Harper speaks ‘frankly’ on energy at Three Amigos summit

When asked about energy in Washington, Prime Minister Harper talked tough

by Luiza Ch. Savage


The Prime Minister met and lunched with President Obama and Mexican president Felipe Calderon today at the White House. At the press conference in the Rose Garden afterward, he was asked about trade and his views of Obama’s leadership on foreign policy. Keystone XL and the oil sands were not mentioned. But the issue took center stage later when Harper made participated in a one-hour question-and-answer interview with former Democratic congresswoman, Jane Harman, who now heads the Woodrow Wilson Center, a think-tank in Washington, home to the Canada Institute, [link corrected] which organized the event.

While the Obama administration continues to consider whether to permit the Keystone XL pipeline from Alberta to the Gulf Coast, the prime minister made some of the toughest energy remarks that I’ve heard him aim at a US audience.

His bottom-line to the Washington audience seemed to be:

1) Canada’s primary interest is not contributing “North American energy self-sufficiency” but to diversifying markets for Canadian oil exports;

2) Canadian producers receive a discounted price for their oil because they are “captive suppliers” and therefore Canada cannot “afford” to keep the US as its only market.

3) His government intends to build a pipeline to the West Coast to enable exports to Asia regardless of whether or not the Keystone XL pipeline gets approved.

Harman asked whether Harper could see Canada and Mexico contributing to a situation where North American could achieve energy “security” or “self-sufficiency” and independent from Middle Eastern oil. [See my magazine story on the prospects for this here.]

Half-way through his answer, Harper said this:

I’ve got to say that Canada’s interests  here are a little bit different, and particularly—I might as well be frank with you—in light of the interim decision on Keystone.  What it really has highlighted for Canada is that our issue when it comes to energy and energy security is not North American self-sufficiency; our energy issue is a necessity of diversifying our energy export markets.

We cannot be, as a country, in a situation where really our one and, in many cases, almost only energy partner could say no to our energy products. We just cannot be in that kind of position.

And the truth of the matter is that when it comes to oil in particular, we do face a significant discount in the marketplace because of the fact that we’re a captive supplier.

So we have made it  clear to the people of Canada one of our national priorities is to make sure that we have the infrastructure and the capacity to export our energy products outside of North America. Now, look, we’re still going to be a major supplier to the United  States. It’ll be a long time, if ever, before the United States isn’t our number one export market. But for us, the United States cannot be our only export market. That is not in our interests either commercially or even, as I say, in terms of price.

And Harper had this to say about the limits on the special Canada-US relationship overall:

Look, I’m a strong and firm believer in not just the economic importance of our relationship, but the security importance and the importance of the United States in the world, but we cannot take this to the point where we are creating  risk in significant economic penalty to the Canadian economy. And to not diversify to Asia when Asia is the growing part of the world just simply makes no sense to Canada.

On Keystone XL specifically, Harper also said: “President Obama has told me repeatedly that this decision will ultimately be made on the basis of its merits, and I have no reason  not to believe him on that.”

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Harper speaks ‘frankly’ on energy at Three Amigos summit

  1. OMG, Harp’s not only been ‘ottawa-ized’, he’s gone rogue….off the reservation etc.

  2. He could also have added “And look how you screwed us on softwood lumber” if he hand’t rolled over for them and tried to make Canadians eat it. 

  3. I applaud Prime Minister Harper for his statements today. His defense on the position of looking out for Canada’s economic welfare is what you should expect from a leader. Canada has a valuable resource that it wants to and has every right to sell, whether raw or refined, to the highest bidder.
    Our President has capitulated to the far left enviorowackos as it regards Keystone, in order to secure their vote in the upcoming election. Trust me when I say that he is not “continuing to consider whether to permit the Keystone pipeline.” The election is seven months away and Obama has decided to abandon the unpredictable union vote in order to keep the Soros money rolling in.
    Mr Harper’s candor in today’s remarks were basically a gentleman’s way of telling Obama “Listen pal – You are a Pinhead”
    Prime Minister Harper very clearly pointed out that Canada is willing to be our best friend and ally but not at Canada’s expense and I say “Bully for him.”
    Sometimes, blunt and to the point is the only way you can get through to some of these idiots. Stephen Harper could well be the Chris Christie of Canada

    •  Well, Harp’s certainly getting plump enough.

  4. Luckily for Harper the current opposition won’t label him as anti-American for putting Canadian interests at the top of the list. And good for him.

  5. But isn’t this the bare minimum of what one should expect from the government, rather than something they should be praised for?  The best arguments against the pipeline are environmental and possibly that it discourages value-add to the product within Canada.  Once we have decided to sell it, where is the Canadian support for selling it more cheaply to one source?

    • Alberta has protected the potential for value add, by retaining the right to collect its bitumen royalties in kind.

