Canada's Oil

I was originally going to post this in Canadian politics but actually this deeply affects USA and China as well. Canada is embroiled in a major political debacle over its energy industry. I'm not just talking about the tarsands in Alberta but all sorts of other energy sources.

Here's a link to provide some background over the political mess it is:

http://www.cbc.ca/news/politics/story/2012/08/10/pol-gateway-future-harper-cabinet.html

But I'll throw out the issues here:

International Market

China and USA both want to buy Canadian oil, primarily tar-sands oil but there is also Saskatchewan and Manitoba oil to think about.

There are three proposed pipelines:

• Northern Gateway pipeline, sends oil from Alberta to the west coast of British Columbia to ship oil in super tankers off to the East Asian market where oil prices are the highest
• Keystone XL pipeline that sends oil from Canada to the Gulf, where the American oil refineries are sitting at half capacity and are begging us to bring in oil... unfortunately Americans are paying us very little money per barrel to make this venture even worthwhile (and will produce zero jobs in Canada once the pipeline construction is done)
• Pipeline to the East, there's actually several proposed ideas and the biggest one is that Enbridge will reverse the flow of a pipeline originally running to east coast refineries to send oil from the prairies to there to be processed, the big thing here is that it keeps crude in Canada and we refine it (but our refineries aren't built to handle bitumen)

Keeping it Canadian

A lot of talk has surrounded the fact that shipping off crude means very few jobs stay in Canada and we have to buy back the refined goods. This ultimately means it's a net-negative deal for Canada in any economic analysis that extends beyond a few years.

It's also incredibly strange for a first world country like Canada to be dependent on a primary resource industry. We should be refining our goods and manufacturing products to sell abroad at international prices, not undercutting ourselves. What are we going to do in 30-40 years when our resources run out?

Sharing Revenue

All the oil producing provinces are landlocked and have no way to shipping crude anywhere without the use of land in other coastal provinces like British Columbia. Even Harper restrained himself from commenting on dividing resource income between provinces, just to show how difficult of an issue is. There's no good idea of how revenue should be shared.

Alberta's Redford wants other provinces to just kowtow to her and build pipelines and stfu. That is of course, completely unreasonable. Other provinces would be accepting the risk of oil spill and not getting a cut of the revenue?

What about the concept of equalisation? It currently allows provinces who heavily depend on resource income to cut it out of the formula.

Other Energy

There is actually more than just oil in Canada. We have the world's supply of uranium. We have hydro. We have fracking. Ontario and BC has green tech. We don't have any plans for any of those in the medium or long term.

Going to have to disagree with you that building a first-world country on a primary-resource economy is strange. Or at least, it's a strangeness that the world has already seen. For example, see the Arab states. Running Canada as an oil emirate should be feasible.

Another thing is that oil doesn't really create a lot of jobs.

I suppose what I'd ask is whether Canada has enough skilled workers in the field to be able to set up its own oil refineries, and whether it's profitable to run oil refineries within environmental regulations (which are the big reason Alaska doesn't refine its own oil).

edited 11th Aug '12 6:17:35 PM by Ramidel

I despise hypocrisy, unless of course it is my own.

I'd love for you to send it here, but if anything Canada should handle it's oil itself.

"sharing" oil revenue seems awfully unfair though. From what I've heard, it basically means the workers end up getting paid less so people not even involved get a share. :/

Course, In the long run I'd like this all to be meaningless.

I'm baaaaaaack

@Joesolo: There's a reason for it. If an oil pipeline crosses other provinces, those provinces have a right to be compensated for the use of the province's land, as well as for the risk of an oil spill.

And unfortunately, "handle its oil itself" is a pain in the ass in any country with half-decent environmental regulations.

edited 11th Aug '12 6:49:12 PM by Ramidel

I despise hypocrisy, unless of course it is my own.

Not to mention that there is no logical reason for resource revenue to be excluded from the equalization formula anyway. It will even help Alberta when this bubble pops and they end up with a huge slag pool to clean up.

Politics is the skilled use of blunt objects.

As someone who's spent the past 10 weeks or so working in the pipeline industry (last day was today, and I shan't be returning, for a variety of reasons), I'll say this:

It's a horrendous industry causing a lot of damage to Canada's environment, and a lot of the people in it are motivated purely by short-term greed and have no foresight.

We need a fuckton of restrictions on whatever we are doing with this oil and the money, to make sure we build an economy that can survive when we run out of oil.

Because if we don't, we are going to face some serious problems when it runs out.

"Lock up your girlfriends, lock up your wives, Grim's on the loose so run for your lives." - Pyrite

Horay For Common Sense!

He's right. Ya gotta be careful. and not OUR careful*

, actual careful. You dont want your own exon valdez or Prudhoe Bay.

edited 11th Aug '12 11:16:11 PM by Joesolo

I'm baaaaaaack

Why not stockpile the money made from taxing the oil for a rainy day and invest it in something reliable? Recognise it isn't a permanent source of income, and thus keep revenue generated by it to one side for emergencies where a quick cash injection is needed.

One of the causes of this recession was both government and the private sector being up to their eyeballs in debt, to simplify it greatly. Keeping a little oil money back now could save a lot of expense and agony later.

Plus, it means once the oil does run out/become worthless, and you need to clear up the damage, the money is there to actually do it. It means not immediately feeling the benefit of the oil, but your grandchildren will thank you for it.

EDIT: In addition, money doesn't just disappear; as long as you have that capital invested somewhere it'll be doing something, even if it isn't actively being spent on services.

edited 12th Aug '12 2:38:14 AM by GameChainsaw

The term "Great Man" is disturbingly interchangeable with "mass murderer" in history books.

