Oil Is Now a Four-Letter Word

In recent years, many of the developed world’s policymakers have duped themselves into believing that energy resources such as oil and gas can be taken for granted.

Perhaps the relative wealth of these countries has blinded some leaders to the fact that these assets are still of paramount strategic importance.

Or maybe there’s simply wishful thinking that clean energy is ready to supplant fossil fuels. While it’s true that technological advances are making renewable energy increasingly economic, we’re not there yet.

The latest evidence of the utter lack of seriousness about energy policy among some politicians is the Canadian Energy Strategy framework recently agreed to by the country’s provincial premiers.

Indeed, as the Financial Post notes, the document underpinning this “monumental” agreement mainly focuses on climate change and renewable energy, while the oil sands aren’t mentioned at all, even though that’s one of the resources that’s helped drive Canada’s growth.

Notwithstanding his recent mantra that oil is not a four-letter word, Saskatchewan Premier Brad Wall ultimately supported the strategy, albeit after some modest tweaks were made. Even so, his comments going into the negotiation are illuminating: “This energy strategy mentions oil, but it’s almost in passing. It’s almost like we’ve become embarrassed that we have this energy asset … ”

A cursory review of the nearly 10,000-word draft shows the word “oil” comes up just 11 times, while “renewable” and “climate” are mentioned 28 and 24 times, respectively. Though oil can also fall under the broader rubric of “energy,” a word that is, of course, frequently mentioned, oil absolutely merits far more individual attention than it received.

It certainly didn’t start out this way. Work on Canada’s energy strategy began back in 2012, initiated by a former premier of the energy-rich province of Alberta, who wanted to ensure that sufficient infrastructure would be built to transport energy commodities to key markets, particularly overseas.

The U.S. is the destination for the vast majority of Canada’s energy exports. But with increasing competition from prolific U.S. shale plays, Canadian energy producers must be able to diversify into other foreign markets in order to achieve enduring growth.

However, premiers of provinces with fewer resource plays, such as Ontario and Quebec, were more interested in using the negotiation to win concessions on environmental protections. And with the ascent of Alberta’s leftist New Democratic Party in the May election, green policies clearly gained further momentum.

To be sure, the agreement does discuss the importance of energy transportation infrastructure. But it does so almost as an afterthought. Pipelines are mentioned just four times, one of which is a citation.

Interestingly, the flurry of press releases and statements issued in the aftermath of the agreement by some of the more environmentally minded premiers attempted to obfuscate the decidedly green bent of the actual document.

Naturally, the outcome of any negotiation leaves frustrated parties on both sides. As dispiriting as this agreement might be for proponents of the energy sector, environmentalists were also upset that a pledge to adopt absolute cuts to carbon emissions failed to make it into the final draft.

As The Globe and Mail put it, “This leaves the global-warming language in the plan as little more than a series of vague aspirations for a ‘lower carbon economy.’”

In trumpeting the agreement, Ontario Premier Kathleen Wynne declared, “This is an issue of a strong economy and strong environmental protection, and those two things are not mutually exclusive. They must be complementary.”

In most cases, however, a strong economy is what helps underwrite strong environmental protections, at least until renewable energy becomes truly competitive against fossil fuels without an assist from government mandates.

And right now, Canada’s energy sector is in turmoil, acting as a drag on the economy as a whole. Although the premiers’ energy strategy looks to the long term, in the near term it seems like an especially inopportune time to kick energy producers when they’re already down.

Reality will eventually intrude upon ideology. But we’re also betting Canada’s premiers are rather more pragmatic than their new energy strategy suggests, especially when important tax revenue is at stake.