This article originally appeared on the Dogwood Initiative website.

“Oil to tidewater.”

It’s an industry mantra happily adopted by politicians — and even some environmentalists. But ask yourself this: what happens when you pump more product into an oversupplied market? Answer: the price goes down.

Who benefits from cheaper crude oil? First, the customers — like China’s state-run heavy oil refineries. And later, competitors with lower overhead, like Saudi Arabia.

You’ve probably heard these twin arguments before:

1. Canada’s oil would fetch ‘global prices,’ if only it could access ‘tidewater.’
2. If we approve pipelines to the coast, the ensuing bonanza will make us all rich.

Let’s address each of these political talking points in turn.

What’s the ‘Global Price?’

The first thing to remember is that pipelines don’t magically add value to crude oil. What they do is reduce transportation costs from point A to point B, allowing the seller to pocket a few extra dollars per barrel.

The real problem for Canadian oilsands producers is that prices all over the world are low. If oil is selling for $45 and it costs you $46 to dig up a barrel of oil, no pipeline can fix that.

Worse, we’re talking about heavy oilsands bitumen, which is worth even less than the global “price of oil” you see quoted in the newspaper.

That’s because oilsands crude is heavy, sticky and high in sulfur, which means you need more lube to get it through pipelines and special refineries to turn it into gasoline.

Most refineries in Canada are not set up to chew through heavy oilsands bitumen. It would be like trying to fuel up your grocery getter with creosote: bad idea. So we export this low-value crude, mostly to the United States, while importing lighter crude and fuel products.

For a real comparison, we have to look at another sea-traded heavy crude. Mexico has a blend comparable to oilsands bitumen called “Maya.” The Alberta finance department tracks the average price spread between the two in a graph they update every month.

Canada is the blue line. We’re chasing the green line:

What would happen if oilsands producers hit their expansion targets, and put all that heavy crude on tankers?

The current oil price slump, which you can see started in summer 2014, was triggered by an oversupply of global markets. Oil producers were pumping out about two millionbarrels per day more than people needed.

Hang on. Enbridge Northern Gateway is designed to carry 525,000 barrels per day. Kinder Morgan’s Trans Mountain expansion would carry 890,000. And Energy East would carry a whopping 1.1 million barrels per day.

“We’re in favour of all pipelines, to be honest,” Alberta energy minister Marg McCuaig-Boyd told the Edmonton Journal in April. “We see the need for more than one pipeline, and what helps one will help another.”

If the Alberta government could wave its magic pipeline wand and build all three of these projects, 2.5 million barrels of heavy crude would flood overseas refineries. With demand growth slowing, this would put downward pressure on prices.

Who Would Benefit?

Subtract the corporate welfare our governments give to oil companies, the billions in damage caused by climate change and the public cost of oil spills. Imagine for a minute the oil companies get their way and sell a whole bunch of crude in Asia at rock-bottom prices. Who benefits?

Not British Columbians, that’s for sure. We get no royalties and not even a guarantee of temporary construction jobs.

The federal government might at least break even, by collecting more income tax from oil workers.

The Alberta government has given itself no other choice. With no sales tax and an electorate hostile to tax in general, Albertan politicians depend on whatever oil royalties they can get to pay for social services.

The real winners would be the state-owned refineries in China, which would get a reliable supply of cheap feedstock. That’s why the government in Beijing has been pushing for these pipelines for 10 long years. And sourcing that crude from Canada would come with a strategic geopolitical bonus.

Dire Straits

With 21.1 million passenger vehicles sold last year and the world’s largest active military, China goes through a lot of oil: 11 million barrels a day.

The majority of that is imported through two geographic choke points: the Strait of Hormuz and the Strait of Malacca. That makes China’s rulers nervous, which is why they’re expanding overland oil and gas pipelines — and looking to Canada as a future supplier.

U.S. Department of Defense

We could help ease China’s reliance on those contested shipping lanes, but it appears increasingly doubtful prices will climb again to the levels that had oil producers rubbing their hands at the prospect of West Coast exports.

