Columnists

Jim Stanford
Raising the subject matter of Canadian energy policy

| April 29, 2011

In the Middle East, fury over the rising cost of energy and other essentials sparked the overthrow of tyrants. In China, desperate truckers held spontaneous strikes to protest against gasoline prices. Even in politically paralyzed America, the government launched a major inquiry into oil industry pricing.

But in Canada, a seemingly well-functioning democracy, soaring energy prices haven't caused a political ripple -- even during a federal election campaign. What gives?

Canadians spent $50-billion on gasoline in 2010. This year, if current prices are sustained, we'll spend $15-billion more. Paying more for what we already buy is, in effect, a $15-billion (or 1.5-per-cent) reduction in national disposable income. Non-gasoline purchases are already being crowded out. Add the impact of other energy bills (such as home heating), and the pain is worse. If history is our guide, this latest price surge will result in hardship, job loss, perhaps even recession.

Imagine what would happen if any party proposed a new $15-billion tax. Yet, this effective $15-billion tax -- collected by oil companies, not government -- doesn't register on the political radar screen.

Free-market purists celebrate the "depoliticization" of energy pricing as a sign of maturity. Canadians have been convinced that energy prices (like any other prices) reflect anonymous forces of supply and demand, and hence there's no point getting riled. Another key reason this enormous issue isn't registering politically is because no one (least of all the politicians) has a clear vision of what to do about it. The best Industry Minister Tony Clement could come up with was inspecting the accuracy of gas pumps -- but that hardly eases the pain of paying $1.30 an accurately measured litre.

Never mind Canadians' passivity, the underlying claim that energy prices reflect anonymous and presumably efficient market forces is downright bizarre. The "world market price" reflects the combined influence of an actively managed cartel, the massive buying power of speculators (exaggerating recent price increases) and the profit-seeking of oil companies (which jack up prices overnight on developments in Libya, for products produced months ago). That's not supply and demand. That's greed, power and brute force.

In Canada, too, the visible hand of policy (not the invisible hand of the market) explains why Canadians will pay $15-billion extra at the pumps. When the Mulroney government deregulated energy in the 1980s, it committed Canadians to competing with the highest global bidder for our own resources. This system was reinforced by NAFTA and its still-unprecedented energy-sharing clause, which prevents Canadians (until we change the treaty) from limiting or regulating energy exports to the U.S.

There's no fundamental economic reason why Canadians must pay billions more this year for Canadian energy that costs no more to produce than last year. This is true only because government policy has made it so. Anyone who points this out, of course, is immediately tarred and feathered for wanting to bring back the national energy program. But knee-jerk McCarthyism shouldn't stop Canadians from debating such an enormously important aspect of our lives.

I'm not arguing for cheap energy. Energy prices need to reflect the true economic and environmental costs of their production and use. But, instead of the current roller coaster, we'd be better served by steady, gradually increasing energy prices -- the revenues from which should be invested in efficiency and green energy (rather than fattening the pockets of oil companies).

Whatever one's views, this is the subject matter of Canadian energy policy. And since we have free elections in this country, no one should have to light themselves on fire to get politicians talking about it.

Jim Stanford is an economist with the CAW. This article was first published in the Globe and Mail.