May 18, 2011

Have we completely bought the idea that “There Is No Alternative”?


Once again, over the last few weeks Canadians have had energy costs on our minds. Prices at the pump rocketed up to nearly $1.50, while the price of a barrel of oil was actually going down.

What can we possibly do?  Industry officials blame unrest in the Middle East and floods on the Mississippi. Former Liberal MP Dan McTeague, who has followed the issue for some time, says “the price of gas can be whatever a handful of players in Canada want it to be.” And federal Industry Minister Tony Clement said he will ask oil industry refiners, distributors and retailers to appear before a parliamentary committee to explain their “opaque” pricing methods once Parliament resumes.

All of which, of course, will amount to absolutely nothing. Then, we will do it all over again the next time we have a spike in costs.

What I find remarkable is just how much our choices seem to have been limited over the years.

We first began to think about this issue nearly 40 years ago in the early 1970s when OPEC members decided to combat years of declining energy prices by combining to increase the cost of oil.

In Canada energy concerns were increased by growing foreign domination of our energy sector and increasing concerns about our own supply of oil.

It was also a time of growing Canadian nationalism.  For two years with a minority Liberal government, the NDP under David Lewis pressured Pierre Trudeau take some action after years of neglect had led to the almost complete takeover of Canada’s energy industry by foreign corporations.  In 1974 Trudeau recaptured a majority but in 1975 his government still introduced a measure to give Canada some control over its energy – Bill C-8, the Petro-Canada Act.

The Liberal Energy Minister was Donald MacDonald, a man who would subsequently lead the Royal Commission that would recommend free trade with the United States. But in 1975 he had different views.  Speaking in the House of Commons MacDonald said:

This bill is a most important element in the government’s long-term planning to secure adequate supplies of energy to meet our national needs. It is firmly rooted in the basic objectives of our energy and resource policies which are, to ensure for Canadians adequate and reliable supplies at reasonable prices, as well as a direct share in the wealth which the development of our resources generates.

Speaking of the now controversial oil sands MacDonald said:

The largest private entities which may be potential participants in oil sands projects are necessarily the foreign controlled internationals.  The best way to secure a Canadian presence, a rate of development consistent with our national interest, a proper share of the income generated by such activity and full access to new technology, is by direct government involvement in key ventures through a corporation which can develop the necessary expertise. 

He continued:

It is striking that every one of the dozen countries from which we import significant quantities of crude oil has its own state oil company and is progressively increasing the role of that company in relation to international transactions.  If circumstances continue to develop in this direction, it could well be more advantageous for us to import some of our crude oil through a public enterprise rather than entirely by means of private companies. 

MacDonald pointed out that Canada’s energy sector was 90% foreign controlled and said:

One way in which Canadians can assert their presence in this heavily dominated sector is by having a nationally owned company which could bring together smaller Canadian companies into a larger, more competitive entity through joint ventures and the forming of consortia.

Conservative energy critic James Gillies responded to MacDonald. Gillies was a former chair of the Ontario Economic Council.  Many of the Conservative arguments against the Bill would be familiar to us.  But many of his comments would astonish us if we heard them from the Conservative government today.  He said:

No one today objects to the proposition that it is the government’s responsibility to provide a level of employment, to keep prices stable, to do something about regional disparities and to lessen disparity of income among individuals in different parts of the nation. 

He presented an alternative solution to foreign domination of the sector.  He said:

If the government is serious about the proposition that there is too much control of the petroleum industry in Canada in foreign hands, surely the answer is to change the tax laws to make it more attractive to Canadians to invest in the industry, and more attractive for companies which own shares to divest them to Canadians.

This solution subsequently disappeared with the passage of trade agreements requiring foreign companies to be treated equally with Canadian companies.

Responding for the NDP was Tommy Douglas, retired as leader of the party but still serving as its energy critic. Douglas told the House:

It should be remembered that the people of Canada have paid billions of dollars to enlarge and enrich foreign oil companies, and only now, belatedly, are we setting up an economic vehicle to develop our petroleum resources for the benefit of Canadians.

While Douglas supported the idea of the legislation he wondered if it went far enough.

This House must recognize that passing this Bill will mean nothing at all unless Petro-Canada is given a real role in the oil industry in this country. This Crown Corporation is an economic tool and nothing more. It can e used effectively, or it can lie idle and hardly be used at all.

He suggested to the House

That Petro-Canada can be a very useful economic instrument.  It can be used to break the economic stranglehold of the foreign oil cartel which, as the Minister said this afternoon, controls over 90 per cent of our production and some 99 per cent of our oil refining. This international oligarchy has squandered our Canadian resources, fleeced the Canadian public, and now it stands ready to hold the government and the people of Canada to ransom to compel us to accept its terms in order to get the economic development we need to meet our oil and gas needs.

The Petro-Canada Bill was passed and the company began operation in January 1976. It expanded through the 1980s until the beginning of the 1990s when the Mulroney government began its privatization. Jean Chretien finished the privatization process. Petro-Canada went through good times and bad but I know we would be better off today if Canada still owned a major oil company.

Our response to energy shocks 35 years ago was Petro-Canada.  We talked about the national interest. We talked about how to capture a proper share the value of our resources. What is our response today?  Oil companies will be politely invited to appear before a Commons committee where they will give their well rehearsed excuses.

The triumph of the oil companies is that today the thought of a Petro-Canada like solution is not even considered. Canadians can barely imagine their right to control and benefit from our resources. Albertans are convinced that even with pitiful returns on their oil royalties, they are better off being run by foreign oil companies than governed by a democratically elected government.

For 30 years we have seen our political options narrow. We need a discussion as to how we can widen them again.

For people who are interested, I am attaching the entire House of Commons debate here in PDF format.  It is worth the read if only to remind ourselves of how limited our thinking has become.