Canada’s Eastern provinces could experience petroleum shortages because, under the North American Free Trade Agreement (NAFTA), the country is forced to export at least two-thirds of its oil production to the U.S. To make matters worse, Canada has no strategic petroleum reserves, thus increasing the country’s energy vulnerability.
Economist Gordon Laxer addresses this disturbing state of affairs in his study Freezing in the Dark: Why Canada Needs Strategic Petroleum Reserves, recently published by the Parkland Institute and the Polaris Institute.
International supply problems are increasingly likely: as deposits are exhausted, world production of oil is about to peak and then decline, if it has not done so already; and global demand is rising significantly with the rapid growth of countries like China and India.
Even though Canada is a net exporter of petroleum, 90% of the oil consumed in Quebec and the Atlantic provinces is imported from countries like Saudi Arabia, Algeria and Iraq. This means that Canada’s current energy policy prioritizes supplying the United States while the eastern part of the country is subject to the instability of international markets! And if there were a shortage, it would be impossible to reduce our exports to our oil-guzzling neighbour to the south.
Gordon Laxer offers the following solutions:
-Obtain an exemption from NAFTA’s “proportionality clause” requiring Canada to export a specified proportion of its production (two-thirds!) to the United States—Mexico has already secured this exemption;
-Reduce oil dependence and vigorously support energy efficiency programs and the transition to renewable energy sources;
-Reverse the Montreal-Sarnia pipeline, so that it delivers oil from Western Canada instead of carrying foreign oil from the port of Montreal to refineries in Ontario;
-Divert Newfoundland’s oil exports to Eastern Canada;
-Create strategic reserves in Eastern Canada.