No matter how much Canadian oil sands producers cut costs, John Stephenson argues it can never be enough.

While the CEO of Stephenson & Co. noted some players in the sector will be able to squeeze out tiny profits in a US$50 per barrel oil price environment – Husky Energy and Suncor Energy, for example, can operate with at least some margin for profitably with prices above the US$30 level – he stressed the oil sands’ economic heyday is over.

“I’m sure the last buggy-whip manufacturer had razor-thin margins and it would have done an excellent job of cutting costs,” Stephenson told BNN on Tuesday, “but it doesn’t really matter if there’s a systemic shift.”

Oil sands producers in northern Alberta have among the highest operating costs in the world. At the same time, limited market access due to ever-increasing controversies surrounding new pipeline proposals, combined with the higher cost of refining thicker oil sands bitumen, means those producers must also sell their output for some of the lowest prices in the world.

Western Canada Select, the most common grade of oil sands bitumen, typically sells for roughly US$15 per barrel less than the North American benchmark West Texas Intermediate price. That means oil sands producers are among the first to lose money when prices fall, which Stephenson said will make the sector struggle to attract investors in hopes of funding potential growth.

“It is not a growth sector, and one of the issues particularly for the oil sands is, if you’re sitting in London or New York or Hong Kong or Tokyo and you’re running institutional money, are you really going to think about being a shareholder in something that’s going to cost billions, take 10 to 15 to 20 years to realize a return and be in the high-cost production when price is under pressure and global growth is slow?” Stephenson said.

“I don’t think so.”

Producers have managed to shave roughly six dollars per barrel off their overall costs in the oil sands over the past year, but analysts have long been skeptical about whether those cuts will be sustainable over the longer term. Unexpected issues – such as the devastating Fort McMurray wildfire that forced more than half the region’s total production offline for weeks – can often send costs soaring.

Suncor said late Monday it would be able to return production back to pre-fire levels by the end of June and its operating costs would not exceed previously announced guidance of $30 per barrel. Syncrude, however, one of the largest oil sands production facilities that is now majority owned by Suncor, will see its operating costs jump 13 per cent as a result of the wildfire to as much as $44 per barrel.

When oil prices fell below US$30 per barrel earlier this year, TD Securities warned more than two thirds of Canadian oil producers were generating negative free cash flow, meaning they had to spend more to extract a barrel of crude from the ground than they received from buyers. In addition to oil sands production, that figure included the more than one million barrels of cheaper-to-produce and higher-priced lighter grades of crude Canada produces daily.

Analysts say any new oil sands projects will need oil prices to peak above US$70 per barrel to justify the multibillion-dollar investment, and new oil sands mines in particular – which are by far the largest job creators – would need prices in the triple digits to be economic. The National Energy Board has been forecasting since February that most of the growth in the oil sands would effectively stop by the end of this decade.

“Cost containment will absolutely be the matter of survival or not,” Stephenson said. “Because we are the highest cost producer in the world and in general – maybe not with Suncor or with some specific properties, but in general we’re the high cost producer.”

“And in a US$50 [per barrel], call it, oil market, forget it,” he said. “We’re just not competitive.”