Why not stockpile the money made from taxing the oil for a rainy day and invest it in something reliable? Recognise it isn't a permanent source of income, and thus keep revenue generated by it to one side for emergencies where a quick cash injection is needed.

In Alaska, we could only get that idea past the people by agreeing to dividend out the interest, and now that money will never be spendable because the dividend is a political third rail.

I despise hypocrisy, unless of course it is my own.

That said, at least it's there and paying dividends. But I see the problem.

This is what I wish we were doing with Britain's oil. Or at least some of it.

edited 12th Aug '12 2:48:40 AM by GameChainsaw

The term "Great Man" is disturbingly interchangeable with "mass murderer" in history books.

Britain's oil? Oh yeah, there is some oil off the northeast coast of England. Otherwise it is Scotland's oil. Or at least, that is the argument a lot of folks up here would put. And I am not sure I disagree with them.

Seems like Canada needs to sort out how the oil gets out, what happens when it does and where it gets transported to and how that gets done. Is there not some kind of best practice guide out there to follow for the oil industry, or does no-one really give a damn?

The problem with the tar sands is that shit is so dirty, if you actually bother to regulate it and charge people for cleanup, it's an economic negative - it costs more to extract, refine, and clean up afterwards than you get in selling it.

If we want to come out ahead in the long run, we should leave it in the ground.

Share it so that people can get into this conversation, 'cause we're not the only ones who think like this.

If their in so much debt, why not just use oil revenues to pay down said debt?

as for alaska- they should just dividend out HALF of the interest, or even 2/3s. keep the rest so it actually builds up.

I'm baaaaaaack

Oil is simply one stream of revenue. To spend it on cutting down the debt, you would have to cut something out of your budget proportionate to the money being accrued from the oil.

The term "Great Man" is disturbingly interchangeable with "mass murderer" in history books.

Well, actually it's not net negative so long as someone else is paying for the oil. We're not the only users of oil, it's mostly China/USA getting the oil. The problem is that our "market going rate" for a barrel is way less than the cost of getting it out. We need to charge more for the oil.

And while revenue sharing between provinces might seem shaky to the landlocked provinces, asking other provinces to assume so billions of dollars in risk for no money is asking for too much. You can't expect people to sit there with bitumen flowing under their soil to go "Okay sure!". What happens if Enbridge or Trans Canada fails and causes an oil spill? Alberta certainly isn't going to fork over a dime to help.

The Norway solution for oil money is likely the best idea. Our problem is that everywhere there is oil is also where there are the anti-tax neocons who think oil lasts forever.

No you wouldn't. This is NEW revenue. basically, don't go spending the new money when you still OWE money.

I'm baaaaaaack

I'm personally hoping the Keystone thing gets nixed. It doesn't even produce American jobs, so there is literally no reason for Americans to want that anymore than Canadians. (That, and Republicans are trying to wield it like a weapon to block other bills that produce actual, permanent jobs.) We've got enough fucking oil down here in Texas to keep the fatcats flush for decades. Hell, if our stuff is at half capacity it's the business's own fault for a variety of reasons.

And hell, the Nebraskans don't want it because of the whole "first plan went right next to a major water source" thing. That route has since been defeated, but I think they're still trying to block the whole thing entirely.

Scary thing is that the Texas oil fields must actually be cleaner than the Alberta tar sands...

Unfortunately anyone who brings up the drawbacks of Albertan oil gets nailed by the regionalism card. "Why do you hate Western Canadians?!" Mulcair actually had a point about the whole "Dutch disease" thing, though I don't really have the economic knowledge to explain it myself.

Politics is the skilled use of blunt objects.

It's pretty simple actually and all oil producing countries have the same problem right now, including Norway. Norway is mitigating the issue via massive investments (using the oil money). Basically, exporting oil drives up the price of CAD, making all other industries suffer because their products become relatively more expensive for export.

I think it's frightening that Alberta has virtually no economy once the oil runs out and then what? After all their hooting and hollaring about the evils of equalisation, they're going to be eating food-aid Newfoundland potatoes past 2040.

@Rationalinsanity: The tarsands are actually supposed to be the most environmentally damaging resource extraction industry in the world.

@Joesolo: We had a massive oil spill in BC already. The Valdez spill flooded our waters just as much as it did Alaska's, and was devastating to our coastline.

It actually led to a moratorium on oil tankers along our coastline for years. The Northern Gateway project, if approved, would end that moratorium. Elsewise, there have been no tankers allowed at ports north of Vancouver for twenty years.

"Lock up your girlfriends, lock up your wives, Grim's on the loose so run for your lives." - Pyrite

Oh not to mention the new tankers are super-tankers just to make you feel better.

"Better."

Yeah, no.

Not the case, as a British Columbian who cares about our environment.

"Lock up your girlfriends, lock up your wives, Grim's on the loose so run for your lives." - Pyrite

Actually, here is a list of things the oil could be used to buy instead of idiotic tax cuts.

• Restore funding to our genetics and stem cell research
• Restore funding to medical radio-isotopes so that we can continue to provide the world's supply of nuclear medicine
• Rail system to transport agricultural goods to the coastlines (nobody is going to complain about that)
• Well Alberta at least eliminated the debt but why are they in deficit this year? Balancing the tax cuts with oil is a bad idea. You know, I wouldn't even feel bad if they kept all the money in Alberta Pension Fund, just stop being dumb with it!

Buy Redford a new private jet, of course.

I despise hypocrisy, unless of course it is my own.

The sad thing is, that's probably why Alberta has a deficit...

"Lock up your girlfriends, lock up your wives, Grim's on the loose so run for your lives." - Pyrite