As Canada continues to tussle with the construction of the Trans Mountain pipeline, the former Canadian Ambassador to the United States Derek Burney told the following to BNN Bloomberg:
“We can’t live with this kind of uncertainty in Canada. We can’t build a major infrastructure project in Canada for what should be our prime asset. We are an energy producing country – we should recognize that fact and pull together as a nation and get it happening … It makes no sense whatsoever if the federal government cannot impose its will and legislate in every way to have an interprovincial pipeline built in the country. We simply have to get our act together on these matters because we’re becoming a laughing stock in the world.”
Why This Matters
The former ambassador’s comments seem fairly accurate for most individuals looking at this situation. Canada has access to vast amounts of a resource, which according to the Canadian Association of Oil and Natural Gas Producers, will continue to be extremely important well into 2040.
We are making far less than what we should be making from this resource, largely due to lack of pipelines. The lack of options constrains our choice of buyers and forces us to undersell.
Just How Much Does This Discount Cost Us?
Economists estimate that the US$24 per barrel discount between Western Canada Select and West Texas Intermediate oil prices will cost us $15.6 billion this year, or around 0.75 per cent of the nation’s GDP.
This is such a large portion of the economy that it is inconceivable that the government would allow it to fail, especially when they are in a tight bargaining situation with an aggressive American regime.
If the Prime Minister wants to step toe to toe with Trump, he will have to do it on a solid economic footing, and I think most people including Trudeau understand that is not possible without other buyers for our crude.
So the question really becomes how far will Trudeau push this charade to please this base and how much will it cost Canadian taxpayers?