Seamanship Quotation

“In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination.”
— from Michael Oakeshott's
Political Education” (1951)

Thursday, December 9, 2010

In Canada, “strategic” automatically means China

As David Emerson, a former Liberal and Conservative Cabinet minister, put it in a recent Policy Option article: "The lack of a pipeline and port terminal facility to safely and efficiently transport Western Canada's resources to energy-hungry customers around the Pacific Rim is critical to Canada's robust economic future."

“. . . The politicians should wait until the results of that review [NEB] are in before trying to kill a project that might have a significant impact on diversifying a Canadian economy that remains dangerously over-dependent on the faltering U.S. economy for three quarters of its exports.”

—John Ivison, “No time for crude political games,” National Post, December 7, 2010.

What is the one thing that could trump environmental and financial concerns about building a $5 billion, thousand-kilometre oil pipeline across the center of beautiful British Columbia? That one thing today is played on all manner of fronts: physically bypassing the United States in order to reduce dependency on the US market by selling to Asia.

The Northern Gateway Pipeline may prove, after a couple of years of hearings, to be a sensible project. But, on the face of it, Canada’s trump argument is a deuce.

First, reducing Canada’s exports of crude oil to the US from 99% to, say, 90% (or even 80%) might make trading more interesting, but it wouldn’t alter our so-called “dangerous” dependence on the US. It could, in some circumstances, make the oil business even riskier. Canada sells to the US at the world price and could not expect to get better terms from Asia. As the US reduces reliance on oil and Asia’s demand keeps growing, opportunities for trade diversification will open up. However, the only event that would change market shares dramatically would be a deep American recession. The impact of such a recession on Canada would not be offset by energy and resource sales to Asia. In fact, a severe American recession would most likely deflate resource prices and markets everywhere.

Second, as joint partners in a continental energy and capital market, neither Canada nor the US should be building North American infrastructure simply to not cross each other’s border. An “all-Canadian” pipeline, if there are cheaper alternatives, would be an extravagant act of chauvinism.

The Chinese don’t care if the oil in the ground was once Canadian or American—or even Iranian, for that matter. We could as profitably sell Canadian oil to US brokers who could then sell US oil to China. Further, if there is cheaper alternative infrastructure capacity to build or rent to move Western Canadian oil to Asia, the new line wouldn’t make sense.

The Enbridge proposal may be far and away the best commercial solution to the problem of moving Western oil to market. But it should not be given a premium simply for being all-Canadian. The idea of Canada as a stand-alone energy superpower (with strategic options all its own) assumes that—in the “national interest”—Canada can turn from one buyer to another and can use oil politically at the expense of its neighbour and its own integrated industrial economy. That’s an illusion.

No comments:

Post a Comment