Further increase in energy costs could create societal unrest
By Bruce Lantz
It doesn’t seem all that long ago that Canadians took pride in their natural resources, and in our position among world leaders in resource development. Ranked in the top four in both resource exports and reserves, why wouldn’t we?
But now it seems as though we are ashamed. And our federal government is largely to blame.
Despite Canada’s vast resources in oil and gas, over-regulation and outright bans by government prevent them from being fully realized. Thus, when the rest of the world is clamouring for the oil and gas, even more now with the Russia-Ukraine conflict, Canada’s federal government largely shuns oil and gas development and instead wants the industry shut down. Meanwhile, the United States has vowed to increase oil and gas production to make up for the 1-1.5 million barrels of oil per day pulled off the market after Russia invaded Ukraine. And the U.S. is ramping up its liquefied natural gas (LNG) production to meet overseas demand, despite rising costs for materials and labour which will boost plants prices as much as 25%.
In Canada, pipelines are considered to be largely a curse, not a blessing, with Ottawa allowing excessive regulations and the Quebec government to end the much-needed $15.7-billion Energy East pipeline by refusing to let it cross provincial borders; cancellation of the Keystone XL pipeline from Alberta to the U.S.; and hurdles for the Trans Mountain pipeline expansion in British Columbia, the costs of which ballooned to $21.4 million after the federal government bought it for $4.5 billion. LNG plants planned for both the east and west coasts have run into hurdles, not support, from government, causing the backers of the vast majority of them to give up. And recently, the federal and Nova Scotia governments joined forces to extend an offshore drilling moratorium in George’s Bank, between the province’s Cape Sable Island and Cape Cod, Massachusetts, for another 10 years.
Thus we have the anomaly that Canada exports millions of barrels of oil per day to its neighbour, the United States, 98% of its total exports, but has to import millions of barrels from other countries such as Saudi Arabia to meet the demands of Canadians. Why, when we’re sitting on huge undeveloped oil reserves? Why does Canada’s rig count sit at around 100, down 120% from 2021 numbers, when our neighbours to the south have a count of 695, the most since 2020 and producing 1.29 million more barrels per day? Could it be because the U.S. industry is responding to high prices and prodding by its government, while Ottawa ignores the obvious needs and opportunities and instead rolls the dice on a carbon-free future?
For example, the Canadian federal government just announced another investment in â€˜clean energy’ to displace the use of fossil fuels: $300 million for wind, solar, geothermal and other projects in rural and indigenous communities. Ottawa has promised to cut climate-warming emissions at least 40% below 2005 levels by 2030 – a 293-megatonne reduction, and has called hydrogen a critical part of the solution to get to the ultimate goal: net-zero emissions by 2050. The federal government has provided tens of millions of dollars to auto manufacturers so they can reconfigure plants and begin to produce electric vehicles, and has promised to spend billions ensuring that there will be enough charging stations nationwide for this new type of transportation. Ultimately, experts say, overhauling Canada’s energy infrastructure will cost hundreds of billions of dollars. And while Canadian producers could boost oil production by half a million barrels a day, but an RBC report says emissions would then jump and up to $51 billion would be needed for carbon capture by 2030.
But while the government is banking heavily on using hydrogen to replace fossil fuels, a report from the Auditor General’s office says unrealistic assumptions were used in calculations which appeared to indicate the clean fuel could cut 45 megatonnes of emissions. But the recent report from the AG’s Environment and Sustainable Development Department said the federal government’s hydrogen strategy wrongly assumed low electricity prices, the adoption of aggressive and sometimes nonexistent policies and an ambitious uptake of new technology, compromising the credibility of the expected emission reductions, which would be better set at just 15 megatonnes. The report said government should standardize its approach to projecting emissions reductions, and improve the quality and transparency of it climate modelling.
Ironically, a recent Ipsos poll found that 72% of Canadians want to see more oil and gas shipped to European counties and 68% want to see the necessary infrastructure needed for these exports, while 77% want better access to Canadian petroleum products. “Clearly, global events are calling upon us and morally requiring us to remove our blinders,” said Montreal Economic Institute (MEI) policy analyst Gabriel Giguere in a news release.
That fits with a projection by U.S. bank JP Morgan, which said in its first annual energy outlook that the world needs to find $1.3 trillion of investment by 2030 in all types of energy output and infrastructure – including oil and gas – to avoid an energy crunch. The bank suggests that with this, demand will exceed supply by around 20%, with oil demand growing by 10% and gas by 18%.
“Until scalable, reliable, clean and affordable technologies are available, the world will need to work with all the current sources of energy – fossil and non-fossil – and their respective drawbacks,” the report said, warning that a further increase in energy costs could create societal unrest and a slowdown in the energy transition.
Governments were originally designed to provide decision-making for the collective, to take the cumbersome weight of running a country off the shoulders of its inhabitants so they could go about the business of making a living and providing for their families. Now, in Canada at least, it seems government has decided it knows best and will take whatever measures it deems necessary to force its constituents to do what it deems advisable. The greater good? A thing of the past.