After being ravaged by low crude oil prices and subdued demand amid the coronavirus pandemic, Alberta has recently decided to shift its focus to the petrochemical industry instead. On Friday, the provincial government announced it will help petrochemical companies offset their expenditures by offering grants that will cover up to 12% of capital costs.
The goal of the new program is to attract new investments worth tens of billions of dollars into the province’s petrochemical industry, which will in turn help diversify Alberta’s oil-reliant economy. The recent downturn of global oil demand has created some unprecedented consequences for Alberta’s economy, with employment levels still 5.4% below pre-pandemic levels, and new investments into the province’s oil sands are virtually nonexistent.
However, Alberta’s latest measure will likely clash with the federal government’s strongly-supported initiatives to reduce plastic consumption, including the elimination of single-use plastics such as take-out containers and straws. Prime Minister Trudeau’s plastic ban joins other governments across Europe, as well as California and India that are taking proactive measures to reduce plastic waste that ends up killing wildlife and polluting oceans. On the contrary though, the pandemic has reignited the demand for disposable plastics such as gloves, wipes, masks, and bottles of hand sanitizer, which all help mitigate the spread of the virus.
Likewise, the Alberta government argues that modernized recycling will help reduce pollution, rather than government-mandated plastic bans. The province’s extensive reserves of natural gas liquids and natural gas will certainly attract petrochemical investments, but incentives such as grants are needed in order to compete with plastic production in regions such as the US Gulf Coast.
Information for this briefing was found via the Government of Alberta. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
