Coronavirus: Oil price crash prompts calls for green energy

By Nathaniel Dove for Global News

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.

“The markets are actually signaling to us that they are less optimistic about how quickly the economy is going to ramp [back] up. And to me, it’s signaling they’re anticipating it’s a question of months, not weeks.”

A barrel of Western Canadian Select hits $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.

“The normal way that you deal with such a situation is to store [the oil],” Concordia University economist Moshe Lander said.

“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.

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.

If “provincial governments and the federal governments want… to spend all of these billions of dollars, [they] may as well spend it on something that’s going to help Canada for the next 50, 60 years. That’s money well spent.”
“If [the plan is designed] to get us through the next 12 months, until the vaccine comes along… wasted cash.”

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.”

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