Monday, December 31, 2012

Stephen Harper's Oil Industry Mismanagement costing Canada dearly

Harper Firewall Blinkers
The Harper new Tories keep plugging the line that Harper's government is a sound manager of Canada's economy, and is doing all the right things all the time, hoping that constant repetition will persuade Canadian voters to believe this mantra.

Unfortunately for Canada, the Harper government is locked into its ideological blinders, which in essence have engraved on the left blinder the phrase 'Big government bad' and on the left blinder 'Small government good'.

This wilful blindness has prevented the Harper government from even thinking of acting strategically in the interests of Canada. 

Instead, Harper has chosen the course of opting out of the role the leader of a modern democracy should fill – that of a leader setting a course for long term development of a strong economy.

The latest example of this Harper failure to provide proper leadership for our country is discussed in David Parkinson's timely analysis of the problem facing one of the main economic drivers of our economy – our oil industry.

Parkinson writes:

The country faces a critical shortage of transportation infrastructure to get its oil to key markets – and it’s threatening to cut down Canada’s energy companies at the knees... 

“Western Canada’s oil industry faces faces a serious challenge to its long-term growth,” Toronto-Dominion Bank said in a report this month. “Production growth will become constrained unless new pipeline capacity is built to access new markets.”

Even though it has been clear for a decade that the heavy oil industry faces problems due to environmental concerns, neither the leaders of the Province of Alberta, the captains of the oil industry, nor the Harper government have taken the time to properly assess the nature of the problems, nor to arrive at innovative solutions.

And this is costing the oil companies dearly:

Nomura Securities International Inc. economist Charles St-Arnaud estimated that this gaping price chasm is costing Canadian producers a collective $2.5-billion a month in lost revenues, relative to what they would get under more traditional spreads to Brent of about $10-$15 (U.S.) a barrel (the current spread is about $55).

Share values are suffering as a result. As of Dec. 19, the stock prices of the top six producers in the oil sands were down, on average, 5.5 per cent this year, compared with a 4-per-cent rise in the S&P 500’s energy subindex; the median price-to-earnings valuation of those companies was barely over 10 – or 1.5 multiples lower than that of the S&P 500 energy group.

And the Harper government's sleeping at the switch is costing our country even more:

TD calculated that investment in Canada’s oil and gas sector was responsible for 20 per cent of the country’s economic growth in 2010 and 2011. It noted that a study this year from the Canadian Energy Research Institute estimated that if current proposed major pipeline expansions don’t proceed, “Canada could forgo as much as $1.3-trillion of GDP … and $276-billion in taxes from 2011 to 2035” as a result of the constrained activity in the oil patch.

Our economy is hurting because Stephen Harper and his handpicked ministers just cannot bring themselves to exert efforts to actually step in and provide leadership in seeking to solve the problems facing the oil industry. They have decided to define their role as the government of Canada as one of onlooker, leaving the heavy lifting to the provinces.

This wilful blindness is consistent with Harper's earlier stated belief in the firewall strategy for Alberta. For Harper, the role of the federal government is a very limited one (build an army, collect fewer taxes each year, dabble in some social issues) that rejects any responsibility for overall strategic direction of the country.

At a time when the oil industry, the oil provinces, and Canada needs men with vision, we are saddled with a do-nothing, small-state onlooker government, courtesy of Harper's blind spot. The 2015 election cannot come too soon if we are to optimize the development of this important resource in our Western provinces.


  1. Asleep at the switch or complicit with the people who have gained the most from the highly discounted Western oil? Have you checked recent extraordinary gains in Multi Nationals Refinery profits? Exxon for example.

    You may be missing the bigger picture.

    Note; Wise scribe Andrew Coyne missed it too apparently.

  2. I doubt your explanation is the one. However, not leading is one of Harper's main survival responses, so I'll stick to my explanation.

  3. What are you suggesting: that he should be doing even MORE to expedite rapid pipeline development than he's already done by gutting Fishing & Navigable Waters Acts to exempt them from federal reviews & messing w. various First Nations Acts to make it easier to build on, buy or lease their land w. the consent of just a few?! He IS showing the bullying, bull-headed leadership he's known for, on this file. Just cuz it's not as fast as oil co's want doesn't mean he's not hopping to.

  4. Yes, I am suggesting that the Prime Minister of Canada be front and centre in the devising of a national energy strategy that adequately plans for the increased export of tar sand and other oil and gas, for a review and amendment of the insurance provisions governing catastrophes such as tanker collisions at sea and oil spills on land from pipelines and trains; for the development of upgraders within our borders to that jobs and wealth are created in our country, to help replace those which have been lost when our manufacturing base was gutted; for a fairer deal for First Nations, including the gifting to them of 10% of the equity in the pipelines and other assets that will impact their lands; for tighter environmental standards and oversight.

    We are a small country, with a small internal market; to produce good jobs that pay well, we need to encourage exports of our natural resources and of finished products.


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