I was in Halifax at the time of the first embargo in November '73. Then, there was a supertanker (chartered by Esso, I believe) headed from Venezuela to the refinery at Port Hawkesbury, Nova Scotia; it held enough crude to get the Maritimes and eastern Quebec through the winter.
Those of us who remember - in the UK, rationing, TV stations off at 10:30 PM; fistfights in long lineups at the pumps in the US, trucker protests, Nixon's 55 mph speed limit; empty autobahns in Germany - will recall considerable anxiety that the tanker would be turned in at New Jersey, and never get to Canada. The reality was that if the US needed the oil, it would just take it.
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Fast forward to 1980; I was in the patch on a Yukon mountain slope, slow drilling to 22,000 feet. By then the NEP had begun to bite, and on satellite TV we watched convoys of rigs headed through the border to the US. It wasn't a month later when our rig, one of the last, was shut in; by that time Fort St. John had changed from a wild west carnival to a ghost town. Ditto Fort MacMurray. Alberta went comatose.
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The keystone of NAFTA was energy, specifically, guaranteed access to Canadian reserves, hydro and less important, other resources. Now, few seem to recall the virulent attacks against Trudeau's National Energy Program; the US lobbied heavily against Canada's goal of energy independence, politically and in pervasive media campaigns. Even as Canadian taxpayers spent (and sadly, wasted) billions to attain the goal, they were called Communists, and worse; prevailing US sentiment bordered on hatred.
Remember, this must be viewed against a backdrop of repeated embargoes, and considerable US anxiety. Despite presidential statements about US "energy independence" starting with Nixon, for a mix of reasons the US never took the next logical steps. To this day, it has made no sensible accommodation to reality, and US demands must factor into the thinking of every remaining energy producer.
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I'm no particular fan of Lyin' Brian Mulroney, but NAFTA was a triumph of realpolitik. Faced with the realization that the US would NEVER accept deprivation while Canada had abundance, NAFTA gave access to Canadian energy at world prices. In so doing, it mitigated - but did not eliminate - other obvious risks.
Now, many have forgotten the antecedents of NAFTA. Canada bargained hard, and successfully, because the US wanted a reliable source of energy. While the primary driver was fossil fuel, let's not forget hydro, of which Canada is also a net exporter.
The overall quid pro quo in hard-fought negotiations was preferential offsets in other sectors: these offsets recognized that Canada incurred steep taxpayer-borne losses, accelerated depletion, and sectoral difficulties in the transition to NAFTA, while making the US a preferred customer for many of its exports. In the last decade, we've seen these offsets disputed, even ignored in the US - because people have forgotten how, and why they arose. Obvious examples are softwood lumber, and the auto sector.
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There's no question that obtaining crude from the Oil Sands is energy-intensive, natural resource-hungry and relatively dirty. However, that fact pales against the backdrop of global emissions.
Evaluating alternative scenarios requires us to recognize that first, the US has become very dependent on Canadian energy, precisely as was intended by NAFTA, the US, and Canada. That was the goal, and the drive still has considerable momentum, by virtue of increasing infrastructure and distribution channels, going north-south.
The real question is: "Will it happen?"
Changing course is no overnight thing; easily, it would take ten years. Multibillion-dollar deals would be cancelled. It would require that the US quickly develop alt energy sources, and implement fundamental changes that go to the heart of its economy. If those changes were undertaken, Canada would have an interim period in which it could redirect exports from north-south to north-west. That's already being planned and executed with natgas.
It would be an enormous project, especially in terms of capex, but Canada could expect considerable assistance from Asian partners. Difficult, but it could be done.
If that happened, NAFTA would have to be revisited, completely, because the main driver for its creation has been largely subtracted. Given the rise of protectionist sentiment in the US, and the expected increase in that sentiment as an outcome of US economic difficulties, NAFTA can expect challenges.
Especially, when few recall the reasons for its creation.
Jim |
