Prime Minister Mark Carney wants Alberta’s oil industry to spend tens of billions of dollars on carbon capture before Ottawa will fully embrace new pipeline projects. The problem? The evidence suggests customers aren’t demanding “decarbonized” oil in the first place.
A new Fraser Institute study concludes that carbon capture, utilization and storage (CCUS) faces enormous technical and economic hurdles. Despite decades of investment, large-scale projects have routinely fallen short of expectations, often capturing less carbon than promised while costing far more than initially projected.
The study also notes that scaling CCUS across the energy sector would require building an entirely new network of pipelines and storage infrastructure comparable to today’s oil and gas system itself.
In other words, politicians are asking Alberta to construct a second energy industry just to support the first.
That wouldn’t matter if customers were demanding it. But there is little evidence they are.
Instead, buyers continue to purchase Canadian crude because it is reliable, competitively priced and comes from one of the world’s most politically stable energy producers.
The Canada Energy Regulator reports Canadian crude exports reached record levels following the Trans Mountain expansion, with Alberta supplying more than 90 per cent of Canada’s exports. New customers in Asia have rapidly increased purchases, not because Canada branded its oil as “decarbonized,” but because they wanted dependable supply from a democratic country.
Reuters has also reported that the Carney government is linking future pipeline approvals to large-scale carbon capture commitments and net-zero requirements, effectively making Alberta producers absorb billions in additional costs before projects can move ahead.
The theory behind this policy is that customers will reward lower-carbon oil. Yet commodity markets have rarely worked that way.
History offers an uncomfortable but revealing example. During its control of territory in Iraq and Syria, ISIS financed much of its terrorist operation by selling oil through black-market networks. Buyers still purchased that oil despite knowing where it came from because oil markets are driven overwhelmingly by price, availability and logistics.
No one is comparing Alberta producers to ISIS. The point is the opposite: if even oil produced by one of the world’s most notorious terrorist organizations found buyers, it demonstrates that commodity markets are driven primarily by economics, not moral branding.
That reality raises an obvious question. Where is the evidence that refiners are willing to pay a significant premium simply because Canadian oil has a lower carbon intensity?
Hellbound and Down 