Why Irving Oil's decision to shelve its plans for a new refinery is an opportunity to grow in a different direction.

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Alec Bruce

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There was always something vaporous about Irving Oil's ambition to erect a second refinery in Saint John. So many intangibles "" the price of oil, market demand, available labour, government support, private partnerships "" conspired to derail the project before the first spade even hit the ground. And so, it wasn't particularly surprising when the company announced, last week, that it has experienced a change of heart.

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In a press conference that resembled a funereal address, Irving spokesman Kevin Scott declared: "Over the last 30 years, gasoline demand kept growing about one or two per cent a year, and that was forecast to continue basically forever, despite changing demographics. [But], since 2007, we've actually seen gasoline demand fall each year. And it may well fall again in 2010. It was going down and we now expect that to continue. Things are much worse than in 2006."

Indeed, what a difference two years make. When the company unveiled its intentions for the new Eider Rock facility, it honestly believed it had a fighting chance to enhance its global presence. After all, it had earned a well-deserved reputation for innovation, reliability, product diversity, and management skill. Moreover, refining capacity in North America was gearing up to meet what was widely expected, in every quarter of the industry, to be increased worldwide demand. The stars seemed perfectly aligned to favour such a venture.

But, as Scott intimated, these were projections filtered through the rose-coloured glasses of the time. "I don't think [the recession] was that significant," he said. "The demand reduction was already starting and that might have been early signs of the recession. It had a short-term impact, but we're looking beyond that. We're looking at the forecast for 2015, and for 25 years beyond that, because that's the time period we have to justify this investment. We have to look at where product demand is going and where capital cost is going and we don't see wither one of them moving in the right direction."

In other words, something far more fundamental than a nine-month economic downturn is happening in international oil markets. Demand for refined products, like gasoline, may be falling "" but so is production of the resource, itself. The United States, alone, generates a fraction of what it consumes. Emerging powerhouses like China and India are slurping up as much as they can get their hands on. Meanwhile, traditional sources of comparatively inexpensive oil "" the Middle East, the North Sea, Mexico "" are slowly, inexorably running out.

Some refer to this as the "peak oil" phenomenon. I won't be this dramatic. Still, the evidence of a supply crunch now and in the future seems overwhelming. And prices will escalate as exploration and drilling companies comb ever more dangerous and difficult locations for the black gold on which we rely for just about everything. In this context, Irving Oil's decision is just smart business. And while many New Brunswickers might mourn the loss of a still-born dream, I prefer to see it as an opportunity.

The Irvings are a savvy bunch. Their knowledge of energy issues is peerless. Such expertise is a coveted commodity in a world whose major, industrialized nations are beginning to shift to renewable sources of power. Who better than this entrepreneurial family to lead New Brunswick into a future of wind, tidal and solar technologies? If the issue for the province is economic sustainability, then let it begin with energy self-reliance and the high-tech manufacturing jobs and export development opportunities this will surely create.

There's nothing vaporous about this dream.

Alec Bruce is a Moncton-based writer. He may be reached via www.thebrucereport.com.