Canadian Energy Political Economy in the Shadow of the … · 2017-12-08 · 1 Canadian Energy...
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Canadian Energy Political Economy in the Shadow of the American Empire
Marjorie Griffin CohenUNAM, Mexico City, October 2007
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Main Points
Canada – no formal energy policyUS policy dominates in oil & gasElectricity still largely in public sector
Rapidly changingUS regulatory imperialism
US trajectory for energy domination in North America
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Oil and Gas
U.S. control pervasiveNo national debateResource nationalism elsewhere
Largest companies & reserves owned by nation states
All new exploration & production controlled by private sector (US)Even energy security not discussed
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Significance for U.S.
“Seamless” energy market throughout North AmericaBush – 2000 election campaignCheney National Energy Policy
Canada & Mexico feature as energy sourcesUS severely energy stressedUS 1/4th of world’s consumption3% of world’s reservesCannot be energy independent
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Integration of US/Canadian oil industries
Long historyCanada now US largest energy trading partner (oil, natural gas, electricity, uranium)Exports to US 60% oil productionExports to US 55% of natural gas
87% of US gas imports (15% total needs)
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Oil Control
Alberta - always a strong private US presenceOil sector developed as extension of US interests
Regulatory policy designed to integrate markets
Integration cemented in 1961 National Oil Policy
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Canada
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National Oil Policy 1961
Alberta – supply oil west of Ottawa RiverQuebec & Maritimes supplied from US based companies shipped from VenezuelaThrough 1960s Canada conformed to US energy demandsNational Energy Board – facilitated needs of oil & gas exporters
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Changes in 1970s & 80s
OPEC crisis - huge price increaesCanada tries to reduce energy security (& foreign control)
Only 6.7% of oil then Cdn. ownedCreates Petro Canada 1975
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National Energy Program (NEP)
US control and threat of energy scarcity – driving forceInitiated by Pierre Trudeau 1980Main points:
Promote Cdn. Energy market (not trade)Reduce vulnerability of eastern CanadaExpand Cdn. ownership
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What Happened?
Lasted 18 monthsOutraged oil & gas industriesOutraged AlbertaOutraged US (Ronald Reagan & Congress)
Cdn. Ownership increased from 6.7% to 34.7% (when privatized)
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Political Disaster
Collapsing world oil pricesTremendous power exerted (Alberta, US, industry)Oil autonomy completely ended with 1985 Western Accord (Brian Mulroney)Petro Canada fully privatized 1991
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Western Accord
Market pricing (US)Reduction in federal taxesNo barriers to foreign entry or controlPrivatize existing public entitiesEncourage exportsLow rents for resourceNEB locates in Alberta
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Oil and Gas Trade
Exports to US
1980 2004
Oil 455 2,118(000bdp)
Gas 979 3,544(bcf)
Imports from US
1980 2004
108 141
0.1 395
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Oil Production
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Canadian Reserves
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Natural Gas
North America self-sufficientCanada supplies most US importsProblems with meeting future demand
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NA Gas Production
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Deregulation in Canada
Profound changes since mid-1980sContinental market in gasCanada: “has the most open natural gas market in the world, with competition extending from production to final consumer marketing” (US – ITC)
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Competition
Introduced in 1985 – Agreement on Natural Gas Prices and MarketsBuyers purchase gas directlyNEB ensure access to transmissionNEB – oversight over exportsNow – completely privateLarge pipeline growth
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Major Gas Pipelines
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Results:
Convergence of Canadian & US pricesLong-term contracts with variable pricesDevelopment of financial market
Futures for gas
Wide fluctuations in gas pricesPrice volatility & uncertainty systematic
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More results
Prices structurally higher than any other time in historyEmergence of ‘spot market’ –encouraged indexing of contracts to this highly visible commodity pricing
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Outlook
Supply tightIncrease from unconventional sources
Coalbed methaneLNG regasification facilitiesArctic gas
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ElectricityRestructuring in U.S. chaotic
Electricity still mostly in public sector in Canada (large integrated utilities
Each system responsible for a large area
Plans supply, distribution, conservation
Inexpensive electricity (because hydro based)
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Massive Changes
Canada rapidly deregulating & privatizing electricity
Two main reasons:
US regulatory imperialism
Private sector demands (Enron initiated)
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Electricity Generation --Type
coal17% petrol
3%
gas5%
nuclear15%
renew2%
hydro58%
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Transmission connections between Canada & USAnd within Canada
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FERC RulesUS Federal Energy Regulatory Commission
US National Energy Policy
Integrated N.A. electricity market
Problems
Adequate Supply
Public sector Control
Transmission
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Solutions for U.S.
US control of transmission gridStandard Market DesignRegulatory ImperialismChange public nature of systems in US & Mexico
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How it will work
Regional Transmission OrganizationsEnsure private producers have access to public grid systemCompletely separate generation from transmission controlUS maintain control of N.A. transmission system
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FERC requiring that Cdn. System mirror US (in order to trade electricity)
Not a NAFTA requirement
All large systems in Canada comply
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Results
Increase in private producersIncrease problems with reliabilityEncourage expansion for export
Increase in power traders (not producers)
Increase in pricesDomination of Cdn. System by U.S. regulator
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Results
Environmental exploitationLoss of energy sovereigntyLoss of energy revenues
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