In 2012, the pro-pipeline Fraser Institute predicted the Enbridge Northern Gateway pipeline would allow oil producers to make an extra $2.50 more per barrel  than if they sold in the U.S. Yes, that’s the pot of gold at the end of the “tidewater” rainbow: a toonie and two quarters per barrel.

Since then the pace of growth in China has slowed while global oil supply has expanded — thanks in part to fracking technology. More worrisome, from the perspective of Canadian oil companies, is the strategic shift by Saudi Arabia.

The End of the Oil Age

“The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.” That prophecy came from the Saudi oil minister, Sheikh Zaki Yamani, in 1973.

In February 2016, Yamani’s successor took the idea a step further. Ali al-Naimi told a crowd of oil executives in Texas why, despite low prices, his country refused to turn off the taps: “We’re going to let everybody compete.” Addressing investors in high-cost deposits like the oilsands, al-Naimi said “inefficient, uneconomic producers will have to get out.”

The Saudi regime slaughters its own citizens and harbours religious extremists. It is, by all metrics, repressive, brutal and corrupt. But when it comes to the realpolitik of oil markets, the Saudis have an advantage. They can pump it out of the ground cheaper than anyone else.

With climate treaties coming and electric transport set to cut into oil demand, the Kingdom is not counting on the return of $100 prices. Instead, it’s planning to crank up production even further, to wring every last drop out of the sand before the rest gets locked underground forever.

What’s becoming clear is that Canada is pursuing the same strategy, despite having a product that costs more to dig up and sells for less.

Under relentless pressure from oil lobbyists, politicians of all ideological stripes have accepted the industry’s logic: just pump more crude and pray for higher prices.

Let’s get real. These pipelines are not nation-building projects. They are catheters designed to drain a giant pool of carbon as cheaply as possible, so oilsands companies can keep the lights on for a few more years.

The irony is that flooding the market with cheap crude would make it less likely for prices to recover. That’s fine for the Saudis, who are happy to compete in a low-price environment. But it’s a poor long-term strategy for Canadians.

Approving Enbridge or Kinder Morgan’s oil tanker terminals will lay the path for a furious final expansion of the oilsands, before creditors stop lending money and the heavy-oil producers start going bankrupt.

We can’t change the end-times mindset of the global oil industry. But we can give our politicians a reality check.

For more on a provincial vote on oil tankers visit LetBCvote.ca.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

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This is a guest post by David Suzuki.

With oil prices plunging from more than $100 a barrel last summer to below $50 now, the consequences of a petro-fuelled economy are hitting home — especially in Alberta, where experts forecast a recession.

The province’s projected budget surplus has turned into a $500-million deficit on top of a $12-billion debt, with predicted revenue losses of $11 billion or more over the next three or four years if prices stay low or continue to drop as expected. Alberta’s government is talking about service reductions, public-sector wage and job cuts and even increased or new taxes on individuals. TD Bank says Canada as a whole can expect deficits over the next few years unless Ottawa takes money from its contingency fund.

It’s absurd that a lower price on a single commodity could have such a profound economic impact, but that’s what happens when you put all your eggs in one basket and fail to plan for such contingencies. With a population and oil-and-gas production profile similar to Alberta, Europe’s largest petroleum producer, Norway, is also feeling the impacts. But much higher taxes on industry, majority state ownership of the country’s largest oil-and-gas company and an approximately $900-billion sovereign wealth fund built from oil revenues are cushioning the fall.

Some see low fuel prices as good news, but there are many downsides. With driving becoming less costly, more cars and trucks could be on the road, which is good for the auto industry but bad in terms of pollution, climate change and traffic accidents. And because the price of oil is now lower than the cost to extract oilsands bitumen, the industry is starting to put the brakes on rapid expansion plans — bad news for workers and businesses in Fort McMurray and those heavily invested in the industry but good news for the planet.

