Opinion: Canadian Fossil Swings at C-69, Misses the Point on Crashing Global Markets
Opinion & Analysis
In a hyperbolic opinion piece this week for the Financial Post, the Canadian Association of Petroleum Producers pivots from the curious notion that a new pipeline project would somehow insulate Canadian fossils from crashing world oil prices, to a demand that the federal government place its new Impact Assessment Act, Bill C-69, on hold.
The post by CAPP President and CEO Tim McMillan was in sharp contrast to a more measured report by Bloomberg Markets, focused on the wider impact of low prices on market perceptions and decisions. “Investors have fled oil in droves,” the U.S. news agency reports, “repelled by a toxic mix that included a global selloff in stocks, rising doubts on OPEC’s commitment to production cuts, and escalating trade tensions.”
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In the Post, McMillan points to the C$30 million per day the Canadian economy loses as a result of the discounted price fossils can collect for the inferior product they sell into world markets. But true to his industry’s continuing campaign to somehow morph one industry’s baked-in disadvantage into a new piece of unneeded infrastructure, CAPP’s CEO attributes the problem to a lack of market access. His post translates the price differential into $7.5 billion in lost government revenues, from an industry that pays ever-lower royalties for its use of a limited public resource—and claims the potential for 120,000 new jobs over the next decade, from an industry that has committed to “de-manning” its operations as fast as it can.
Then McMillan shifts his gaze to impact assessment, reinforcing the fossil industry’s all-out attempt to delay Bill C-69’s adoption in Senate. “Unfortunately, the regulatory process in Canada is making it virtually impossible to get new pipelines built.,” he complains. “This is about to get even worse if the federal government passes Bill C-69 in its current form. The Bill will change the National Energy Board and Canadian Environmental Assessment Acts, resulting in a new regulatory process. The government’s direction is flawed, and Bill C-69 will only increase complexity and uncertainty.”
But while McMillan closes with a call to “pause Bill C-69 until it is fixed and enables investment to return,” Bloomberg Markets has a decidedly different take on what those investors are thinking. “Since hitting a four-year high in early October, crude prices have now crashed about 30%. They set a new low for the year on Tuesday, falling more than 6% in New York and London, the second huge loss in just over a week.”
With crude oil (and other) stocks plunging, Donald Trump added another twist with a claim that his newfound allies in Saudi Arabia were “responsive” to his request that they keep oil prices low—raising investor qualms about whether OPEC will follow through on plans to curtail production when it meets in Vienna early next month.
“This had the smell and feel of a liquidation trade,” said energy trading analyst Michael Hiley of New York-based LPS Futures. “The Saudis have sent messages that they are going to discuss production cuts. But in the meantime, we’ve moved down so much that [investors] are just getting out.”
Against McMillan’s sunny claim that “demand is there, so when we have greater demand for our product, we can sell it for a higher price,” global economist Cailin Birch of The Economist Intelligence Unit opined that “the recent slide in oil prices reflects the worsening outlook for oil demand. We expect the pace of growth in both the U.S. and China to slow heading into 2019, which will maintain downward pressure.” (Apples and oranges, or not: McMillan was writing in Canada. Birch was speaking from the UK. Both were talking about the global markets that Canadian fossils have been making such a determined but futile effort to tap into.)
And that’s before the total cost of owning and operating an electric vehicle falls below the equivalent cost for internal combustion in the next five to 10 years, triggering a continuing drop in fossil demand.