Federal election will hinge, again, on cheap oil

It is hard to remember now, but there was a time when it was the Conservatives who wanted to make oil more expensive and the Liberals who campaigned against it.

It was 40 years ago this year that the Liberals brought down Joe Clark’s minority government over a budget that would have increased the tax on gasoline by 17 cents a gallon — about 4 cents a litre, or roughly the same as this spring’s first tranche of the carbon tax — while allowing the federally regulated price of oil to rise.

Prices were already soaring in the wake of the Iranian revolution (the second major spike in the price of oil after the Arab oil embargo of 1973); the Liberals protested, in the words of the fatal motion, that the budget placed “an unfair and unnecessary burden … on middle- and lower-income Canadians.” They fought and won the 1980 election as the party of cheap oil.

Indeed, the national energy program, introduced in that fall’s budget, deliberately suppressed the domestic price of oil below the world price, as well as im

posed new taxes and other measures aimed at confiscating surging oil revenues for the federal government, to be distributed to its favoured causes and enterprises.

At the time it all made perfect political, if neither economic nor environmental, sense. Since the 1930s, the Liberals had won a string of elections — 10 of 14! — on the strength of their domination of the large and populous provinces of central Canada: Ontario and Quebec. Both were heavy users of oil, as the locus not only of much of the country’s population but of its heavy industry; neither produced it.

Oil production, on the other hand, was largely confined to one province, Alberta, which had neither the population, with just seven per cent of the seats in the House of Commons, nor the voting record (it had never returned more than a handful of Liberals in any election since Laurier’s time) to much interest the Grits.

It was no contest. More than half the Liberal caucus elected in 1980 was from the province of Quebec; nearly nine in 10 of its MPS were from central Canada; just two were from west of Ontario. If a cheap oil policy meant pillaging Alberta — economists calculate the NEP in its brief life transferred as much as $100 billion from the province to central Canada — that was a chance they were willing to take.

The situation is very different today, and not only because the two parties have switched places. Population movements have given Alberta, and the West generally, greater clout in the federation. In 1980 the four western provinces combined had only about as many seats as Quebec; today they have a third more.

Neither is Alberta so alone as it once was, with the emergence of Saskatchewan and Newfoundland as major energy producers (plus smaller but significant industries in B.C. and Manitoba).

Most important, a dear oil policy, as embodied in the federal carbon tax, has very different political consequences than the cheap oil policy of the 1980s. For where the NEP pit the producing and consuming regions against each other, the carbon tax, so far as it hits both consumers and producers of oil (or is perceived to do so), seems to have united them. Or at least it has in Ontario.

It is difficult to imagine Peter Lougheed in 1980 receiving the sort of standing ovation Jason Kenney was accorded at a luncheon speech in Toronto earlier this month. But then, even before anyone had heard of carbon taxes, Ontario’s politics seemed to be changing: no longer looking east to Quebec as much, as in the past, but increasingly looking to the West, and identifying with it.

It isn’t just that more of Ontario’s economic interests lie to the west than before, but its political values, once so different, more nearly resemble those of the region. (A Doug Ford government would have been unthinkable in the Loyalist Ontario of 40 years ago.) A political coalition built on Ontario and the West, which in Clark’s day proved neither durable nor capable of delivering a majority, is today a real possibility.

At any rate, that is what this election will decide, as Ontario will decide this election. Only two times since 1921 has a party won a majority in a federal election without also winning a majority of the seats in Ontario. It is particularly crucial to the federal Conservatives. Lacking a historic base in Quebec, they cannot win without it. And it has never been more crucial than it is likely to prove in this election.

It’s hard to see the carbon tax being terribly controversial in British Columbia or Quebec, each of which already has its own version of it, with bipartisan support in their provincial legislatures. For opposite reasons, it’s hard to see many seats in Alberta or Saskatchewan turning on it: what few seats the Liberals have to lose there were lost long ago. It’s in Ontario where it might prove decisive.

The last provincial election was instructive in this light. The provincial Liberals, under Kathleen Wynne, had bet that Ontario was fundamentally a province like B.C. and Quebec: consumer provinces that could nonetheless be persuaded to support a carbon tax, more or less out of a sense of environmental duty. Ford’s victory has left that very much in doubt.

I say this as a fully paid-up subscriber to the orthodoxy on carbon pricing. For the Tories to win by pretending either nothing need be done on climate change or that nobody needs to pay for it would confirm all of one’s worst suspicions about Canadian politics. But cheap oil was a winning strategy in 1980 and I fear it may well be again in 2019.