Recent research shows most of Canada’s oilsands bitumen — as well as all Arctic oil and gas, most of Canada’s coal and some conventional oil and gas — must be left in the ground if the world is to avoid a global temperature increase of more than 2 C above pre-industrial levels, the internationally agreed-upon threshold for limiting catastrophic impacts of global warming. The report, by researchers at University College London's Institute for Sustainable Resources and published in the journal Nature, concludes a third of the world’s oil reserves, half of gas reserves and more than 80 per cent of coal reserves must not be burned before 2050.

The study also found that carbon capture and storage, touted as one way to continue exploiting and burning fossil fuels, is too new, expensive and limited to make enough of a difference by 2050.

Study co-author Paul Ekins told National Geographic that putting hundreds of billions of dollars into fossil fuel exploration and development is “deeply irrational” economic behaviour. “What would be ideal,” he said, would be to “use the opportunity of this fall in the oil price to start instituting a global carbon tax, which would take some of the volatility out of the prices.” Removing fossil fuel subsidies would also help.

John Stone, a Canadian scientist and lead author on the most recent Intergovernmental Panel on Climate Change report, told CBC the UCL study “is another wake-up call to snap us out of our denial of climate change.”

With 2014 confirmed as the hottest year on record, and 13 of the hottest 15 years having occurred since 2000, we can’t afford to ignore the consequences. According to researchers, the odds that natural variability is causing today’s climate change are less than one in 27 million! It’s astounding that, in the face of such overwhelming evidence from scientists worldwide, people continue to deny the problem exists or that humans are responsible and can or should do anything about it.

It’s especially irresponsible when energy conservation and cleaner fuel alternatives offer so many economic benefits, including job creation, greater stability and reduced health-care costs. As world leaders prepare for the UN climate summit later this year, we must look at the recent market meltdown as an opportunity to shift away from fossil fuels. It’ll be much easier and less costly to get on with it now than to wait until we’re left with few choices.

Written with contributions from David Suzuki Foundation Senior Editor Ian Hanington.

Learn more at www.davidsuzuki.org.

Image credit: Falling oil price graph by Makaule via Shutterstock.

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This is a guest post by Cameron Fenton, Canadian Tar Sands Organizer with 350.org.

This week, the cover of the Economist proclaimed "the fall in the price of oil and gas provides a once-in-a-generation opportunity to fix bad energy policies." The article teased on the cover explains how low oil prices create the space for governments to make rapid leaps to change energy policy instead of "tinkering at the edges" urging policy makers to use this moment to "inject some coherence into the world's energy policies."

The article gets a lot of things right. Eliminating fossil fuel subsidies and forcing big polluters to pay for the mess they're making are crucial policy steps, but the piece also presents some more dubious proposals. The last paragraph of the Economist piece is the perfect example of the inherent dangers ahead.

After calling for policy measures to constrain climate change, the author encourages that "governments should be encouraging the growth of seamless global energy markets" through steps like approving the Keystone XL pipeline or lifting restrictions on energy exports. It's the logic of free-market economics laid out in Naomi Klein's Shock Doctrine applied to the climate crisis – that moments of crisis be exploited to reduce regulations and open markets.

Without a big, bold and diverse climate movement these ideas may never have a chance, or worse could be transformed into policies that leave out or sacrifice those communities on the frontlines of climate change and extraction. If we've learned anything in the past decade about climate policy it's that just because policy makes sense, that doesn't mean it will happen.

It's now up to us to seize this moment, not to follow politicians but to push them and demand the kind of energy revolution that the best scientific minds on earth are saying we need. This is a moment build on the momentum of the Keystone XL fight to hold politicians to higher standard, to refuse to accept weak policy and empty commitments on climate.

According to the Carbon Tracker Initiative, $1.1 trillion of potential capital expenditure on fossil fuel projects, including $271 billion in tar sands developments, require a price of oil above $95 a barrel. With the current price hovering close to half that, Stephen Harper's government has been forced to delay the release of their 2015 budget until April. 

An eight year push to expand the tar sands is now coming face to face with the reality of the beginning of the end of the fossil fuel age, and it's something that neither Harper nor big oil are equipped to deal with.

The fossil fuel industry's business model, echoed in the policies of the politicians they prop up, is to extract every dollar and barrel they can before the bottom drops out. It's a model of business as usual that has set us on a crash course, both economically and climatically.

