Wildfire Cuts Tar Sands/Oil Sands Output, Portends Uncertain Future for Fort Mac
Global oil prices edged upward Thursday as the massive wildfire in Fort McMurray, Alberta took 600,000 to 800,000 barrels per day of crude oil out of the market and set analysts speculating on how long production would be scaled back.
Early Thursday, CBC reported that Shell Canada’s tar sands/oil sands facility and Suncor’s base mines north of Fort McMurray had been shut down, and plants run by Suncor, Syncrude, Husky, and Conacher had scaled back their output. That wasn’t because the facilities were threatened by fire, explained Auspice Capital Chief Investment Officer Tim Pickering, “but because of the people issue. Of course, they’re being sensitive to their employees and family issues.”
On Thursday evening, Athabasca Oil announced it was evacuating its Hangingstone camp south of Fort McMurray, with the fire just five kilometres away.
For well over a year, the world price of oil has been driven down by an oversupply of one to two million barrels per day. That global glut has left “lots of oil in tanks, so even if oilsands production slows in the short term, it should not have an effect on the world price in the long term,” CBC reports.
“But in the medium term, the question becomes how to operate the oilsands without its key staff,” many of whom “have been sent home to other parts of the country because the camps are now housing residents evacuated from Fort McMurray.”
While a share of the tar sands/oil sands work force is normally housed in the camps, “a substantial number of Fort McMurray’s permanent residents live in the city and commute daily to work at the oilsands plants,” notes CBC reporter Tracy Johnson. One bus line alone carries 14,000 people per day between the Syncrude plant and the city’s Timberlea neighbourhood—which “suffered serious losses in the fire.”
With whole sections of the town burned to the ground and the fire not yet under control, many residents and some news reports are beginning to consider how much of the community’s loss will be permanent. “With hundreds of Fort McMurray homes and other buildings lost, and fires still raging in and around the community, the future for the small businesses there is hazy at best,” the Globe and Mail reports.
“If you lose all of your downtown or all the neighbourhoods, I don’t know what happens,” local restauranteur Andy Parker told the Globe. “But I know a lot of business owners, and they’re my friends, and they care about Fort Mac, so I don’t see people giving up and just walking away.”
Yet “there could be a stark divide between businesses that cater to the oil sands industry and those that rely on spending by residents,” the Globe notes.
Storeowner and former local MLA Mike Allen said businesses that cater directly to tar sands/oil sands operations could bounce back quickly, as long as bitumen production continues. “But for those that are in the smaller retail sector, how many of our customers have lost homes? How many will return? How long can you sustain no business? It will be a matter of wait and see.”