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Big Oil calls for supply management to correct sinking crude prices

On Tuesday, the president of Cenovus Energy Inc., one of the Big Five players in the Alberta oilsands, called for temporary production cuts across the Canadian oil sector to push the sinking price of oil back up again.

It's all about supply and demand.

"We think there is a strong case for the government to temporarily mandate reduced production for the industry," Cenovus said in a statement emailed to a CBC reporter in Calgary. Progressive Conservative Premier Peter Lougheed did just that back in 1980 during his battle with Ottawa over the National Energy Program, it noted.

"Our inability as a country to build critical new pipeline projects means we are now in a situation where we can't get our growing oil production to market," Cenovus claimed in its statement. "This has resulted in a market failure."

Never mind that big oil companies are run by the kind of people who would normally claim markets can't fail, ever, as a matter of ideological faith. This market failure, though, is a political one, see, so it requires a political solution.

"This market failure is the result of policy failures at the federal level that impacted pipeline projects, and in the short term it can only be fixed by the Government of Alberta through temporary mandatory industry-wide production cuts," the Cenovus statement said.

"Nobody is making money at this price and this is rapidly becoming an emergency situation in the economy," Cenovus CEO Alex Pourbaix told CBC radio listeners the next morning. That said, it's a fact that the Big Five oilsands producers have made pots of money in difficult circumstances in the past.

Also Thursday, a big shot from another one of the oilsands Big Five jumped on the Cenovus bandwagon. "It just makes total sense," piped in Steve Laut, executive vice-chairman of Canadian Natural Resources Ltd. "It's the simplest, cleanest and most effective way to ensure Albertans get value for resources and end the subsidies to U.S. buyers."

Alberta Premier Rachel Notley indicated she's thinking about it -- but noted that not every company in the oilpatch agrees with the idea of the government imposing production limits, even with the differential between world prices and the price of Alberta crude from the oilsands as wide as it is right now.

"We need to work very, very quickly to address it. We're going to have conversations and discussions with all the players about the most effective way to move forward," Notley said, adding that a decision could be made within weeks.

The CBC story with that quote didn't have a response from the Opposition United Conservative Party, but I wouldn't be at all surprised Leader Jason Kenney would be delighted to criticize the government for not moving fast enough on that file, just as he has on another example of state intervention -- the Trans Mountain Pipeline Expansion Project.

Now, let it be said that there’s nothing wrong with governments intervening actively in the economy. It's their job, and despite 30 years of steady neoliberal propaganda, it often works very well.

But let's call a spade a spade. What Cenovus and CNRL are talking about is called … supply management.

And supply management is in rather bad odour in certain corners of the political right just now.

Last month, indeed, you could almost hear the right wing pundits, think tankers and professional free marketers cheering in the media when supply management of dairy products took a hit in the NAFTA 2.0 trade talks in Washington, otherwise known as the United States-Mexico-Canada Agreement.

As was noted in this space at the time, that was because movement conservatives had been salivating at the prospect of dismantling supply management in dairy, poultry and eggs for decades. Why do you think Maxime Bernier came so close to winning the Tory leadership last year?

The number of what we used to quaintly know as column inches devoted to attacking supply management in Postmedia's newspapers could probably reach from Alberta to the glimmering blob of quota-controlled green cheese that floats in the night sky.

Whether or not to throw Canada's dairy farmers under the milk truck turns out to be an issue so divisive to conservatives it’s driving their movement asunder, with Stephen Harper mini-me Andrew Scheer taking the side of the farmers, for now, and his former leadership rival Bernier forming his own spoilsport party to shake Big Milk.

The trouble with supply management from the ideological right wing perspective is that it works too well. No wonder Big Oil wants in!

As Britain's Guardian newspaper pointed out in a piece last spring, thanks to supply management, Canada's dairy industry "is thriving like never before -- and like none other in the developed world."

"The result is that dairying remains a key economic support of traditional rural life throughout Central Canada." Yeah, milk and cheese prices may be a little higher, "but to supporters, the uniquely prosperous, protected Canadian dairy industry stands as a model alternative to the increasingly disruptive and unpopular dynamic of unrestricted free trade in all things."

Of course, Canadian dairy farmers may be doing OK, but they're not billionaires like some of the guys who run Big Oil and spread their wealth around to think tanks, slush funds and Astro-Turf groups set up to attack things like supply management in agriculture.

We've just seen how mad a few Canadian dairy farmers made U.S. President Donald Trump. I imagine things would get quite a bit worse if a Canadian province stopped allowing sales of cheap crude to American refineries to drive the price up.

Perhaps Devin Dreeshen, the UCP's trade critic and former Trump campaigner, could whisper some soothing words in the president’s ear.

Still, I say Notley should go for it and do what Pourbaix and Laut suggest. But if she does, she should call it what it is: supply management.

As for the Canadian dairy industry, there's a lesson for them in this too: They should call the obvious results of ending supply management in their industry -- lost jobs, abandoned farms, devastated rural communities, and the shipment of profits to another country -- a political market failure, for which the only solution is political intervention.

As someone said, it just makes total sense.

This post also appears on David Climenhaga's blog, AlbertaPolitics.ca

David Climenhaga, author of the Alberta Diary blog, is a journalist, author, journalism teacher, poet and trade union communicator who has worked in senior writing and editing positions with the Toronto Globe and Mail and the Calgary Herald. His 1995 book, A Poke in the Public Eye, explores the relationships among Canadian journalists, public relations people and politicians. He left journalism after the strike at the Calgary Herald in 1999 and 2000 to work for the trade union movement. Alberta Diary focuses on Alberta politics and social issues.

Image: Pixabay

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