Paying more at the pump for gas is a news story these days. In the U.S., President George W. Bush has backed an energy bill that is packaged for the consumer, claiming to reduce dependence on foreign oil, protect the environment and lower prices.
Actually, Bush will sign legislation that offers $14.5 billion (U.S.) in tax breaks and subsidies to energy companies over the next ten years. U.S. critics point out that nothing in the bill does what Bush says it will do.
The Bush approach is to allow market prices to decide who gets the oil. His policy embodies the belief that high prices will lead to more oil being found, lowering prices. Running out of oil, or burning too much is not part of the energy question for Bush and his followers.
Canadian energy policy has adopted the same faith. The way we look at resource pricing and production changed when the Free Trade Agreement of 1988 provided Canada with a new economic constitution. Public resource policy has since been designed to promote profit-making opportunities. Crown corporations which owned the resources as trustees for citizens were privatized. The new resource companies were supposed to deliver more supplies to consumers at lower prices as market competition replaced public ownership.
This way of thinking was a fairy tale then, and it will be producing nightmares and worse to come so long as it remains dominant. A couple of recent examples tell the story:
- Saskatoon is now home to small groups of millionaires from privatized public wealth. The Financial Post reported on the weekend that stock options have allowed some 40 insiders at Potash Corporation (privatized in 1989) to cash in some $60 million in pre-tax profits, and another 32 insiders at the uranium producer Cameco (privatized in 1991) have taken home about $40 in pre-tax profits through stock options.
This is the outcome of privatization: profit-taking by individuals. The recent rise in commodity prices explains the money being made, financial wisdom being grounded as always in a rising market. As for conservation of scarce resources, we are not supposed to notice nobody is home minding nature's legacy.
- Enron is synonymous with corporate crime. This past week our very own CIBC paid out $2.5 billion (U.S.) in fines for its part in helping Enron mislead private investors hoping to cash in on energy shortages. Conveniently, the CIBC head honcho had hit the retirement trail richer by $52 million before the news hit the CIBC stock price (down by $10). Furious, some institutional investors want him to give the money back.
The real cost of privatization is infinitely greater than the private fortunes handed out to friends in the crony world of corporate Canada.
For public policy, privatization is a form of improvidence. Help a lucky few cash in today, while letting supply for tomorrow aka, succeeding generations look after itself. But you cannot plant oil and gas and expect it to grow back. Shipping non-renewable oil and gas reserves South to a ravenous U.S. market, when it cannot be replaced, makes no sense either for the U.S. which needs a new way of living with scarce energy, or for the Canadian citizens who under the 1867 constitution (as amended in 1982) are the owners of the resources.
The consequences of adopting corporate ownership as public policy instead of public ownership are not going to be pretty. Importantly, in a breach of free market faith, American consumers were guaranteed a perpetual share of Canadian energy production equal to past consumption.
As sources of Canadian conventional oil and gas decline, the reality of shortages will emerge in this country. When you cannot heat homes in a cold climate, you move or die. By this time it will be too late to blame the Canadiansâe(TM) complicity in the continental energy policy: Mulroney, ChrÃ©tien and Martin and their friends in the corporate world
Figuring out how to get public ownership, provident administration and regulation in the public interest back to the centre of resource policy where they belong, has to be a top priority. Learning how to understand the purpose of legislation in the corporate interest and how to replace it with laws made in the public interest to advance the common good starts with appreciating the limitations of market pricing as public policy.
As the price at the pump rises, eventually the truth will emerge. Market pricing is a form of primitive rationing based on income. The wealthy are allowed to waste as much as they can afford while others do without. When the issue is energy, the consequences for Canada are who gets to live here, in what circumstances.
We can either take back control of our resources or face recurring conflicts as supplies run out. We need legislation to protect the energy user and the environment, and to make that choice, we need a wide debate on energy policy, going behind and beyond the prices at the pump.
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