Like past crises, like the 2008 recession, it's unlikely that those truly responsible – CEO's and their political allies – will feel the biggest hit. Instead it's the workers, thousands of who have already been laid off, the communities and the people who will be left out in the cold.

Much of the time, movements move slow and steady, but sometimes we have a chance to sprint. This is one of those moments, and if we wait too long we might miss it. The good news is we don't have to start from scratch. The beginning of the end of the fossil fuel age has started at campus divestment campaigns, in frontline communities organizing against extraction, where local communities are stopping new fossil fuel infrastructure, and together in the streets at mass mobilizations like the Peoples Climate March.

This is the climate movement's moment to seize. It's a moment for the labour movement and climate movement to join together to demand investment in re-tooling and re-training workers to build the new economy.

It's a moment to divest from dangerous fossil fuels like tar sands and reinvest in the solutions that are here and growing, especially those being led by those communities most impact by extraction and climate change. It's a moment to recognize that climate justice needs racial, social and economic justice, and most of all, it's a moment to be bold.

Image Credit: Natural gas flaring in North Dakota by Tim Evanson.

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The White House confirmed today that President Obama will veto Congressional legislation designed to greenlight construction of the Keystone XL pipeline, the contentious project first proposed six years ago to carry more than 800,000 barrels per day of Canadian oilsands crude from Alberta to refineries and export facilities along the Gulf of Mexico.

Despite strong indications of support in Congress, the Obama Administration has already indicated it will veto the bill to expedite approval of the $8 billion project if approved. A similar bill was blocked by Democrats in the Senate in November.

“If this bill passes this Congress the president won’t sign it either,” Josh Earnest, White House press secretary, said. Obama rejected TransCanada's application to build the pipeline in 2012, suggesting congressional Republicans had set a "rushed and arbitrary deadline" for the project's approval.

The bill, proposed by Republican Senator John Hoeven from North Dakota and Democratic Senator Joe Manchin from West Virginia, will be debated in a Senate Energy and Natural Resources Committee hearing Wednesday with the panel set to vote on the project Thursday.

“For us to continue to produce more energy and compete in the global market we need more pipelines to move crude at the lowest cost and in the safest, most environmentally friendly way,” Hoeven said in a recent press conference. “That means that pipelines like the Keystone XL are in the vital national interest of our country.”

According to Danielle Droitsch, director of the Canada Project at the Natural Resources Defense Council, Obama “made the right call.”

“What’s needed now is for him to kill the dirty tar sands pipeline outright,” she said in a statement.

Droitsch said the president is clearly focused on the question of national interest.

“On principle, the president is right to put the national interest first. It’s not the role of Congress to short-circuit the legitimate process of presidential review designed to ensure the best outcome for the country."

She added Keystone XL “would pipe some of the dirtiest oil on the planet through the breadbasket of America so most of it could be shipped overseas. It’s not a plan to help our country. It’s about big profits for big oil – and big pollution for the rest of us.”

The president indicated he will stick to the official pipeline review process and noted an ongoing challenge to the pipeline’s route through Nebraska has yet to be resolved.

In addition to massive public opposition to the pipeline, plummeting oil prices are calling into question both the short and long-term viability of North American oil projects.

As Canadian economist Jeff Rubin recently put it in a Globe and Mail op-ed, the political economy of oil is rapidly changing our relationship with fuel transport infrastructure:

“The first thing Canadians should recognize about the new world order for oil prices is that – contrary to what we’re being told by our federal government – the economy is no longer in dire need of any new pipelines. For that matter, it can live without the new rail terminals being built to move oil as well. Yesterday’s transportation bottlenecks aren’t relevant in today’s marketplace.

At current prices there won’t be any massive expansion of oil sands production because those projects, which would produce some of the world’s most expensive crude, no longer make economic sense.”

Bill co-sponsor Joe Manchin – one of the few Democrats to support the pipeline – said he is encouraged by the fact that the Keystone XL bill is one of the first pieces of legislation this year.

