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Energy

Justin Trudeau’s existential problems with oil and gas: Jack Mintz

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From the MacDonald Laurier Institute

By Jack Mintz

Squeeze the industry to please his party’s green base or keep output, revenue and high-paying employment flowing?

Talk at the latest climate-change shindig in Dubai has centred around the future of the oil industry and whether countries should pledge to phase out oil and gas production entirely or simply transform the industry in decades to come. Canada always talks a deep-green game at these affairs but are we really ready to nail shut the oil and gas coffin?

Maybe not. In Dubai Canada announced a cap-and-trade approach to oil and gas emissions but argued it won’t actually stop oil and gas production outright. The provinces, who yet again weren’t consulted, may not agree. Besides, promises are one thing. The record is another.

It also emerged in Dubai that the Emirates, seventh largest oil producer, is expecting to increase its production by a million barrels a day (mbd) by 2030. This is not a new trend. According to the U.S. Energy Information Service, the UAE increased production of oil and hydrocarbon liquids like coal oil by 15.3 per cent between 2015 and 2022, from 3.7 mbd to 4.2, fourth-most of all oil-producing economies. That’s much faster than world output, which was up only 3.6 per cent since 2015, reaching 100.1 mbd last year.

The irony — maybe even the hypocrisy — is that three countries in the Americas have increased their petroleum output even more than this Middle Eastern oil sheikhdom has: the U.S., Brazil and, yes, us: Canada.

The Biden administration, which is promising 2030 emissions will be half 2005 levels, has so far failed to stymie oil and gas development. U.S. petroleum and liquids production has soared by 33.9 per cent since 2015, reaching 20.3 mbd in 2022. Two-fifths of the increase has been on Biden’s watch. The U.S., not Saudi Arabia, is now the world’s leading oil producer, accounting for fully 20 per cent of global supply.

The Trudeau government has pledged that 2030 oil and gas emissions will be 42 per cent lower than in 2005. This has led to tensions with the oil- and gas-producing provinces, which are resisting emissions caps for oil, gas and electricity. Ottawa’s opposition to liquefied natural gas sales even as the U.S. and Qatar are making great inroads in the world market has had industry leaders scratching their heads. Even so, since the Liberals came to power in 2015, Canada’s oil and gas production has grown second fastest globally, at 26.7 per cent, to reach 5.6 mbd last year. Much of this growth is due to big investments in the oil sands before 2015 but the production increase has been accommodated by pipeline expansion, with the federally-owned TMX soon to come on stream.

Neither Biden nor Trudeau is attending COP28 but Brazil’s president, Lula de Silva, stormed in at the head of a delegation of 2000 to repeat a pledge to cut 2030 emissions to less than half 2005 levels. Much of reduction results from reforestation, however, not phasing out oil and gas. And, to the surprise of attendees, Lula announced that Brazil will align itself more closely with OPEC. No shock there. Since 2015, Brazil’s oil and gas production has risen by 20 per cent, making it the 8th largest producer in the world at 3.8 mbd last year. It now evidently sees itself as a player.

Besides the U.S. Canada, Brazil and UAE, only Iraq (at 10.4 per cent) and Kazakhstan (at 4.5 per cent) have seen their oil production grow faster than the world average since 2015. The rest have had little growth, with seven countries registering declines, including 22.4 per cent in Mexico and 36.7 per cent in Nigeria, the biggest drop anywhere.

The standstill or even loss in oil and gas production in many oil-producing countries since 2015 is due to several factors. Oil prices dropped by three-fifths after 2014 and the pandemic caused another crash. More recently, Saudi Arabia and Russia have persuaded OPEC+ to constrain production and push prices to over US$80 per barrel — mainly in order to replenish their treasuries. In some places, including Ghana, the U.K. and Norway, old fields are depleting. Elsewhere, but especially in Africa and Mexico, crime and political instability continue to discourage development. Finally, in the face of lagging demand, investors have encouraged companies to distribute profits rather than invest in greenfield oil and gas projects.

But top producers like the U.S. and Canada are not holding back and governments aren’t stopping them. Phase-out is all short-term cost in pursuit of climate gains that won’t be realized for decades, if at all. Nor are politicians willing to eliminate the tax revenues and high-paying jobs the industry generates. With energy security crucial in an increasingly dangerous world, oil-consuming countries are finding that intermittent renewable energy and other high-cost energy sources are no substitute for fossil fuels.

As the federal Liberals sink in the polls, they face a many-ways existential choice. Do they pursue their climate promises and phase out oil and gas? Or do they secure the benefits of oil and gas production for years to come? Or, a third option: do they say one thing but quietly do the other? Is it all, as Shakespeare would say, “much ado about nothing”?

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Business

Premiers fight to lower gas taxes as Trudeau hikes pump costs

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From the Canadian Taxpayers Federation

By Jay Goldberg 

Thirty-nine hundred dollars – that’s how much the typical two-car Ontario family is spending on gas taxes at the pump this year.

You read that right. That’s not the overall fuel bill. That’s just taxes.

Prime Minister Justin Trudeau keeps increasing your gas bill, while Premier Doug Ford is lowering it.

Ford’s latest gas tax cut extension is music to taxpayers’ ears. Ford’s 6.4 cent per litre gas tax cut, temporarily introduced in July 2022, is here to stay until at least next June.

Because of the cut, a two-car family has saved more than $1,000 so far. And that’s welcome news for Ontario taxpayers, because Trudeau is planning yet another carbon tax hike next April.

Trudeau has raised the overall tax burden at the pumps every April for the past five years. Next spring, he plans to raise gas taxes by another three cents per litre, bringing the overall gas tax burden for Ontarians to almost 60 cents per litre.

