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Wednesday, November 23, 2011

Einstein and the Future of Alberta's Energy Market

By Walsh Mannas (Calgary)

Bloomberg recently ran an in-depth article reviewing Alberta’s role in global energy supply in the wake of the American Government pushing off a decision on the XL Keystone Pipeline for 15 – 18 months (the article can be found here).

The article addresses a number of key issues facing Alberta’s energy policies which include evaluating Alberta’s potential trading partners, environmental risks associated with various pipeline routes and the delicate relationship between Albertan and American politics.

Immediately after the global economic correction which hit Canada in late 2008 there was a lot of ink spilled contemplating what historical averages, be they rental rates, commercial real estate vacancy rates or energy prices, Alberta would stabilize at. My position is that recent technological advancements and the forming of new international trade/investment relationships have rendered the correlation between historic and future averages nearly obsolete. As Albert Einstein mused that it is insane to expect different results by doing the same thing repeatedly I would argue that it is insane to expect the same (historic) market results by producing energy more efficiently and selling that energy to a broader market.

I draw this conclusion by evaluating the technological advances Alberta’s energy market has adopted through the past decades (horizontal multistage natural gas fracturing and steam assisted gravity drainage being two of the most advantageous) and the ongoing diversification of foreign trade/investment partners. These two market realities paired with buoyant oil prices have insulated Alberta from recessionary forces over the past three years and have put Alberta in a great position to meet the ever increasing global demand for refined and unrefined energy alike.

As recent Alberta energy land sales have hit all time highs this year, energy production is becoming more and more efficient and as the global energy markets are clamouring for more energy security Alberta seems to be an ideal market for long term investment.

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