditry going into yesterday was that this “whole variety of perspectives” would come together in the form of a more vigorous opposition during Alberta Premier Ed Stelmach’s next term, his majority reduced.  Stelmach’s full-speed-ahead development policy would run into headwinds not just from the left-leaning parties, but also a significant faction within his own Progressive Conservatives.

An interesting window on the political zeitgeist was captured in the Toronto Star. Toronto is hundreds of miles from Alberta, but as Canada’s largest-circulation paper explained in an editorial before Albertans went to the polls:

Some worry about the greenhouse gas emissions that would come with
unfettered development of what is already Canada’s largest single
contributor to climate change. Others are concerned about the
destructive effects oil-sands development is having on waterways, air
quality, and wildlife. Still others fear the negative impacts on
society at large in a province where housing, schools, roads and
hospitals can’t keep up with the oil-sands’ breakneck pace.

Yet a Stelmach victory still appears to be the most likely outcome in a province that is Tory blue, through and through.

The
result many Albertans are hoping for is that Stelmach’s majority will
be pruned back sufficiently to make him see that there is little public
support for continuing the rapid pace of oil-sands development.
Ontarians should hope for no less.

Surprise, surprise: When it was all over, Stelmach’s party grew its overwhelming 60-23 majority into a crushing 72-11 majority.  It’s full speed ahead in Canada’s oil patch:

Voters appeared to give the green light to Stelmach’s plan to get a
handle on the roaring petro-powered economy by spending billions of
dollars to upgrade and build roads, schools and hospitals, hiring more
doctors and nurses, and creating more daycare spaces…

Political scientist Doreen Barrie described it as a stunning win.

“This
result just blows me away. I don’t know what happened to all the
(voter) crankiness, all the dissatisfaction over all the problems in
the province,” said Barrie, with the University of Calgary.

“I’m astounded. I don’t think anybody could have predicted the vote”…

Statistics Canada reported recently that investment in the oilsands
will soar to almost $20 billion in 2008, more than all the spending on
manufacturing in the rest of the country combined.

The oilsands are also one of Canada’s biggest producers of greenhouse
gases, but Stelmach said he won’t impose limits on emissions for 12
years and will then go slow through to mid-century to avoid disruption
or job loss in the oilpatch.

So there you have it.  Other Canadians might wring their hands about the environmental effects of developing the oil sands, but Albertans have had the final say: There will be no let-up.

For more insight into what’s happening in world oil markets, check out <this forecast from Byron King of Outstanding Investments.