This oil pipeline is underwater, shutting down Canada’s economy

Story highlights This pipeline will be shut down by July 10, due to severe flooding in B.C. This is a major blow to Canada’s oil industry. Just days after shutting down production on the…

This oil pipeline is underwater, shutting down Canada's economy

Story highlights This pipeline will be shut down by July 10, due to severe flooding in B.C.

This is a major blow to Canada’s oil industry.

Just days after shutting down production on the Alberta oil sands due to wildfires and a hostile relationship with the Alberta province, Kinder Morgan Canada is now directly under attack from floodwaters in B.C. The decision has caused the Canadian oil industry to suffer a major setback.

This is terrible news not only for the Canadian oil industry but also for the people and businesses affected by the storms. Many of these residents are trying to recover from the catastrophic floods that killed at least 10 people in recent weeks. But now even less aid is coming to them.

For those unfamiliar with the Trans Mountain pipeline, it’s a vital piece of infrastructure that transports Canadian oil from Alberta to B.C. But as The Canadian Press notes, flooding in the Cariboo region of B.C. is causing this giant infrastructure to shut down.

This oil pipeline network carries about 40% of Canada’s oil production. This will cause a significant increase in import costs, which will in turn impact the Canadian economy.

The sudden halt in pipeline construction could be particularly troublesome to Alberta, which relies heavily on oil exports. It will also cause devastating ripple effects on the economy down the line.

“These impacts will be felt through broader economic and business sectors, both in Alberta and in communities throughout the entire country,” read a press release issued by the Canadian Chamber of Commerce.

As the Parliament of Canada also released a statement, noting that floodwaters have swamped a vast area across southern B.C., keeping millions of people away from their homes and thwarting much needed aid from reaching those affected by the disasters.

“Even where communities and essential government services have been spared, help may be delayed or not be available for affected residents,” the press release read.

“The flooding disaster is a national tragedy on a scale we have not seen in Canadian history.”

So far, no one has been killed as a result of this pipeline shutdown, but the pipeline will only stay shut down until at least July 10. As of now, this is the longest pipeline shutdown in Canadian history.

When it is reopened, Canadian oil has promised to meet shipping commitments. This includes shipments to China, Mexico and India. However, the oil industry will have to pay a premium due to the flood and travel delays in moving the oil.

This is not the first major flooding in recent months. After a relentless rainfall caused many devastating floods in Alberta, two pipelines were closed and Kinder Morgan Canada decided to temporarily stop all oil production there.

“One quarter of Canada’s oil production has been cut off,” said former Alberta premier Ed Stelmach to CBC News. “And since Kinder Morgan put out that press release at about 3 p.m. on the afternoon of Wednesday May 3, we’ve seen a 100% drop in oil production and a drop in the value of the Canadian dollar as a result of this oil production.”

These floods are just the latest reasons why it’s better to avoid being too dependent on a single resource. Climate change has proven to be an unrelenting opponent of this goal. In fact, climate change is the greatest contributor to the drought and wildfires in Alberta.

Still, the economic downturn from this industry blow isn’t the only threat to Canada’s economy. Following a reorganization at Citizenship and Immigration Canada, many experts warn of increased immigration numbers with a limited capacity for supporting them. When this happens, Canada’s economy is often held back.

“That’s exactly what happened following the recession in 2008. Our country reached a point where it was exporting more than it was importing. There were claims then that we would be out of the economic recession in a matter of days,” said former Parliamentary Budget Officer Kevin Page in an interview with CBC. “What happened is that growth continued for a few years. But the process of eliminating that problem of ‘growing out of’ the recession did not start until we lifted the cap on immigration in 2010. The net result of the recession that we have experienced since then has been that Canada’s potential growth rate has been reduced.”

Fortunately, there are many alternatives to Canada’s crude oil industry. Alternative energy sources, such as wind and solar power, could become a more viable option in the future. But there’s no escaping the impact flooding has on Canada’s industry right now.

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