Pipeline expansion at standstill
The head of Canada’s largest bank made the case for new pipelines on Monday, while also calling for a national price on carbon.
“Our ability in the decades ahead to finance innovation, to create technologies that will power the 21st century and help transform the world to a cleaner economy, depends on our decisions today to get our natural resources to market,” Royal Bank of Canada CEO Dave McKay told a luncheon in Edmonton. Demand for oil and gas continues to rise around the world and domestic energy companies will lose their window to supply the market without new pipelines, he said.
If that happens, McKay said, Canadian governments will need to tax other sectors to make up for lost revenue.
“We can’t get to the economy of the future if we don’t use all of our resources smartly and sustainably,” he said.
McKay noted that RBC has a large stake in the energy sector, and therefore has an interest “in Canada getting this right.”
Oil and gas investments represent roughly 1.3 per cent of the bank’s total loan book as of the third quarter of this year — which is proportionately less than some of the other big six banks, but RBC is still one of Canada’s biggest lenders to oil and gas companies.
The bank forecasts that oil prices will average US$45 per barrel this year, but could rise to average US$59 per barrel in 2017 if the U.S. economy continues to grow.
Alberta’s economy continues to contract given the now two-year-long downturn in oil prices.
McKay said “Canadians are polarized more than ever about oil and gas — when we should be focused on how cleanly we can produce it, how safely we can transport it, and how wisely we can consume it.”