Step 1: Canada must fix its energy errors
USA relies on Canadian energy. Canada relies on the US market. The USA wins.
Trade War
It’s done. President Donald J. Trump has been sworn in as the 47th president of the United States of America and is, as I post this, busy signing dozens of day one Executive Orders to shake up the world as we know it.
In addition to unwinding many Joe Biden policies, Trump has promised to introduce crippling tariffs on Canada and other close American allies. The price of friendship with Donald Trump’s America is, apparently, never high enough. The new president sees no allies in the world, only adversaries. The cost to the USA of this world view will be high in the long run. But, in the short run, it is US allies like Canada who will suffer. Grievously. Perhaps, Trump hopes, mortally.
In his inaugural address, Trump underlined his plan to “Drill, Baby. Drill!” and fully develop America’s energy resources. He invoked the historic axiom of “Manifest Destiny” – a dog whistle to alarm Canada – but turned it towards Mars, confirming Elon Musk’s dream of colonizing the red planet under an American flag part as a core part of Trump’s agenda. There is little doubt Trump sees Canada’s oil and gas reserves as part of America’s destiny.
Meanwhile, our national government is in disarray. Leaderless for some time now, there is no one to face the menace across the border.
Provincial premiers are trying to step up to lead Canada’s response. Individually, however, their mandates are limited. Ontario’s premier Doug Ford has been the most outspoken and adopted the highest profile. He’s rattling his sabres, floating the idea of turning off America’s lights. Alberta’s premier Danielle Smith is standing up for her province which depends on revenue from oil and gas exports – chiefly to the USA. No interruption of that energy flow or the cash flow it produces will work for her.
In the meantime, Canada prepares for a battle with little or no economic weapons at our disposal. We are uniquely and horribly vulnerable to the vagaries of US leadership. How did we get into this mess?
More importantly, how do we get out of it?
When your heavily-armed and increasingly belligerent neighbour tells you he’s going to take your house and subjugate your family, you have to take him seriously.
It’s time to fix past mistakes
We don’t have to wait for US tariffs to take effect. We don’t have to threaten or impose our own counter-tariffs. We can focus immediately on strengthening those areas of our economy that make us the most vulnerable.
We begin by fixing past mistakes. This will not be quick and will not be easy. But, it can start right now. Before the Liberals choose a new leader. Before Canadians elect a new government. Right. Now.
Energy First
I am not an expert on energy resources or pipelines. I’ll leave the details of what needs be done to the experts. But, I do not a thing or two about strategy. And Canada’s national strategy is… absent. We need one. Quick. Energy will be at the heart of it.
Canada’s lifeblood has always been our natural resources, where we are rich and the world is hungry. This will continue to be the case for generations to come. The world will not stop needing oil, gas and other forms of energy any time soon. Despite environmental rhetoric to the contrary, a total global transition to “clean energy” is decades away. It just is.
Right now, Canada’s friends and allies in Ukraine are struggling through another cold winter, under brutal attack from Putin’s Russia. Europe and Asian allies are forced to pay Vladimir Putin for Russian energy because there are few alternatives. They could surely use some of Canada’s natural gas to keep their lights and heat on. They’re not getting it because Canada made stupid decisions in the past. It’s time to right those mistakes.
Canadian threats to shut off oil and gas to the USA are feeble. Canada’s liquid energy cannot flow from the prairies to the East without going through the USA. Our Eastern provinces must rely heavily on foreign energy. Turning off the taps for America means turning off the taps for much of Canada east of Manitoba. We can freeze the Americans this winter only by freezing ourselves or doubling down on foreign oil often from brutal anti-democratic adversary states.
Much of the gasoline and refined fuels we put in our motor vehicles is refined in the USA. Canada has limited domestic refining capacity. Too much Canadian oil is shipped to the USA, where it’s refined and shipped back to Canada with the value added. Again, turn off American oil. Turn off Canadian gas.
Canada has increased its pipeline capacity to the Pacific coast, but the lack of deep sea port access in B.C.’s lower mainland requires much Canadian oil to be shipped overseas from American ports in Washington state. Canada nixed the Northern Gateway pipeline that would have carried Canadian energy to a deep sea port in northern B.C. We refused to build a Liquified Natural Gas facility there that could have shipped Canadian natural gas to Asia. Much Alberta oil flows south, through the U.S. to the Gulf Coast for sale abroad. I could go on.
The USA. depends on foreign oil to run its economy. Almost 70 percent of that oil comes from Canada. But, because Canada’s domestic pipeline infrastructure provides few routes to tide waters for foreign distribution, we have few alternative markets for that oil. Canada, therefore, is reliant on one major consumer: the USA. As a result, the Americans are able to extract a steep discount for Canadian energy. They have us over our own barrels.
As I write, the spot price for Western Canadian Select crude oil is $64.60 per barrel. The price of oil from Texas is $78.10. That’s a 17 percent discount on the Canadian oil. There are some differences in the oil quality, but much of that discount is simply due to the fact there is only one customer for Canadian oil and that customer can name its price.
If Canada was a serious country with a national strategy it never would have come to this. But it did. So what do we do now?
Build pipelines
Threatening to turn of the lights in the Eastern USA or shut down the flow of oil is not a strategic solution to Canada’s problem. Opening new markets for our oil and gas is.
If Canada had ready access to non-US markets, the price of the oil we sell would increase. If we were able to ship our plentiful LNG abroad, we could vastly increase our revenues from energy sales to non-US markets. The less we depend on the U.S. as our only customer, the less beholden we are to the whims of their governments.
Canada should be able to ship Canadian oil and gas from one side of the country to the others. To Canadian-owned deep water ports on both the Pacific and Atlantic oceans – and, if the globe is in fact warming, to the Arctic Ocean as well. This would provide us with the ability to heat our own homes with our own energy throughout the country. And, it would allow us to sell Canadian energy to the highest bidders around the world.
There are projects, long on the books, repeatedly abandoned that would accomplish this. Energy East would allow Canadian oil and gas to flow to the East coast. Northern Gateway would build out a pipeline to northern BC to reach the Pacific Ocean and Asian markets. It’s time we got these done.
Get serious
Quebec opposes Energy East, even though it relies on money from Alberta’s oil sales to fund its provincial budget. It’s time for a come-to-Jesus moment with Quebec. Energy East is a national project in the best interest of Canada – and Quebec. No more free riding.
The Trudeau government cancelled Northern Gateway because “there is no business case for LNG,” according to the Prime Minister. A statement made in the presence of German Chancellor Olaf Scholz who was in Canada asking for Canadian LNG. The world, including Canadian allies in Europe and Asia with whom we should have much stronger trade relations to offset our over-dependence on the USA, goes hungry for Canada’s energy. No business case indeed.
Energy independence is a national strategic imperative. We should pursue these infrastructure projects as if we were at war. Because, we are. Donald Trump has made his intentions crystal clear: Canada is an adversary to the Trump administration, not a friend.
If building out this infrastructure requires Canada to adopt a war time economic footing, let it be done. If that means using the Emergencies Act to clear obstacles from our path to self-reliance, then do so.
We need not engage in head-to-head tariff-for-tariff warfare with the USA. But any prudent nation, lead by any serious government would act with haste and alacrity to gird itself against economic assault.
In Trump’s own words, he will use “economic force” to bend Canada to his will. Generations of Canadian governments have given Washington the weapons it needs to destroy us. We need to act now. As if our sovereignty depends on it.
Because it does.