Recent developments in Venezuela and Iran could lead to a very new set of circumstances for the Canadian oil and gas sector. On the other hand, it might not. Economists are famous for saying “on the one hand, on the other hand…” and failing to take a stand on an issue as a result. The events in these two countries are too recent to opine on their implications and eventual results, but it’s not too early to speculate on what they could mean for Canada’s most important industrial sector, especially considering that the two countries involved are both in the top five conventional energy producers in the world.
Canada’s concerns to date have mostly focused on Venezuela as a potential threat to replace our oil exports to the U.S. Considering that currently, over 90 per cent of Canada’s oil exports go to the U.S. and the Canadian product represents about half of the U.S.’s crude oil imports, any reduction in these numbers would have a significant impact on Canada. As many experts have pointed out, even if the worst-case scenario does happen, it will take many years and massive investment to upgrade Venezuela’s energy sector infrastructure to current standards that would permit the nation to substantially increase its production. It will also take years to build a pipeline in Canada.
Whatever the case, the argument in favour of building a pipeline from Alberta to the West Coast makes even more sense with the Venezuelan upset. The notion of building pipeline(s) to tidewater has made eminent sense for decades of course, if only we could elect a government that actually wanted to maximize Canada’s potential instead of kneecapping it. Whether the Venezuelan situation will light a fire under the Carney government remains to be seen. It could also help Canadians understand if Carney is at all serious about building a pipeline or if the Memorandum of Understanding he signed with Alberta Premier Danielle Smith was merely a way for the federal government to further rag the puck to temporarily mollify Smith but not produce anything.
As the U.S. incursion into Venezuela continues to unfold, it is of course very possible that the oil industry will not be revived and present a threat to Canada. So far, U.S. President Donald Trump has seemingly gone along with leaving most of the Maduro regime in place, much to the disappointment of the Venezuelan people who want to see the back of this repressive government that has ruined their country and their once-high standard of living. Trump’s meeting with Venezuelan opposition leader Maria Corina Machado this week will hopefully give some indication of whether a more democratic regime in the country will be encouraged by the U.S. The implications for Canada’s upcoming trade negotiations with the U.S. are also affected, as Trump has gained leverage over Canada with an oil source that can potentially compete with Canadians exports of heavy oil, as Venezuela’s output is very similar to that of Alberta’s oil sands.
The Iranian situation is at least equally as unpredictable, and perhaps even more so. The current uprising of average Iranians in an attempt to overthrow the murderous theocratic regime of Ayatollah Khomeini is the largest since the 1979 takeover by the Islamists. Possessing the third-largest oil reserves in the world, just ahead of Canada in the global pecking order, means that world energy markets could also be greatly affected if Iranian supplies are disrupted because of the protests. One scenario would be a sharp increase in international oil prices that would damage importing countries but be to the advantage of net exporters such as Canada.
If Iranians do manage to overthrow the current government – and that is a big if – it will also mean a weakening of Iran’s support for global terrorism, an excellent development for most of the civilized world. The outcome is completely unknown at present, but for the sake of average Iranians and the potential for significantly reduced terrorism world-wide, we should all be rooting for the protesters.
These developments promise to be game-changing for the world, not only in terms of the oil and gas sector but in disempowering the main sponsors of terrorism and anti-Western values globally – China, Russian and Iran. The potential for a massive, positive change and a brighter future for the average citizens of Iran and Venezuela is significant, and we can all hope for that outcome. Whether or not Canada can be a major beneficiary of these changes will very much be up to our governments, and whether they choose to capitalize on the changes or be left on the sidelines. All Canadians should be encouraging them to opt for positive action, as the stakes are very high.
She has published numerous articles in journals, magazines & other media on issues such as free trade, finance, entrepreneurship & women business owners. Ms. Swift is a past President of the Empire Club of Canada, a former Director of the CD Howe Institute, the Canadian Youth Business Foundation, SOS Children’s Villages, past President of the International Small Business Congress and current Director of the Fraser Institute. She was cited in 2003 & 2012 as one of the most powerful women in Canada by the Women’s Executive Network & is a recipient of the Queen’s Silver & Gold Jubilee medals.
