Jim Prentice lives in Calgary and is a Global Fellow at the Wilson Center’s Canada Institute in Washington. His book Canada, Energy and the Environment will be published by Harper Collins.
It is encouraging to see some early signs that Canada’s new governments understand that export pipelines are vital to Canada’s economic future.
Canada is one of the world’s largest exporters of crude oil. We produce four million barrels of oil a day and export three million barrels of it. We are also the world’s fourth-largest exporter of natural gas.
Sadly, we are not a global presence when it comes to our energy resources. Canadian governments play checkers, while others play chess.
The critical problem is that we have effectively landlocked ourselves and lack the pipeline or port infrastructure to access global markets or realize global ambitions. Instead, we serve as a supplier to one customer, admittedly an important one, the United States.
The United States has been a comfortable energy market for Canada for many years, but today, the American market is saturated with competing oil-supply sources and new technologies have opened up its own oil and gas supplies. Those new supplies have pushed aside Canadian natural gas and have suppressed the prices for continental oil, including Canada’s. This isn’t because the Americans are taking advantage of us; it is what free markets do when they are oversupplied and it is costing Canadian governments billions of dollars every year.
The answer obviously lies in keeping our costs down and opening additional global export markets for our oil and natural gas.
Today, a pall has settled over the Canadian energy industry, brought on by OPEC’s success in collapsing commodity prices, but also by opposition on every front to the expansion and export of oil from Canada’s
Our attempts to access the Asia Pacific basin have stalled in the face of opposition to Enbridge’s Northern Gateway project and Kinder Morgan’s Trans Mountain expansion. Neither is supported by the government of British Columbia and both are actively opposed by many of B.C.’s First Nations. Then there is the Energy East project, which would open up the Canadian market from B.C. to New Brunswick and the Atlantic basin. It had seemed straightforward enough – until recently. Now, Energy East is opposed by Montreal’s municipal leaders, by some First Nations and by the province of Quebec. And, of course, there is the Keystone XL Pipeline blocked through the intervention of the President of the United States.
Canada’s First Nations have been especially resolute in their opposition, unmoved by promises of economic advantage and unconvinced, especially on the West Coast, that the Canadian energy industry or the Canadian government really knows what it is doing when it comes to the protection of the marine environment of Canada’s Pacific coast.
All of this is, justifiably, cause for alarm.
The Americans, by contrast, have moved quickly to advance their own commercial interests. American refiners have benefited for years from cheaper oil feedstock, including Canada’s, and have therefore enjoyed a competitive global edge for their gasoline and diesel fuel. They moved with lightning speed to allow export of their natural gas via liquefied natural gas (LNG) facilities. And most recently, the U.S. Congress repealed the United States’ 45-year-old export ban on oil. Within 30 days, American light crude oil was loaded in tankers and bound for higher-priced export markets. Meanwhile, Canada procrastinates. We have no operating LNG facilities and no meaningful oil exports.
Most disturbing in all of this is the negligence that Canada is showing in advancing our own world ambitions. The Canadian oil sands are arguably the most important resource asset held by any Western democracy in the world – with enormous geopolitical significance.
The development of our oil sands, along with natural gas from both Canada and the United States, now means that the North American goal of energy sufficiency (not independence) has been attained. The Americans are delighted by this, as they should be. Strategic thinkers in the United States (those who play chess) are now equally excited by the parallel objective of using Canadian oil and North American natural gas as global export assets, weakening the global economic and political power of OPEC suppliers.
And yet, Canadian governments dither, without so much as a discussion of the possibilities, timidly viewing the largest democratically held petroleum reserve in the world as an embarrassing environmental problem, rather than an opportunity. Does anyone think that the Americans would cap their oil-sands production or procrastinate in the building of pipelines if the oil sands were located there? Would China or France?
The impact of collapsing commodity prices and lack of export capacity upon Canada’s economy and its public finances is profound. The growth in Canada’s energy economy, centred in Western Canada, but which is a positive influence in every region of Canada, has stalled. Investment has declined. Projects have been cancelled. Job losses mount. Our national government and the Alberta government face rising budget deficits and the Canadian dollar has plummeted to its lowest levels since 2003.
Low prices will eventually be superseded by higher prices and by even more volatility. By then, the United States will be exporting Canadian crude oil from American ports – to their own advantage.
And we will still be talking endlessly about pipelines, still playing checkers while others play chess.Report Typo/Error
Follow us on Twitter: