Canada doesn't have oil, Alberta does

By Rondi Adamson
Toronto Star
23-Oct-2005

Canada doesn't have oil, Alberta does, and U.S. is our main trading partner, says Rondi Adamson

The United States does not have too much "control" of our oil. The idea that it does — because, under NAFTA, we sell a certain proportion of oil to the United States — shows a failure to understand any number of things.

Who is the "our" in our oil? I don't know many Albertans, but I know enough of them to know they don't think Ontario, or much of the rest of Canada, is part of that "our."

Since Ottawa sold its stake in Petro-Canada, it could be argued that the federal government doesn't control any oil. Albertans do. And Albertans may feel that they kindly allow Ottawa to collect billions of dollars in taxes from that oil.

In short, Eastern oil consumers and Western oil producers most likely disagree about who controls what, and who it "belongs" to.

Control of oil comes from the marketplace, not from any buyer. Let's just imagine that the Canadian government mandated oil sales to China. China would then buy less from everyone else and American firms would still end up paying about the same price on the world market and getting about the same amount.

The only difference? According to John Palmer, economics professor at the University of Western Ontario, "We would force Canadian producers to pay more to ship it to China instead of the United States. In the process, we would further strain Canada-U.S. relations while donating cheap oil, by probably subsidizing the transport costs, to China."

Prime Minister Paul Martin should keep that — among other things — in mind when he decides to use oil to threaten the United States. Speaking two weeks ago in New York, the Prime Minister attempted to address the ongoing softwood lumber dispute. He hinted that Canada would look at China and India as a marketplace for "our" oil, restricting energy exports to the United States, if the Bush administration doesn't smarten up.

Apart from how morally questionable it is to suggest that trading with a dictatorship like China is a preferable/equal option to trading with a free country like America, there is also the matter of reality.

Canada is dependent on the American market, which buys approximately 85 per cent of what we have to offer. This is not to mention how our Prime Minister is causing further deterioration of already tenuous Canada-U.S. relations.

In the world market, oil is fungible. Who sells how much to whom is of little import. The price is determined by supply and demand, not a single oil company, or state. Certainly, if American demand dropped, so would the world price, but American firms do not set oil prices.

It would be nice if Canadian politicians would realize all of this and find less childish ways to deal with our largest trading partner. We always seem to be reacting against the United States, rather than carefully thinking through our rhetoric and our options.