While Trudeau keeps hiking costs for taxpayers at the pumps, premiers of all stripes have been stepping up to the plate to blunt the impact of his punitive carbon tax.

Obviously, Ford has stepped up to the plate and has lowered gas taxes. But he’s not alone.

In Manitoba, NDP Premier Wab Kinew fully suspended the province’s 14 cent per litre gas tax for a year. And in Newfoundland, Liberal Premier Andrew Furey cut the gas tax by 8.05 cents per litre for nearly two-and-a-half years.

It’s a tale of two approaches: the Trudeau government keeps making life more expensive at the pumps, while premiers of all stripes are fighting to get costs down.

Families still have to get to work, get the kids to school and make it to hockey practice. And they can’t afford increasingly high gas taxes. Common sense premiers seem to get it, while Ottawa has its head in the clouds.

When Ford announced his gas tax cut extension, he took aim at the Liberal carbon tax mandated by the Trudeau government in Ottawa.

Ford noted the carbon tax is set to rise to 20.9 cents per litre next April, “bumping up the cost of everything once again and it’s absolutely ridiculous.”

“Our government will always fight against it,” Ford said.

But there’s some good news for taxpayers: reprieve may be on the horizon.

Federal Conservative leader Pierre Poilievre’s promises to axe the carbon tax as soon as he takes office.

With a federal election scheduled for next fall, the federal carbon tax’s days may very well be numbered.

Scrapping the carbon tax would make a huge difference in the lives of everyday Canadians.

Right now, the carbon tax costs 17.6 cents per litre. For a family filling up two cars once a week, that’s nearly $24 a week in carbon taxes at the pump.

Scrapping the carbon tax could save families more than $1,200 a year at the pumps. Plus, there would be savings on the cost of home heating, food, and virtually everything else.

While the Trudeau government likes to argue that the carbon tax rebates make up for all these additional costs, the Parliamentary Budget Officer says it’s not so.

The PBO has shown that the typical Ontario family will lose nearly $400 this year due to the carbon tax, even after the rebates.

That’s why premiers like Ford, Kinew and Furey have stepped up to the plate.

Canadians pay far too much at the pumps in taxes. While Trudeau hikes the carbon tax year after year, provincial leaders like Ford are keeping costs down and delivering meaningful relief for struggling families.

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Economy

Gas prices plummet in BC thanks to TMX pipeline expansion

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From Resource Works

By more than doubling capacity and cutting down the costs, the benefits of the TMX expansion are keeping more money in consumer pockets. 

Just months after the Trans Mountain Expansion (TMX) project was completed last year, Canadians, especially British Columbians, are experiencing the benefits promised by this once-maligned but invaluable piece of infrastructure. As prices fall when people gas up their cars, the effects are evident for all to see.

This drop in gasoline prices is a welcome new reality for consumers across B.C. and a long-overdue relief given the painful inflation of the past few years.

TMX has helped broaden Canadian oil’s access to world markets like never before, improve supply chains, and boost regional fuel supplies—all of which are helping keep money in the pockets of the middle class.

When TMX was approaching the finish line after the new year, it was praised for promising to ease long-standing capacity issues and help eliminate less efficient, pricier methods of shipping oil. By mid-May, TMX was completed and in full swing, with early data suggesting that gas prices in Vancouver were slackening compared to other cities in Canada.

Kent Fellows, an assistant professor of Economics and the Director of Graduate Programs for the School of Public Policy at the University of Calgary, noted that wholesale prices in Vancouver fell by roughly 28 cents per litre compared to the typically lower prices in Edmonton, thanks to the expanded capacity of TMX. Consequently, the actual price at the gas pump in the Lower Mainland fell too, providing relief to a part of Canada that traditionally suffers from high fuel costs.

In large part due to limited pipeline capacity, Vancouver’s gas prices have been higher than the rest of the country. From at least 2008 to this year, TMX’s capacity was unable to accommodate demand, leading to the generational issue of “apportionment,” which meant rationing pipeline space to manage excess demand.

Under the apportionment regime, customers received less fuel than they requested, which increased costs. With the expansion of TMX now complete, the pipeline’s capacity has more than doubled from 350,000 barrels per day to 890,000, effectively neutralizing the apportionment problem for now.

Since May, TMX has operated at 80 percent capacity, with no apportionment affecting customers or consumers.

Before the TMX expansion was completed, a litre of gas in Vancouver cost 45 cents more than a litre in Edmonton. By August, it was just 17 cents—a remarkable drop that underscores why it’s crucial to expand B.C.’s capacity to move energy sources like oil without the need for costly alternatives, allowing consumers to enjoy savings at the pump.

More than doubling TMX’s capacity has rapidly reshaped B.C.’s energy landscape. Despite tensions in the Middle East, per-litre gas prices in Vancouver have fallen from about $2.30 per litre to $1.54 this month. Even when there was a slight disruption in October, the price only rose to about $1.80, far below its earlier peaks.

As Kent Fellows noted, the only real change during this entire timeline has been the completion of the TMX expansion, and the benefits extend far beyond the province’s shores.

With TMX moving over 500,000 barrels more per day than it did previously, Canadian oil is now far more plentiful on the international market. Tankers routinely depart Burrard Inlet loaded with oil bound for destinations in South Korea and Japan.

In this uncertain world, where oil markets remain volatile, TMX serves as a stabilizing force for both Canada and the world. People in B.C. can rest easier with TMX acting as a barrier against sharp shifts in supply and demand.

For critics who argue that the $31 billion invested in the project is short-sighted, the benefits for everyday people are becoming increasingly evident in a province where families have endured high gas prices for years.

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