“We have everything to gain by building this pipeline, especially since it would help create thousands of jobs right here at home and limit our dependence on foreign oil,” he said.

Yet to the White House, the move is symbolic of potential discord with the Republican-led Congress.

"Congressional Republicans are well aware of the position of this administration, which is that we believe clearly that this administrative process is the one that should determine the viability of this project and that is a long held view," White House press secretary Earnest said.

"So it may raise questions about the willingness of Republicans to actually cooperate with this administration when you consider that the very first bill that is introduced in U.S. Senate is one that Republicans know the president opposes," he added.

According to The Hill, Hoeven and Manchin already have a plan to push passage of the pipeline legislation later in the year, despite Obama’s veto.

Image Credit: Susan Melkisethian via Flickr

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When you cover energy and environment issues day in and day out, you’re prone to having some pretty geeky fantasies.

Case in point: over the holidays, my mind wandered to considering what advancements in Canadian energy policy I’d put on my wish list for 2015. I could have rattled off five or 10 things, but one kept rising to the top.

If I could wave my magic wand and make just one thing happen on the energy and environment front, what would it be? I’d like Alberta to start managing its oil wealth more responsibly.

The context: as 2014 draws to a close, Calgary public-school officials are asking the province to cough up the funding required to complete eight new schools and two modernization projects on time.

Right now, one-third of Calgary’s schools are running at more than 90 per cent capacity. All of the projects that require funding have been announced by Alberta Premier Jim Prentice since he took office in September.

“With the recent fluctuation in oil prices, we’re concerned,” Calgary Board of Education trustee Amber Stewart told Metro Calgary.

Let’s take a pause and reflect on how totally absurd this is for a moment.

Alberta has been developing one of the world’s largest sources of oil for more than 40 years and yet Calgary’s schools are nearly overflowing and the province doesn’t know if it’ll be able to locate the cash to build new ones because — surprise! — the price of oil changed.

So what’s wrong here? For starters, new infrastructure shouldn’t be tied to the price of oil. Even the Fraser Institute and the Canadian Centre for Policy Alternatives can agree that the Alberta government shouldn’t rely on non-renewable resource revenue to fund its operating expenses. (For the best run-down on this topic, read Money for Nothing: The Province vs. Non-Renewable Resource Revenue by Alberta Oil editor Max Fawcett.)

Fawcett references a 2013 Fraser Institute report that said to treat oil revenues as “analogous to sales tax receipts, and to spend them on projects that provide a flow of present services, would be to engage in unwise capital consumption, a drawing down of principal. Intuitively, the present generation would be selfishly eating away at a finite stock pile of wealth, rather than acting as custodians of ­nature’s gifts on behalf of all future generations.”

Another report by former Premier Ed Stelmach’s Council for Economic Strategy noted: “The true Alberta advantage is not the ability to create a low-tax environment by underwriting a significant proportion of government services with funds received from the sale of energy assets.”

Despite generating almost $190 billion in non-renewable resource revenues since 1980, the value of Alberta’s Heritage Fund was just $17.3 billion at the end of 2013 — paling in comparison to both Norway and Alaska’s non-renewable resource savings.

So here we are digging up two millions barrels of oilsands per day, and Prentice is warning that tough times could lie ahead as oil prices plunge below $75 U.S. per barrel. The province has projected that there could be a $7 billion shortfall in revenues next year as a result of the price crash.

Could these fiscal woes offer the window of opportunity needed for Albertans to wake up and see how poorly their oil wealth is being managed?

It took millions of years for all of that oil to end up trapped in sand in northern Alberta. We only get one shot at digging it up. It’s high time we start getting that right (and getting that right would inevitably mean going slower and collecting higher royalties).

The first step in changing the way Alberta manages (or mismanages) the oilsands is to untether government spending from oil revenues, thus starting to dismantle the government’s reluctance to fairly regulate industry. Right now you have a situation in which the Alberta government is reluctant to bite the hand that feeds it.

