Energy fuels Canada’s economy and enervates its politics.
As with Saudi princes, dumb luck has made it less urgent for Canadians to confront their country’s shortcomings and reconcile Canada with big changes in the neighborhood. As commodity prices peak, Canadian politicians continue re-circulating ideas that soured when prices soured before.
Martha Hall Findlay has been branded by the Editorial Board of the Globe and Mail as a “policy-oriented” candidate for the leadership of the Liberal Party of Canada. She also lives in Toronto.
So, it’s not surprising that she secured free space in that paper to write about Canada’s energy industry and its pipeline infrastructure. There’s no other intellectual center in Canada further removed from the action yet more determined to sound more thoughtful about energy.
In her column, Hall Findlay joined an alliance of pinstriped bankers, pipeline engineers, cash-strapped politicians, and Canadian nationalists who believe that it would be inspiring, profitable, and incredibly sophisticated to lay more steel pipelines across Canada. The country, she claims, needs a “national strategy for energy infrastructure.” She sees the need, but never identifies who would pay—only that the federal government should have a “key facilitating and brokering role.”
Underpinning her seemingly inexpensive platitudes, however, are a couple of hot new truths that are more dangerous than true.
“Canada has an abundance of energy – and the world wants it. Yet, Canada is a captive supplier to the U.S., which results in a significant discount in the price we receive. And with the International Energy Agency’s prediction that America will become the world’s largest oil producer by 2020, our reliance on the U.S. market is even more worrisome.”
The numbers "2020" and the letters "USA" all by themselves seem to inspire dark visions in rather ordinary Canadians.
But Canada isn’t a “captive supplier” to the US. Today’s price discount is caused by a temporary bottleneck in US regional infrastructure, not because the US per se is a lousy customer. In addition, Canada isn’t just a supplier. It also buys oil from the US and overseas. Western Canadian oil moves north and south, and out of Canadian ports as well.
One forecast by the IEA and the delay by President Obama of one pipeline project will not close the US market for future Canadian exports and do not automatically make new east-west, all-Canadian oil pipelines necessary or commercially wise.
Furthermore, even if the US were to become a net seller rather than a net buyer of oil, there would be no strategic or commercial reason why American ports and refineries wouldn’t be able and willing to export Western Canadian oil to China and elsewhere, while continuing to transport American oil to Eastern Canadian refineries.
If economics were to decisively favor giving up on the US market, the private capital markets and Canadian regulators will facilitate the construction of appropriate alternative east-west infrastructure.
Conventional energy projects only need premiers’ conferences, prime ministers, think-tank endorsements, and "new strategies" by federal governments when the merits of the projects are moot.
Fortunately, Martha Hall Findlay and, more importantly, Stephen Harper don’t need to concoct a new strategy.
North Americans have a perfectly good one now. Continental free trade, continental investment protections, and a shared Canadian-US policy of allowing global competition to drive energy markets have made both countries spectacular energy leaders—and their consumers the envy of the world.
There’s no guarantee oil prices will always favor Canadian sellers. There’s no chance high prices won’t lead to new competitors and tougher competition for Alberta and Oklahoma oil producers. And there’s no way environmental concerns will fade away.
Shifting commodity-market realities, however, don’t demand that Canada rewrite its policies and give up on a continental vision that enriches both countries right now.