Canada and Playing The Energy Card

We read The New York Times award-winning columnist Thomas Freedman's latest missive. He stated that the world was happy with the election of Sen. Obama, but they should show their support with troops, money and trade.

I was just in Calgary and heard a speech by a former political leader telling energy executives that Canada should develop a national energy policy that could be used to counter the expected protectionism legislation from the United States under President-elect Obama that would hurt the Ontario-based auto industry. I had other conversations with locals who all were suggesting the use of Canada's energy card as a way to extract benefits for Canada or to protect the county's economy against protectionism. So much for the attitude of cooperation from one of our closest and most important neighbors.

Below is what I have written about this issue in this week's Musings From the Oil Patch that will be published Tuesday.

Canada And The Energy Card

We spent last week from Election Eve on in Calgary and found some interesting Canadian views about the United States. Many Calgarians were aware of the dialogue during the U.S. presidential campaign about the North American Free Trade Agreement (NAFTA) and the desire of President-elect Barack Obama to re-negotiate it. As a backdrop for this dialogue, the Democratic Party has agreed to push to re-negotiate NAFTA in return for voting and financial support from the unions. The argument for trying to redo NAFTA is that it hurts manufacturing and has been the cause of union job losses. The most visible example of this problem has been the U.S. automobile industry.

The U.S. automobile industry’s financial problems have forced companies to cut manufacturing jobs, which has hurt the Eastern Canadian economy where a number of auto assembly and auto parts plants are located. In fact, the province of Ontario has been hurt to the point where it is eligible to receive payments from the rest of the country under the federal government’s program to help the “have nots.”

A more damaging issue has been the Democratic Party’s efforts in support of climate change legislation to ban the use of “dirty” fossil fuels such as the oil produced from the Canadian oil sands. Some more level-headed U.S. politicians have worked to derail that “dirty” fuels legislation, but given the overwhelming Democratic Congress and a Democratic president, that momentum may build.

While we were in Calgary, we had discussions with various people in addition to attending a presentation by a former Canadian politician. The topic of several of these conversations, in addition to the politician’s presentation, was that after the U.S. election Canada should play its energy card. In the case of the Honorable Preston Manning, his suggestion for playing the energy card involved the Canadian federal and provincial governments developing a national sustainable energy policy that would help to counteract the growing issue of U.S. protectionism. He believes that the U.S. needs Canadian oil and gas and will figure out how to deal with the “dirty” fuel issue. But the prospect of Canadian oil and gas supplies being needed by the U.S. to solve its energy problems should be utilized by the Canadian government to protect Ottawa’s auto industry.

We also had a conversation with a taxi driver who went on at great

lengths about Canada’s need to confront the United States over its energy use and double the prices of the oil and gas exported south of the border. He actually thought that Canada should look to double the price of all goods sent to the United States – not a likely scenario.

What we found most interesting in these discussions was the recognition that the United States clearly needs Canada’s natural resources and it was time for Canada to get as much as it can in this trade relationship. That desire to extract maximum prices from Americans is being rationalized as a way to offset the potential of U.S. protectionism raised with the election of Senator Obama. Let’s hope that our relationship with our good neighbor to the north does not deteriorate to that degree, but will the new administration be capable of turning its back on its supporters and promoters?

Let me know what you think about the energy card and the possibility of a protectionist attitude dominating our politics under the next Administration.