      Upgrading and refining oil, in general, is a horrible low margin spread business, with constantly changing government rules and regulations, and environmental rules and regulations.  In general, it is best for a company or country to do as little refining as possible to maximize the economic benefit for the company and for the country.  i.e. It is usually a waste of capital to do more refining that one has to, and it would be better for that capital to be invested in other things.

      If the spread between the price of refined products and raw bitumen becomes too large, then  Alberta or other parts of Canada can be encouraged to increase upgrading/refining capacity, and Alberta can guarantee bitumen supply with royalty bitumen.  i.e. Alberta has  retained the ability to control the supply of bitumen over the medium and long term, which will act as a deterrent from multinationals or other countries from taking advantage over medium and longer time frames.

      And one still needs pipelines for the upgraded and/or refined product.  More processing does not eliminate the need for pipelines.

      Pipelines are safer than trains.  The oil will move by train to the BC coast to be exported if the pipelines are not built.  The train tracks already exist.  And CN and CP won’t have to give aboriginal groups 10% of the business for nothing (as Enbridge is offering) to carry that oil. 

      Obama’s idiotic delay of Keystone has already resulted in rapidly increasing oil train traffic from North Dakota booming Bakken oil play to Texas.

      Oil was moved by train before pipelines.  If the pipelines are blocked, it will be moved by train again.

      Blocking Northern Gateway just means that CN and CP trains become the pipeline to the oil export terminals, and the aboriginal groups lose any of the economic benefits.

      • This is all very interesting and may very well be plausible, but unless oil actually becomes less valuable the more you refine it, my tenative argument still stands, i would think.

        • The “value added” argument is a valid one, but it is an argument that is almost entirely beholden to the economics of the international commodity market, which (although I am not an economist) I understand do not favour spending billions of dollars developing additional refining capacity here, when there is already an excess of that capacity elsewhere.  As well, as WSISYW has pointed out, building refineries does not negate the need for pipelines – indeed, it may make them even more necessary.

          There’s also the environmental bogeyman, writ large, when it comes to building new refineries – perhaps you can suggest what in your view is the most suitable locale for one and we’ll run the idea by the locals.

          •  If it’s a there or here question and we have stronger environmental standards, then anywhere in the country is probably a net gain environmentwise.

        • The price of oil and the price of refined products (gasoline, diesel, etc) trade independently.  The spread between the price of the refined products and the price of oil is called the crack spread.

          The profitability of refining depends on the crack spread, and historically, large crack spreads never last long.  i.e. Refining is usually not a very profitable business, and thus, economically speaking, it is a waste of capital  for a company or a country to do more refining than it has to.

          Basically, most of the economic benefit of oil comes from the raw product itself.  One should only do enough refining or the threat to upgrade/refine to maintain the value of the unrefined produce.

          Large crack spreads never persist.  Refining will always be a lousy business in the medium to long term, so a company or country should strive to do as little upgrading/refining as possible and spend their investment dollars on more worthwhile investments.

          The point I am making is very poorly understood by the vast majority of politicians and the general public, even in Alberta.

        •  Also worth noting is that the main argument is “Once we have decided that we will sell the oil with this [limited] amount of regard for the environment and this [also apparently limited] amount of value add, should Harper be praised for selling it to more than one source, or should we merely, you know, expect it?”

          • In deciding whether Harper should be praised, you have to ask yourself whether the other parties would adopt the same position.  Somehow, I have trouble seeing Mulcair as an enthusiastic  proponent of international “tar-sand” market expansion.

      • Thank you for your clarification regarding shipping raw product vs selling the refined (final) product. I hope this will shut down the “hewers of wood and drawers of water” crowd.
        It is refreshing to see your Prime Minister stand up to the idiotic antics of the current administration. You only have to browse some of the more balanced news websites to appreciate what our Idiot In Chief has for his agenda

        •  The oil patch IS the “hewers of wood and drawers of water” crowd.

          Primary resources…raw or refined.

          • Put down the bottle of gin and realize that the people that are running the oil and extraction companies might actually know what they are doing. Better yet, you could invest in any company that you think could turn a better profit than what is being done.
            For once in your miserable existance – try to be part of the solution rather than part of the problem.

          •  Stop insulting people and realize that there are lots of people who understand the actual situation, not the fantasizers spinning dreams.

            ‘Hewers of wood and drawers of water’…..or oil….isn’t the solution to anything.

            Nor is it meant to be….I simply remarked it was a ‘primary resources economy’.  Pre-industrial.

      •  Not much point in shipping oil by rail to the coast when there won’t be any tankers to load it on to.

  6. The Canadian position is loud and clear, however blunt. When it comes to trade, the business case ought to be our foremost consideration.

    Kudos to Harper for stating it on American soil.

  7. Harper can squawk all he likes, but Canada will always be a captive supplier to the US on energy (especially if it is unupgraded bitumen), and the Northern Gateway Project ain’t goin anywhere soon.

  8.  So where was our Prime Minister of Canada at the 3 amigos concert ?
    I only saw, from left-to-right, President  Calderon, President Obama, and our Prime Minister of Alberta ???
     

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