1 Boom, Bust, and Consolidation*Corporate Restructuring in the Alberta Oil Sands
Ian Hussey, Éric Pineault, Emma Jackson, and Susan Cake
The Alberta oil sands tend to evoke images of sprawling surface mines worked by giant rope-and-pulley shovels and larger-than-life trucks, extracting and transporting a tarlike substance to immense industrial processing facilities. The oil sands may also conjure up images of tailings ponds and mountains of caustic sand—the by-products of bitumen extraction—and of billowing smokestacks that send greenhouse gases rising into the atmosphere, along with visions of pipelines and trains snaking their way south, east, and west to refining hubs or to ports elsewhere on the continent. Underlying these images, however, is another, more abstract one: that of a massive web of economic power, concentrated in Alberta but linked to policy makers in Ottawa and to central Canadian elites via Bay Street finance. This hegemonic complex, an intricate network of both public and private power, has had an enormous impact on Canadian politics, economics, and society, particularly over the past two decades. It has been able to exert a defining influence in areas as diverse as labour regulations and employment, fiscal policy, interprovincial commerce and international trade, climate and environmental management (including the protection of water resources), funding for scientific research, and relations of the colonial state with Indigenous nations.
The early years of the twenty-first century were dominated by concerns that the world’s supply of oil was running out, which contributed to an upward spiral in oil prices. Over the course of a ten-year commodity boom—prices were high from 2004 to 2014—the oil sands grew into an ever more dominant economic force capable of nourishing and sustaining the hegemonic power of the fossil fuel industry. Then, in the autumn of 2014, oil prices crashed, with a barrel of West Texas Intermediate (WTI) losing nearly half its value in the space of only four months.1 Yet the key corporations that make up this hegemonic complex managed to emerge from the crisis relatively intact, with the oil sands industry ultimately retaining its status as a decisive economic and political force.
The power of the oil sands industry is grounded in the activities of a surprisingly small number of firms: five extractive corporations dominate bitumen production in Canada. Together with two major pipeline companies, these corporations form the core of this hegemonic complex.2 Their strategies of capitalist accumulation are embodied in the fixed capital mentioned above—in the equipment, physical structures, and other tangible property bound up in the flow of bitumen from pit to refinery—as well as in the labour and energy required to mobilize these assets. The accumulation of capital has sustained the hegemonic power of the oil sands as an economic and political force, and this power has in turn been exercised to further the accumulation strategies of the major corporate players in the industry. The “Big Five” are Suncor Energy, Canadian Natural Resources Limited (CNRL), Cenovus Energy, Imperial Oil, and Husky Energy.3
Of course, the oil sands industry is populated by thousands of businesses, of all sizes. In 2011, at the height of the oil sands boom, the extractive portion of the Canadian oil and gas sector comprised 7,051 firms that actually employed staff (counting employee-less shell firms the number goes up to 14,415). Of these firms, 6,537 (93 percent) were small businesses with fewer than fifty employees. Of the remaining 514 firms, 485 were medium-sized businesses with 50 to 499 employees, while only 29 were large corporations with 500 employees or more. Most of these firms (including roughly two-thirds of the small ones) operated in the area of “services to oil and gas extraction,” a category that accounted for 62 percent of the total number of firms with employees. Conventional oil and gas extractors made up another 25 percent of the total number, while 10 percent were oil and gas contract drillers. At that time, firms active in “non-conventional oil extraction” accounted for fewer than 1 percent of the total.4 Yet it is the investment decisions made by this handful of firms—firms engaged in extracting hydrocarbons from unconventional sources such as oil sands and in exploring for new reserves and developing ways to increase extractive capacity—that determine the overall growth trajectory of the industry.
The accumulation strategies of the Big Five must be examined in the context of the commodity cycles that mark the development of extractive capital. Capitalist development is not a linear and progressive process. Accumulation is, by its very nature, cyclical, and commodity-producing industries are subject to some of the wildest economic gyrations. Price volatility is a hallmark of commodity-producing sectors, all the more so given the existence of vast and deeply rooted financial markets where shipments of basic commodities are bought and sold and options on future transactions traded. The price dynamics of commodity extraction and circulation drive an investment cycle that is prone to immense overshoots, which can have dire economic consequences as the value of fixed capital is destroyed during the inevitable downturns. These cyclical dynamics lie behind the recent development of the Canadian oil sands, and an appreciation of their influence is crucial to the analysis presented in this chapter.
We begin by examining the Big Five’s key assets—both financial and organizational—with a view to understanding the nature of their oligopolistic power. The Big Five have, in particular, been developing and implementing their accumulation strategies in an era of “extreme oil,” and we go on to outline the industrial, financial, and ecological relations in which bitumen as a commodity is enmeshed. We then turn to the cyclical dynamics that undergird the Big Five’s accumulation strategies, focusing on the three phases of the most recent commodity cycle—boom (2004–14), bust (2014–16), and restructuring and consolidation (from 2015 onward). This analysis enables us to offer certain projections about the future direction of the extreme oil industry in a world now gripped by climate change.
Mapping the Oligopolistic Core of the Oil Sands Industry
In the period from 1999 to 2016, bitumen’s share of overall oil production in Canada grew by 419 percent, with bitumen (refined and unrefined) accounting in 2016 for roughly 63 percent of the oil produced in the country (Hughes 2018, 55, figure 50)—a figure that had risen to 64 percent by the following year.5 In 2017, Canada’s overall oil production averaged 4.2 million barrels per day (bbl/d), and bitumen accounted for nearly 2.7 million of those barrels.6 The Big Five alone had the potential to produce even more than that amount: their combined capacity for bitumen production stood at 2.86 million bbl/d in 2017 (see table 1.1). This meant that they controlled 79.4 percent of Canada’s total potential capacity for bitumen production, which stood at 3.6 million bbl/d in 2017.7 Beyond control over supply, however, their production capacity also gave them control over an immense amount of wealth.
Table 1.1. The Big Five’s key economic variables, 2017 | Assets Market capitalization (TSX ranking) | Total revenue Net incomea | Number of employees | Bitumen production capacity (bbl/d) |
Suncor | $89,494,000,000 $84,375,452,708 (4) | $32,176,000,000 $4,458,000,000 | 12,381 | 1,175,372 (including 54% stake in Syncrude)b |
CNRL | $73,867,000,000 $55,044,350,036 (9) | $17,669,000,000 $4,640,000,000 | 9,973 | 655,500 (including 70% stake in Athabasca Oil Sands Project) |
Imperial | $41,601,000,000 $34,926,986,855 (18) | $29,125,000,000 $490,000,000 | 5,400 | 501,750 (including 25% stake in Syncrude) |
Husky | $32,927,000,000 $19,615,752,388 (34) | $18,946,000,000 $786,000,000 | 5,152 | 90,000 |
Cenovus | $40,933,000,000 $16,808,580,856 (40) | $17,314,000,000 $3,366,000,000 | 2,882 | 440,800 |