Kenney Seeks North American Oil Cartel to Counter Saudi Price Cuts
While the collapse of OPEC and the subsequent crash of global oil markets has Alberta Premier Jason Kenney musing about setting up a North American cartel to control prices, it isn’t at all clear that the Canadian government will back the idea.
During a provincial pandemic briefing Friday, Kenney “floated possible tariffs on oil imports and an investigation of Saudi Arabia’s dumping of oil into the North American market, similar to a proposal made last week by U.S. shale tycoon Harold Hamm,” the Globe and Mail reports. He “also wants to pursue a coordinated approach to production curtailment across North America, to help stabilize prices once the continent emerges from the COVID-19 pandemic,” and “welcomed the idea of a closed U.S.-Canadian oil market that rejects crude from outside North America.”
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“We cannot allow the Saudis and Russians to effectively run us out of the business of producing energy,” Kenney said. “We must be partners on a North American basis, in part so we don’t end up being sideswiped by any potential American action to defend the industry.”
The massive drop in crude oil prices was triggered both by falling demand due to the coronavirus pandemic and by Saudi Arabia’s concurrent decision to drastically increase production and move as much of its product as it can. “They recognize the world is transitioning off oil, demand is going to drop, and there’s going to be fierce competition for a larger share of that shrinking pie,” Greenpeace Canada Senior Energy Strategist Keith Stewart told The Mix last week. “So Saudi Arabia is advertising that they’ve got really cheap production, and they’re trying to produce as much as they can and push out some of their competitors.”
But on Friday, Kenney was undeterred in his bid to defend one of the world’s most expensive, inconvenient sources of crude oil against one of its cheapest. “I fear, if the Saudis and Russians continue this foolishness in the midst of a crash in demand, you will see these kinds of catastrophically low prices for some time,” he told the briefing. “We cannot let them win.”
At his own daily coronavirus briefing Saturday, Prime Minister Justin Trudeau seemed curiously determined to remain laser-focused on, y’know, the coronavirus pandemic. “This is a moment we need to focus on getting through COVID-19 as best as we possibly can. I think there will be a lot of reflections on how various countries behaved in this particular moment,” he said.
“Obviously, we are very concerned with OPEC’s decisions that are putting at risk the livelihoods of people around the world, particularly Canadians who work in the oil and gas sector,” Trudeau added. “We are focused on helping those Canadians, helping people who are hardest hit economically by COVID-19.”
Alberta economist Trevor Tombe said the current pricing situation is “unavoidably difficult”, with no simple solutions on offer.
“There’s not an easy fix here,” he told CBC. “We can’t slap a tariff on oil imports and think that’s going to make a material difference to producers in Alberta.” Instead, any added costs would just be “shifted onto consumers”.