COVID-19 shows need for a bilateral U.s.-canada oil pact
Creating an Opec-free market would protect us and ensure our energy independence, Diane Francis writes.
Canada and the United States should join forces by banning all oil imports from Saudi Arabia, Russia and other OPEC countries and replace them with oil produced right here in North America.
The creation of an Opec-free market would protect our two countries from price shocks and ensure our energy independence. Given OPEC’S ongoing sabotage of international oil markets, a bilateral energy pact will be essential going forward.
The U.S. and Canada produce as much oil as Saudi Arabia and Russia combined and can produce more than enough to meet our combined domestic needs. By 2019, the Canadian and American oil industries were already heavily integrated. Western Canada exported 4.4 million barrels a day of oil to the United States, and the U.S. exported one million barrels a day to Eastern Canada. We also imported from foreigners: up to half a million barrels a day was imported to Eastern Canada, mainly from Saudi Arabia, but also from Norway, the United Kingdom, Nigeria and Azerbaijan. The United States produced more than 12 million barrels a day, but also imported another two million barrels daily from Saudi Arabia, Russia, Mexico and Colombia.
By banning offshore oil, an additional market of up to 2.5 million barrels a day would be freed up for American and Canadian oil producers, if demand returns to pre-pandemic levels. (Canada would already be self-sufficient if Energy East had been built, but Quebec’s pipeline ban from the West is supported by the Liberals and separatists. This is despite polls showing that most Quebecers would rather use Canadian oil.)
A bilateral deal will simply mean that Eastern Canada will get all its oil from American, rather than overseas, suppliers. The U.S. and Canada each have more than enough capacity to meet that additional requirement, and then some.
This would ensure that our oil supply would be secure and less vulnerable to cartel pricing schemes.
The oil price collapse was triggered by a 30-per-cent decline in demand due to the coronavirus lockdowns, but was worsened when Saudi Arabia flooded the market with oil. This was part of its long-term strategy to drive the higher-cost shale and oilsands industries out of business, so Saudi Arabia can hold us to ransom once more.
This is why the country should be shut out of our oil supply and reasonable, regulated prices — for producers and consumers — should also be established. Would this mean higher prices in North America since shale and oilsands are more expensive to produce than Middle Eastern oil? No. OPEC’S cheaper production costs have never been passed along to western consumers and, worse, their enormous profits have been pocketed by the thieves and despots who meddle in our politics and cause trouble around the world.
COVID-19 has revealed the danger of relying on foreign supply chains, whether it be for masks or commodities. Oil is a strategic commodity, since it is the lifeblood of modern economies. We have lots of it and must gain control over its supply — permanently.
Now is the time to dump OPEC and establish a bilateral oil deal that would capitalize on the competitive advantage of North America’s vast resources. Bilateral energy self-sufficiency will also optimize the buying power and value of our currencies. If Canada’s oil export industry is permanently crippled, the Canadian dollar will fall to US60 cents or lower.
A new deal will increase the size of the pie for these vitally important industries on both sides of the border, and protect consumers from gouging by offshore price-fixers. Frankly, it’s a no-brainer.