As an added bonus, keeping one-time resource wealth out of the province’s operating budget could weaken the government’s chokehold over its citizens (pretty easy to stay in power when you’re dishing out $400 “prosperity cheques”) — not to mention actually creating a savings fund for the future.

In an interview with The Tyee, Terry Lynn Karl, one of North America's foremost experts on the politics of oil, offered some wise words on the impact of oil revenue on governments. 

"Let me be clear: the commodity itself is neither good nor bad,” she said. “But the excessive profit involved from what Adam Smith called 'reaping what has not been sown' has led to a concentration of power and influence that makes it exceptionally difficult to fight the negative consequences of hydrocarbon dependence.”

The first step to breaking up that concentration of power and influence? Stop borrowing from the future and spending oil revenue like it's going out of style.

So here’s a little new year’s resolution suggestion for Prentice and the Alberta government: show your commitment to managing the oilsands responsibly by weaning yourselves off relying on one-time oil revenues to provide government services. If you showed that kind of courage, there may be short-term pain, but Albertans 50 years from now would still be clinking their glasses in your honour.

Photo: Jim Prentice by Connect 2 Canada

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It turns out we have yet to reach peak oil, after all. And in this topsy-turvy world where the U.S. now produces more oil than it needs to import, it may be Prime Minister Stephen Harper's power that has peaked instead. Why? Because in his quest to build an "energy superpower," Harper tied his political fate to the price of Canadian crude.

Harper won his long-coveted majority in May 2011, with a simple promise to energy producers: he would do whatever necessary to get their wares to market. Higher export prices would unlock deeper, more marginal reserves. And for the Tories, the resulting spurt of growth could pay for tax cuts, helping to paper over voters' concerns about environmental tradeoffs. But Harper's plan, like a runaway oil train, is going off the rails.

The day before the last federal election, Canadian heavy crude was trading at $82.87 a barrel. Since then the price has gone up and down, only to end up right back where it started. Thanks to fixed-date election laws he himself brought in, Harper has at most 20 months to fulfill his promise to energy producers — or they will find someone else who can.

If your profits depend on getting crude oil to saltwater, you need the right political salesman. Right now those companies are looking for someone who can reboot Canada’s relationship with First Nations, maintain trust with voters and ultimately secure social licence for development. On all three, Harper is poised to fail. His current troubles may be largely self-inflicted, but they were set in motion by events beyond his control.

In the middle of the last decade, a technological revolution in U.S. oil fields inverted the logic on which North America's energy infrastructure was built. Instead of refineries around the edge of the continent sending imported petroleum inland, it's the interior that is suddenly brimming with oil and gas. Eventually those fracked wells will see their production drop off sharply, but for now the U.S. is swimming in high-grade crude. Canada's oilsands, more costly to extract and refine, have lost their lustre in all but the hungriest energy markets.

Harper's decline likely began in November 2011, with a nasty surprise from Barack Obama. The President announced he would push back his decision on the Keystone XL pipeline — indefinitely, it turns out. That "no-brainer" lifeline to heavy-oil refineries on the Gulf Coast was supposed to be open by now, draining nearly half the daily output of the oilsands on its own. That November, Harper met with the commander-in-chief in Hawaii to convey his grave disappointment. "In fact he was furious," reported Maclean's political editor Paul Wells.

According to Wells, "two days after the chat with Obama, at a meeting of cabinet’s priorities and planning committee in Ottawa, Harper handed out orders to a half-dozen ministers. Energy exports were the government’s new top strategic priority."

Why? Because Harper knew his political survival depended on the price of Canadian crude.

One of the people around that table was Peter Kent, who began using his platform as environment minister to gut any laws impeding the energy industry — all the while championing Canada's "ethical" oil. Of course, if refinery operators had the luxury of caring about human rights, they wouldn't buy oil from the places they do. What they care about are price and quality. On both fronts, oilsands producers find themselves at a disadvantage.

Eventually Kent's rhetorical gymnastics wore thin, and the hapless former newscaster was dismissed.

