This is an opinion piece from Brian Jean, the former leader of the Wildrose Party of Alberta, and a former Conservative MP representing the Athabasca and Fort McMurray regions.

(CBC)

Our energy industry is currently in trouble, but Albertans are resilient, and the product has long-term value. The world will need and want our energy in the future — so we will get through this.

It will be painful, many businesses will fail, and most of us will see a negative impact on our prosperity and standard of living, but we will get through this.

Having said that, the government of Alberta needs to take urgent steps to protect Albertans over the long term from the extremes of volatility in the global and regional energy markets. This means significantly increasing the oil storage capacity in Alberta.

We have recently seen regional and global examples of how energy markets can massively fall out of balance.

In 2018, two West Coast refineries that bought Alberta oil went offline for maintenance. This, combined with pipeline constraints and market speculators, drove the differential between Alberta oil (WCS) and U.S. oil (WTI) to what was then an all-time high of $50 per barrel.

As the value of WCS plunged, the provincial government was required to curtail production in order to break the market psychology that undervalued Alberta oil.

Curtailment not enough

This spring, a price war between Saudi Arabia and Russia followed by the demand collapse from the worldwide COVID-19 quarantine has plunged global oil prices to virtually record lows.

The value of Alberta's WCS has fallen even further — as I write this, a big cup of coffee sells for more than the spot price for a barrel of WCS.

Alberta has announced that it will further curtail oil production. While this is a necessary step to help prop up prices, it results in lower employment in the energy industry and in Alberta selling the wealth of future generations at a discount.

Remember, the resource belongs to Albertans — it is our oil. The oil companies only extract it and pay us a royalty.

The solution to riding out temporary extreme fluctuations in energy prices is to have the government buy and store oil when prices crater and then sell it back into the market when those prices recover.

To do that, we need to massively increase Alberta's storage capacity.

Oil storage tanks owned by the Colonial Pipeline Company in Linden, N.J. The United States has 727 million barrels of oil in its Strategic Petroleum Reserve. Alberta has none. (The Associated Press)

Alberta has just 88 million barrels of oil storage capacity — all of it privately owned.

The United States has well over a billion barrels worth of storage capacity, including 727 million barrels in its strategic petroleum reserve in underground salt domes on the Gulf Coast. China has 476 million barrels of strategic reserves. Alberta has zero.

By massively increasing oil storage capacity in Alberta, we can absorb short-term price shocks and supply-demand imbalances and even profit from them — all while creating much needed employment.

Alberta has many salt and gas domes and the government should immediately begin the process of exploring whether we can use our geology to create our own strategic petroleum reserve capacity.

Put our underground storage to use

This is something that cannot be done by the private sector because the government expropriated all underground salt and gas domes and pore spaces to use for carbon capture and sequestration.

We are doing very little carbon sequestration, but if the right geology for underground storage exists along the oil pipeline hubs between Fort McMurray, Hardisty and the U.S. border, then it already belongs to the government, and we should immediately begin the process of putting it to use.

Even if Alberta's salt and gas domes end up being in the wrong places or technically difficult to exploit, the government needs to bring more surface storage online. It should work with the private sector to create more storage tank farms.

Once we are out of this shock, global oil demand will sustain this industry for many more decades. Alberta oil is now easy to extract, sustainable and, after initial investment, can be produced inexpensively.

If we solve our export pipeline issues, the world will be using Alberta oil for the rest of this century. If we don't solve these issues, the Americans will continue to buy it at a discount.

There will always be short-term hiccups in the energy market. The creation of strategic storage capacity by our government can provide us with a way to weather those problems and, if the reserve is large enough, it can be a tool to help government even out the booms and busts of an energy economy.

This can be an important way to protect the future prosperity of Albertans.