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Libyan Leader Moammar Gadhafi adjusts his gown after speaking in Tripoli on March 2, 2011. (Ben Curtis/Ben Curtis/Associated Press)
Libyan Leader Moammar Gadhafi adjusts his gown after speaking in Tripoli on March 2, 2011. (Ben Curtis/Ben Curtis/Associated Press)

Gwyn Morgan

The ethics of oil in a time of turmoil Add to ...

The recent book Ethical Oil, by my favourite iconoclast Ezra Levant, argues that buying Canadian oil sands production is morally superior to purchasing oil that helps prop up corrupt regimes such as Moammar Gadhafi's in Libya and Hugo Chavez's in Venezuela. This paradigm-busting book is gaining traction, with Environment Minister Peter Kent adopting the "ethical oil" defence of the oil sands (a sin for which a coalition of anti-oil-sands groups has vowed he will pay dearly in the next election).

But with Mr. Gadhafi ordering savage attacks on his own people, while trying to recover billions of dollars siphoned off and stashed in various countries, how can anyone argue that Libya's bloody oil largess is ethically superior to Canadian oil? Mr. Levant also points out that environmental standards governing the Canadian oil sands are vastly superior to those in the oil-soaked Niger Delta or Venezuela's Orinoco region.

The "ethical oil" argument was already squaring off against the "dirty oil" campaign of U.S. environmentalists when U.S. Republicans (who favour Canadian oil) replaced Democrats on the powerful House of Representatives energy committee. Now, with the freedom firestorm destabilizing oil-producing countries in North Africa and the Middle East, security of supply trumps all else. As Republican Ed Whitfield, head of the energy committee, said: "Events in the Middle East ... certainly reinforce the ... importance of Canada, and our relationship with Canada as it relates to energy."

Libya produces less than 2 per cent of world's oil supply. But together, 13 Middle Eastern and North African countries supply more than 28 million barrels a day, or about a third of global demand. In 2010, the production in countries where anti-government protests have occurred was as follows: Iran, 4.2 million barrels a day; Algeria, 2.2 million; Libya, 1.9 million; while Egypt, Yemen and Tunisia collectively produce slightly more than one million barrels a day. This adds up to 9.3 million barrels a day, well above global spare capacity.

Essentially, that spare capacity is in one country - Saudi Arabia, the world's top oil producer at 11 million barrels a day. Just across the causeway, members of Bahrain's Shiite majority are protesting against the Sunni-controlled emirate. Sources in the region say Saudi diplomats are warning Bahrain not to give any quarter to the protesters. It's inconceivable that the Saudis would allow a successful uprising so close to home, particularly a Shiite-led rebellion that could foment rebellion of Saudi Arabian Shiites, along with its unemployed and disaffected youth.

Only a few weeks ago, instability in the House of Saud seemed inconceivable. But the generational divide that is driving regional protests is perhaps greatest in Saudi Arabia. Nearly half of its people are 18 or younger, and 40 per cent of Saudis aged 20 to 24 are unemployed. At the other end of the divide, the country's top three rulers are aged 76 to 83. Saudi activists want jobs, democracy and greater rights for women. Through Facebook, they are calling for a "day of rage" on March 11.

No wonder U.S. President Barack Obama's congratulatory speech after the overthrow of Egypt's Hosni Mubarak was so poorly received in the Saudi capital of Riyadh. And when American diplomats threatened to end U.S. financial support for the Egyptian military if it intervened to support Mr. Mubarak, the Saudis immediately offered to replace that financing - a notable schism in the long-standing close relationship between Saudi Arabia and the United States.

With countries producing nine million barrels of oil a day facing instability, any serious disruption to Saudi Arabia's 11 million barrels would send oil prices to stratospheric heights. Already high food prices would follow suit, pushing the world into unthinkable economic and political turmoil.

The West needs to avoid this nightmare scenario, even if it means compromising democratic ideology with the reality of preventing global economic meltdown.

Despite the billions of dollars poured into scientifically impractical "green" energy initiatives, world oil demand keeps rising. So do the risks of catastrophic supply disruption. Canadians should be thankful that the country's oil sands guarantee uninterrupted supply, and Americans are being reminded that their biggest energy supplier is close, reliable and friendly.

Gwyn Morgan is the retired founding CEO of Encana Corp.

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