Wednesday, December 7, 2011

Building pipelines to export oil might be Nation-Building - but which nation?

The Conservative government is using an amazing range of rhetoric to sell the Northern Gateway pipeline - which is designed to ship oil from the tar sands to China- to Canadians. In their latest attempts, Natural Resource Minister Joe Oliver claims the plan is a priority for "Nation Building". Considering that one of the most famous examples of Canadian "Nation Building" was the railway that connected our Atlantic and Pacific coasts, it might be worth while to look at some of the facts behind Joe Oliver's claim to see if it makes sense.

First, Canada requires 2 million barrels of oil each day to meet our current needs. Canada also has one of the least energy-efficient economies in the developed world requiring 1780 barrels of oil per million dollars of GDP, compared to countries like Denmark who require less than 750 barrels for the same benefit in GDP, which means our overall economy is highly vulnerable to high oil prices. In addition to our oil consumption, Canada currently exports more than 2 million barrels of oil per day to the US for a total of 4 Million barrels of oil per day.

Now comes the problem. Canada only produces 3 million barrels of oil per day and Eastern Canada is completely dependent on 1 million barrels of oil primarily shipped over 9000 km by oil tankers each day from unstable regimes in the Middle East. If oil prices rise suddenly or if these regimes stop exporting this volume of oil or if this steady stream of oil tankers is interrupted, our brothers and sisters in Eastern Canada will literally freeze in the dark.

On top of this problem, Eastern Canada's manufacturing sector has faced dramatic declines in recent years and this has resulted in serious unemployment and a growing gap between the rich and poor. Recent OECD reports indicate these problems are primarily caused corporations moving jobs overseas to take advantage of cheaper labor costs.

Interestingly, these problems are entirely related to high oil prices. First, the Canadian dollar is viewed as a petro-currency because Canada is a major oil exporting country. Higher oil prices over the past 5 years have led to a 40% rise in the value of our dollar and this indirectly raises the cost of employing Canadian workers relative to other countries. Second, higher energy prices also increase the cost of running factories and shipping materials which adds additional burdens to the manufacturing industries.

So, let's review Joe Oliver's claim that building a 900+ km pipeline across pristine BC wilderness that is home to more than 130 First Nation communities to fill 200 oil tankers per year that will ship the oil through one of the most environmentally sensitive regions in the world on the way to China is a nation building priority. Ultimately, this will leave Eastern Canada completely dependent on high priced foreign oil while increasing the value of the Canadian dollar which further erodes the competitiveness of Canadian workers, exporters and tourism industries which will lead to greater unemployment in all of these sectors.

Wouldn't it make more sense to upgrade the bitumen here (generating Canadian jobs) and building a 2700 km pipeline to Eastern Canada to ensure they have a reliable source of energy for their manufacturing industries?

Wouldn't that be Nation-Building?

Environmentalists, aboriginals won't stop pipeline: minister

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