The rest of the world has adjusted to the new reality. Why can’t Trudeau and Biden?
What is the long-term future of a society that attacks its economic foundation for political gain?
North Americans must ask this question.
By putting politics first, some politicians in both the U.S. and Canada undermine North America’s core strengths of energy security, economic competitiveness and continued prosperity.
Many elections have been won on the future of energy. Fossil fuels are bad. Renewables are good. Financial support for oil, gas or coal producers was branded as a crime against the future of civilization. Those who asked questions were labelled climate change deniers.
But that was so 2021. Everything has changed.
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Since the Russian invasion of Ukraine in February, the western world is determined to figure out how to replace oil and gas from one of the world’s largest producers.
You’d think this would precipitate different messaging from both Ottawa and Washington, but modern politics obviously leaves no room for flexibility.
But this behaviour is confined to North America because the rest of the world is quickly rewriting energy and climate policies to adjust to new realities.
The latest round of oil bashing followed the release of third-quarter earnings by American and Canadian producers. Big profits. Record earnings.
While the alleged driver is artificially high commodity prices, the unrecognized contributor is operating costs that have been slashed to the bone to survive seven years of low commodity prices and attacks from politicians, radical environmentalists, the public and capital providers.
Oil companies have been repeatedly told they have no future. Only 18 months ago the International Energy Agency told oil producers not to invest in new supplies. A CNN headline read, “Oil companies advised to stop drilling now to save the planet.”
So producers have been paying down debt and returning capital to shareholders. When they do get bright ideas about increasing output, legislative, regulatory and permitting obstacles continue.
After ExxonMobil, Chevron, Shell and TotalEnergies announced big Q3 profits, U.S. President Joe Biden told a Democratic party event, “Can’t believe I have to say this, but giving profits to shareholders is not the same as bringing prices down for American families. I’m going to keep harping on it. They keep talking about me picking on them – they ain’t seen nothing yet. I mean it. It outrages me.”
A California Democrat called oil profits “obscene.” Implicit in that adjective is knowing exactly what oil company profits should be, which, for the doctrinaire left, is zero. That’s no solution to the global supply crisis.
It’s not about energy security but the mid-term elections. What could matter more?
Federal Environment Minister Steven Guilbeault gave Canadian producers similar treatment with a different spin. In a video, he questioned again why producers weren’t putting more money into tackling climate change. A Canadian Press story stated, “This is the third time in the last six months Guilbeault’s frustration has spilled over as oil company profits soar.”
Having spent most of his adult life trying to put oil producers out of business, the minister wants to see more money spent on his priorities, not rewarding long-suffering shareholders. Increased production is never mentioned.
That North American oil producers are again profitable is good and could lead to investment in increased output under different policies is lost on politicians in Washington and Ottawa.
The entire developed world is envious of the energy security and low prices enjoyed in the economic fortress of North America. European companies are considering relocating to the U.S. because of stable supplies of lower-cost energy.
Natural resources created Canada. Coal at the western end of the vast prairies gave the backers of the national railroad the confidence to complete the transportation link that connected the country.
Huge oil reserves helped the U.S. win international wars in Europe and the South Pacific and to become an economic powerhouse and global force. Canada contributed high-octane aviation gasoline refined from the Turner Valley oilfield during the Second World War.
When oil prices exploded in the 1970s and again early this century, it was the western oil companies that put new supplies on stream and reduced prices, to the benefit of the entire world.
In the late 1970s, it was the North Slope of Alaska, Europe’s North Sea and Canada’s oil sands that returned balance to world oil markets.
When crude hit US$146 a barrel in 2008 – which helped precipitate the world financial crisis – it was Canada’s oil sands and U.S. shale oil that put 10 million barrels per day of new production on stream by 2020. This led to the collapse of world oil prices in 2015 and gave the world five years of unrepeatable economic prosperity.
Today, however, these same oil producers are criticized by their own governments.
With energy security taken for granted last decade, plentiful oil at low prices allowed politicians in Europe, Canada and the U.S. to win elections by campaigning against fossil fuels and the promise that wind and solar power were suitable alternatives.
But as Europeans plead for more fuel from North America to save the economy and liberate them from Russian energy, the governments that could help the most continue to campaign against the very industry that has made Canada and the U.S. the envy of the western world.
Surely this cannot be sustainable.
David Yager is an oilfield service executive, oil and gas writer, and energy policy analyst. He is author of From Miracle to Menace – Alberta, A Carbon Story.
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