A former Saskatchewan cabinet minister said the historically low price of oil — caused by a drop in demand brought on by the coronavirus pandemic — shows the need for the country and the province to diversify their economies.
“We would have a lot more financial security by building a renewable energy future, globally and in Saskatchewan,”said Peter Prebble, former NDP MLA and current board member of the Saskatchewan Environmental Society.
For the first time in history, a barrel of West Texas Intermediate crude oil, a global price benchmark, was worth less than zero dollars — dropping to -$38.76 USD ($55.03 CAD) at one point on Monday afternoon.
A barrel of Western Canadian Select crude, Alberta’s main export, dipped to $3.96 USD on Monday — less than the cost of a Big Mac on Uber Eats.
University of Saskatchewan political scientist Greg Poelzer, speaking to Global News then, said the price heralded an economic depression.
A barrel of Western Canadian Select his $0.13 USD ($0.18 CAD) on Tuesday.
The severe drop in demand is caused by the measures implemented around the world to stop the spread of COVID-19.
So many people are staying at home that Gita Gopinath, the chief economist for the International Monetary Fund, has started calling this period “the Great Lockdown.”
Demand is so low that oil, which was still being pumped, can’t be used.
“But storage facilities are full. So the fact is that any oil coming out of the ground is worth less than worthless.”
Lander said the price drop would hurt provincial and federal budgets.
“So when you’ve made all of these promises on spending and you don’t have revenues, if there weren’t deficits before, there’s going to be deficits.”
Poelzer said the economic damage would also include job losses in the oil and gas industry and in the sectors that support it.
He said the path to economic recovery involves shifting jobs away from oilfields.
“Canada needs to start thinking of itself as an energy country, not just a fossil fuel country,” Poelzer said.
On Tuesday Prebble said that should include green energy and that shifting the economy away from one dominant — and environmentally-damaging sector — would help Saskatchewan’s revenues and employment figures recover.
He said a federal stimulus plan should involve developing sustainable energy.
“For every million dollars we invest in renewable power, we create a lot more jobs than we do by investing in oil or coal or other fossil fuels,” he said.
As an example, he cited the “labour-intensive” process of converting buildings to sustainable energy would create employment opportunities.
Prebble added that the benefits wouldn’t be seen for months but would create a more sustainable, and less vulnerable, economy.
Lander said a stimulus plan should invest in long-term developments instead of short-term stopgap measures.
He compared the idea to the New Deal, the American stimulus plan that helped the US economy rise out of the Great Depression in the 1930s.
He added the U.S. interstate system of highways was built because of the New Deal.
Lander said the biggest challenge to implementing a new program isn’t the cost, it’s a lack of political courage. He said governments, regardless of party, don’t want to make quick decisions when “today’s policy is tomorrow’s headline.”
A government, he said, is likely to convene a panel of experts that would issue a report in a year’s time, at which point the crisis has (hopefully) passed.
“Will it actually happen? I’m skeptical,” he said.
“I think that right now everybody is merely worried about providing work to unemployed workers, which, of course, is important. But everybody is merely trying to look at what’s right in front of them, not what’s on the horizon.”