Another cabinet colleague was Denis Lebel, transport minister and Harper's lieutenant in Quebec. On his watch, rail companies ramped up their shipments of crude, in an effort to circumvent the slow approval process for pipelines. Then the Lac-Mégantic disaster struck, killing 47 people and prompting a backlash by municipalities. A week after the flames were finally put out, Lebel was shuffled off the transport portfolio. A string of derailments since has only deepened public anxiety over oil trains.

Another minister at that 2011 meeting would have been rookie MP Joe Oliver, a career investment banker chosen to quarterback the natural resources file. Less than two months after Obama sent the team scrambling for other pipeline routes, Oliver launched his attack on British Columbia's "radical groups," whom he implied were paid agents of shadowy foreign saboteurs. The episode galvanized grassroots opponents, adding friction to proposals across the country.

Seen through this lens, a pattern of events over the past two years comes into focus. The use of CSIS to spy on environmentalists and First Nations, on behalf of oil and gas companies. The use of the National Energy Board to stifle citizen input on project proposals. The use of the RCMP to break anti-fracking blockades at Elsipogtog. The use of millions in public money to buy ads for the energy industry.

With a four-year deadline, Harper bent the mandates of federal ministries and agencies to serve his "top strategic priority." And yet it's doubtful any new pipelines will be under construction before the next election. Meanwhile, international energy markets are shifting. On all fronts, time is running out.

Strongman tactics tend to conceal fear and weakness.

Harper's weakness stems from the pact he signed with energy exporters, while his fear is that voters' perception of Canada's economic performance will come unglued from his political brand. The irony is that one may be helping the other come true.

As University of Alberta economist Andrew Leach points out, despite Harper's outsized focus on oil and gas extraction, that sector now makes up less than seven per cent of Canada's GDP. Since the Conservatives took power in 2006, corporate taxes collected from the oil and gas industry have fallen from eight per cent of the total to 4.3 per cent.

All that political capital spent, for an industry that doesn't even pull its weight. Meanwhile, December's job losses brought the unemployment rate up to 7.2 per cent. Consumer debt has surged, while the income gap has only widened. Even if Harper's pipeline dreams come true, the resulting spike in crude prices could easily create more losers than winners.

It's not true that a rising tide of oil would float all boats. But if the price of Canadian crude falls, so too will Prime Minister Stephen Harper.

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A new paper put out yesterday by respected Canadian economist Robyn Allan, finds there is no existing data to back up the much-touted claim by CIBC energy analysts – and echoed by industry, government and major media outlets – that Canada is losing $50 million a day because it is selling tar sands crude "on the cheap."

In the paper, titled: Bitumen’s Deep Discount Deception And Canada’s Pipeline Mania: An Economic and Financial Analysis [PDF], Allan writes that the basis for the $50 million a day loss claim is a March 6, 2012 CIBC Institutional Equity Research Update published “Double Discounting of Canadian Crudes.” Google the phrase "double discounting Canada's crude" and "oil sands $50 million a day" and you will see how often these two phrases are being used to argue for further pipeline expansion in the form of the Keystone XL, Gateway and other proposed projects.

On Tuesday Joe Oliver, Canada's minister of natural resources, told reporters that:

"Because of a lack of pipeline capacity, Canadian oil is selling at a considerable discount to the international price. Some CAD $50 million every day is lost to the Canadian economy."

A Google search also shows that the CIBC report is not publicly available. 

When Allan asked a CIBC analyst for the data backing the $50 million loss claim, the analyst told her, "I don't have that data anymore."

Without the data, Allan attempted to recreate the loss claim made by CIBC and concludes that, "on an annualized basis, and adjusting for natural differentials, we don’t need supply volumes to conclude there was no real loss posted to the oil industry for [synthetic crude oil] or for diluted bitumen as compared with [Western Texas Intermediate] in 2012."

In layman's terms Allan is saying the CIBC claim is incorrect and that in fact the $50 million figure is derived from a natural price differential that has always existed between the going market price for diluted tar sands bitumen (which Allan characterizes as "junk crude") and Western Texas Intermediate oil (WTI) which is a more valuable light crude oil. 

Image Credit: Enbridge Northern Gateway Pipeline Brochure.

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