Alberta Government Leadership on Energy Diversification Needed to Create Jobs Lost to Oil and Gas Automation

Premier Danielle Smith says the oil and gas industry is creating jobs. The Canadian Association of Petroleum Producers says the oil and gas industry is creating jobs. The data, however, says that over 33,000 Alberta oil and gas jobs were permanently lost in the past decade, and economic modelling suggests that as many as 50,000 more may be cut due to automation by 2040. The province needs to find other ways to create good-paying employment for its residents, like investing to further diversify the energy sector.

Employment in the Alberta oil and gas industry peaked at 171,364 in December 2013 at the height of oil sands construction (industry employment was 137,612 in February 2024). The boom was driven by massive capital expenditures to build oil and gas extraction facilities. Peak capital spending occurred in 2014, with $33.9 billion for the oil sands and $26.7 billion for crude oil and natural gas.

Then the Saudis opened the oil taps, driving down global prices, and by the end of 2014 the boom was finished. Western Canada Select bottomed out below $30 per barrel in 2016, struggled to reach $38.50 in 2018, then crashed again the following year because of a Keystone pipeline leak that restricted exports.

Employment followed prices. The low of about 120,000 was reached in 2016, then again in 2020 because of the COVID-19 pandemic. Each time the Alberta oil and gas job market did not recover to previous heights.

Critics – such as the United Conservative Party (the UCP was created in 2017) – loudly blamed then-Premier Rachel Notley and the New Democratic Party (NDP) government, ignoring the fact that the provincial government doesn’t control global oil prices. Unfortunately, the many inaccurate claims against Notley stuck and Jason Kenney came to power in 2019 on a slogan of “Jobs, Economy, Pipelines.”

Not surprisingly, Premier Kenney’s UCP government fared worse than the NDP, losing about 14,000 jobs in the ten months before the COVID-19 pandemic was declared in March 2020. Since Danielle Smith became premier in October 2022, she has not done enough for energy workers as their fortunes continue to be volatile and unpredictable.

Meanwhile, Alberta oil and gas production marched ever upward. In just 12 short years, oil extraction rose from 1.9 million barrels per day to 3.7 million barrels per day. By 2030, supply may top 4 million barrels per day.

High prices and record output combined to make 2022 a record year for oil and gas company profits. Revenue that year rose 53.6% to $269.9 billion. Net income grew by about 80% compared to 2021, topping out at a whopping $63.1 billion, most of which was returned to foreign shareholders.

Will oil and gas workers fare any better than they have over the past decade? Not likely, say experts.

A 2020 forecast by consultancy EY and Petroleum Labour Market Information indicates that Canada may lose another 30% of its oil and gas workforce by 2040 – that’s 40,000 to 50,000 jobs. Faced with pressures from investors to produce ever higher returns, corporate executives are using digital technologies – including artificial intelligence and machine learning, automation, sensors and big data, and drones – to replace workers.

“The social contract between Albertans and the companies is that we allow them to profit from extraction in return for jobs, royalties, and taxes,” says Gil McGowan, president of the Alberta Federation of Labour (AFL). “Since the industry is now shedding jobs as fast it can, the labour movement has to ask itself whether the existing deal needs to be renegotiated.

Unfortunately, most of the jobs have been lost in the service sector, which is concentrated in rural Alberta, where good-paying jobs are relatively harder to find than in the cities. The number of service jobs plunged from a peak of 78,000 in September 2014 to 46,100 in February 2024, many of them replaced by technology. Pumpers, for example, no longer drive around oil and gas fields periodically checking on wells because remote sensors transmit data via the cloud to head office, where it is checked by technical staff.

This is a global trend that Alberta cannot escape. The oil and gas sector has matured, and companies are under pressure to lower costs. The first place to economize is always workers.

“The Alberta oil and gas job machine is broken,” said McGowan. “What we need is leadership from the provincial government to build more diverse energy industries that will provide employment for Alberta workers.”

McGowan criticized Premier Danielle Smith and the UCP government for ignoring recommendations set out in the AFL’s “Skate to Where the Puck is Goingreport, released in October 2022.

“We described numerous opportunities in seven sectors where Alberta could invest to create the energy jobs of the future, as well as seven policies the government could use to help attract private investment in those sectors,” he said. “Instead, the Premier is trying to grow oil and gas production and exports, which will help her corporate buddies but do nothing for Alberta workers because of industry automation.”