Even in this new world order, when profoundly held beliefs are cast aside according to the whims of political weather, the Oct. 24 call by the Canadian oil lobby for a government takeover of crude by rail (CBR) is a stunning abandonment of principle.
Like its U.S. big brother, the American Petroleum Institute, the Canadian Association of Petroleum Producers (CAPP) had been a fierce warrior for free enterprise with minimal regulation. Now, however, awash in low-grade tar sands bitumen amid a world glut of high-grade oil, the not-really-Canadian oil producers want the federal government to nationalize the transportation of crude. They want Ottawa to force Canada’s railways to move it ahead of grain and other more critical commodities people actually want to buy.
Joining the oil producers in their psychedelic trip down the rabbit hole, Alberta’s ostensibly leftish and greenish provincial government is demanding that the federal government purchase a huge fleet of tank cars to move privately owned oil assets at public expense.
Meanwhile, Canadian main lines are still clogged with last year’s grain harvests and CN rightly states that crude-by-rail must be the lowest of its priorities.
The petroleum lobby may want to be the biggest sand-kicker on the beach, but compared to the voting clout of Western grain growers, Big Oil is a 97-pound weakling. Neither the oil lobby nor the provincial government is going to get its way, because their vision of nationalized CBR would mean either putting Canadian grain farmers out of business, or building a parallel network of tracks to meet what the industry itself concedes is a temporary demand spike pending the completion of pipelines.
“Because of the lack of volume, I think the federal government does have an obligation to step in and help make up that medium-term gap,” CAPP President Tim McMillan said in an interview with the CBC (Canadian Broadcasting Corp.).
A day earlier, Alberta’s erstwhile progressive Premier Rachel Notley (leader of the Alberta New Democratic Party) said all Canadian taxpayers, from coast to coast, should subsidize the province’s oil industry through a massive purchase of tank cars and some unexplained magical track expansion to carry them.
“The best and only long-term solution to the price gap is building new pipelines,” Notley said. “In the meantime, however, we need to take a close look at the tools available to us to close the differential, where it’s feasible—like, for example, increasing the efficiency and availability of rail capacity to move our products.”
Notley also demanded that eastern Canadian refineries be forced to stop buying Saudi Arabian crude because of that country’s autocratic abuses. There’s nothing like falling royalty revenues in Edmonton to make its government suddenly sensitive to human rights in Riyadh (not so much to the destruction of northern indigenous peoples’ communities by tar sands pollution and landscape devastation).
Alberta and its foreign-controlled oil producers argue that pricing for “Western Canadian Select” (actually a down-market slurry of bitumen and diluent) is fetching $50 a barrel less than West Texas Intermediate (a high-grade light oil needing minimal refining) because sellers of the Canadian ersatz can’t deliver enough to meet demand. That would mean Economics 101 is all wrong about supply, demand and price. Somehow, in the minds of the Canadian oil lobby, more supply would mean higher prices.
The simple, unavoidable fact is that demand for costly tar sands sludge is low and dropping in a world where fracking is producing ample quantities of cheap, light oil. Alberta and its oil industry made a horribly bad bet when they placed all of their chips on the tar sands in an era when “peak oil” was at hand (it wasn’t).
Their calls for nationalization of CBR are self-pitying wails of desperation from a province that simply wasted its flood of royalties in the good times and an industry that out-smarted itself by bottom-feeding while the rest of the oil-producing world headed up-market.
Contributing Editor David Thomas is a reporter who has covered government and society since graduating from Ottawa’s Carleton University with degrees in political science and journalism. He has written for National Geographic, Maclean’s, The Globe and Mail, The Gazette, and The Canadian Press news agency from postings in Ottawa, Montreal, Quebec City, Toronto and London, England. “Railroading has been a personal fascination since a childhood timed fortunately enough to witness the golden years of steam on the late-to-dieselize Canadian National and Canadian Pacific,” he says.