Strategy

Live & Learn: Pierre Alvarez

The former President of the Canadian Association of Petroleum Producers talks about hybrid cars, climate change and knowing when to leave the office at the office.

Born March 22, 1959, in Trail, B.C. • Longtime energy industry adviser and insider

There are few industries where you can see what the prices are when you drive down the street every day. Price per litre of gas is up there. You don’t see that for copper; you don’t see it for electricity; and you don’t see it for paper; but boy do you see it for the price of gasoline.

My family and I moved to Calgary the spring of ’99 and the price of oil was $11 a barrel. The world has changed.

I grew up in Trail with five brothers and sisters. I’m No. 3 of six. My dad was a doctor, and my mom was at home. Trail was a great community. It was home of the Smoke Eaters, the last amateur team to win the World Hockey Championship.

I worked my summers at Cominco in a big refinery in Trail. I took a year off, travelled around the South Pacific, went to Queen’s to do my master’s degree in politics and found that academic life wasn’t for me. Flora MacDonald was the MP for Kingston in the early ’80s, and one of my thesis advisers knew her very well and said, “Why don’t you think about working on the Hill for a little while?”

I’ve been doing energy policy for over 25 years now, so I’ve seen lots of things come and go. What has been different in the last few years is that we’ve never seen the price of oil continue to stay high or escalate for such a long period of time.

Global demand is growing very, very quickly. They’re putting 8,000 new cars a day on the road in China. Global demand is going up at a time when global supply cannot come on at the same rate.

I have a family van that’s very fuel efficient and highly rated, and a small sedan. When I turn those in, I’m trying to figure out what the hybrids are like. My only question is: what do you do with the batteries afterward?

Governments, as a group, have not understood that you can’t keep layering on. You had the income trust decision; you had changes to the oilsands tax regime; you’ve got climate change. As prices continue to go up, you can stand a certain amount of additional costs. But there is a point where things will slow down and there will be a reaction.

When you’re this big an industry and you’re having this big an impact on the landscape, you’re going to face escalating demands on the environment. I think people understand that. Our challenge now is to take the capital that we deploy, the brain power we have, the innovation we develop and not just focus on the economic issues, but focus on the economic and the environmental issues.

It’s been said we fought royalty increases. We didn’t fight royalty increases. We said very clearly there was room for increases, but remember two things: You have to recognize as the prices go up, costs go up; and, secondly, this is a commodities business and at some point, prices will come down.

Now, to be honest, prices have stayed up, and they’ve been very sticky for a long time. But nobody that I know in this industry is counting on $130 oil on a consistent basis to project economics.

We’ve been at climate change for 15 years now. We’re seeing increasing signs of federal and provincial systems that don’t interact and aren’t harmonized. We’re seeing expectations of what industry can do well beyond what is physically going to be possible. So while the royalty issue certainly attracted all the attention, the bigger issue is going to be climate change when you look at the long-term health of the industry.

This is an industry that works hard — let’s face it — especially in this job, where you’re interacting with CEOs from so many companies on so many issues. Do I lose sleep over it? You know, you’ve got to be able to leave the office at the office.

There are jobs that demand a lot from you. There’s a point where you say, “I think I’ve done what I can do.” The decision to leave CAPP is one that my family and I have talked about for a while.

You are as good as the people that you have around you. The next best idea isn’t going to come out of a computer. It’s going to come from one of your people. It is, without a doubt, the business of managing, finding and developing people that makes companies the strongest.

If there’s a mistake, own up to it. If you’re going to fix it, make sure you fix it, because if you’re going to have any longevity, people want to trust what you say. Integrity and honesty are what it’s all about. With a little bit of luck, if you’ve got the first two, you’ll be successful.