Oil May Be Canada's Undoing

We are inexorably moving towards a huge crisis in Canada, as the issue of oil and natural gas is moving from the geological to the political.

The story begins with the oil crisis of the 70s, which raised the world price of oil. The Alberta government, under Peter Lougheed, raised the price of Alberta oil, which brought howls from Central Canada since they imported from Alberta. The Trudeau government, fresh from a 1980 election win, introduced the National Energy Program (NEP). The program imposed federal authority over energy resources and established new price and revenue sharing schemes without western consent.

In March 1981, Alberta cut the flow of oil to eastern Canada by five percent. Lougheed increased the percentage to ten percent in June. A poll conducted in 1981 showed that forty-nine percent of Albertans supported separation from Canada.

Memories of this program are long, especially in Alberta, and to a lesser degree, British Columbia. The NEP was followed by a long recession in the two western-most provinces, especially. The federal government tried to blame this on other external factors, but Albertans remain unconvinced. They remember the "recession" years as the times the oil rigs were inactive. The bumper sticker of the day read, "Let Those Eastern Bastards Freeze In The Dark".

Oil hostages

The same conditions exist today, for the Federal government to step in and try to regulate production of oil and establish an oil price that's favourable to Central Canadian interests. The price of oil is on the rise and many experts see the day not far off when it reaches US $100 a barrel.

If the Fathers of Confederation had known about oil and how it would underpin the economy, they might not have given control over natural resources to the provinces. But they did. And this had a profound impact on the Canadian psyche. When John A. Macdonald brought in the "National Policy," Western Canadians saw this as a plan, whereby, Central Canada bought western resources cheaply and sold them back as finished products at exorbitant prices: prices that were protected against American imports by high tariffs.

Moreover, due to favourable freight rates, it cost more to ship westwards than eastwards. I have often said that if you could explain why it costs less to ship a pound of nails to Vancouver from Ontario, but not the other way around, you would explain deep-seated western resentment.

Things have changed, of course. Western resources are heading south and west rather than east. The Free Trade Agreement has taken away the tariffs that protected Ontario and Quebec industry. Other provinces have become oil producers. Ottawa, nevertheless, faces the same problems it did in 1980 -- the regions with the biggest populations don't want to be held hostage by OPEC oil prices when there's all that Canadian oil around.

The Federal government can't "take over" natural resources, but it can use its taxation ability to accomplish the same thing, and it's hinting at doing just that. But while 1980 was a sensitive time for national unity with Pierre Trudeau working to patriate the constitution, the times are even more fragile now: Quebec has gained and continues to gain more and more independence; there is another referendum around the corner; the country is politically divided with no party able to claim that it's a national party. Further, Atlantic Canada now has oil and gas of its own, and while it still goes to Ottawa with begging bowl in hand, that's more from habit than need

It may well be that Canada's natural resources should belong to all Canadians, but they don't. In Western Canada, especially in Alberta and British Columbia, there is not only a deep-seated mistrust of Ottawa, there is a growing confidence that, if necessary, they could go it alone or together. In short, it is a time when Ottawa dares not ignore the energy needs of Central Canada, and at the same time, dares not further alienate western provinces.

And that is a difficult circle to square.

Rafe Mair writes a Monday column for The Tyee. His website is www.rafeonline.com.