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Saudi spat shows need for Canadian oil pipelines

Thursday August 10, 2018
Lorne Gunter

On Thursday, Saudi Energy Minister Khalid al-Falih said the current diplomatic spat between the Kingdom of Saudi Arabia (KSA) and Ottawa would not affect Saudi oil sales to Canada.

Of course not. That’s money we pay them. Everything action they’ve take so far affects only money they send us.

The Saudis aren’t stupid. We get about 15 per cent of our foreign oil from them; between $4 billion and $5 billion a year.

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They have recalled the 7,000 university students they have in Canada, as well as those students’ 5,000 dependents. Since the kingdom pays full foreign-student tuition on their behalves, the loss for Canadian universities is in the neighbourhood of $350 million to $450 million a year.

The Saudis have expelled our ambassador, cancelled commercial flights from Riyadh to Toronto, ended purchases of Canadian wheat and called into doubt $15 billion in arms sales from Canadian manufacturers to the Saudi military.

But most of that costs us, not them. They’re not going to forego a big chunk of change just to drive home a point.

Now imagine if we had the capacity to cut off their oil sales to us. That might give Canada the upper hand.

We have more than enough oil of our own to replace every drop we buy from the Saudis. Indeed, our reserves are third-largest in the world behind only theirs and the Venezuelans’.

Why in heaven’s name is Canada buying foreign oil in the first place?

You can blame the Trudeau government for the fact that we can’t cut off the Saudis, so the kingdom has the advantage over us as a result.

Not only did the Trudeau government start this fight with Saudi Arabia by sending out some pompous Tweets last week demanding the Saudis immediately release a prominent women’s rights activist, along with other political protestors. (It’s not the subject of these Tweets that’s the problem, it’s the fact the Trudeau-ites chose to conduct “diplomacy by Tweet” rather than just through formal channels – not unlike Donald Trump.)

The Trudeau government is also to blame for putting us in a weakened bargaining position by killing the Energy East pipeline last year.

Energy East would have carried hundreds of thousands of barrels of Alberta oil a day to eastern refineries, mostly in New Brunswick. With that much capacity, we could cancel sales from any of our foreign supplier in case of a trade dispute – even the U.S. (53 per cent) – and not notice any disruption or inconvenience among consumers.

Energy East would have put Canada in a strong position in any trade war.

But last summer, the Trudeau government moved the regulatory goalposts for approving Energy East. Instead of making the line’s owners, TransCanada, responsible for the environmental costs of constructing and operating the line, the Liberals decided to add the environmental costs of extracting the oil that would travel down the line AND for the cost of refining and consuming the oil after it had exited Energy East.

That change made the costs prohibitive, so TransCanada backed out last fall.

Even if Energy East had been approved, it wouldn’t yet be ready. The pipeline would be of no immediate benefit in the battle Ottawa has picked with the KSA.

But it would be a psychological boost to our position to point out that in a couple of years, we wouldn’t need Saudi oil. Or American oil. Or Norwegian, Nigerian, UK or Azerbaijani.

It’s hard to imagine any other country with the ability to have energy self-sufficiency or security not taking advantage of that chance. But Canada, especially under the Trudeau Libs, has done everything to keep itself dependent on foreign oil and foreign governments.

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