It’s all well and good that Iran, with its conservative religious leadership and avowed hatred of Israel, has agreed to lose interest in developing nuclear weapons and has been rewarded by the world’s nations by having sanctions, that had been levied against it, now dropped.
These sanctions were aimed at the one commodity Iran has to offer the world: crude oil.
The world, in particular the middle east, is now doubtless safer for the fact that Iran is not officially contemplating nuclear weapons.
But the dropping of the sanctions against the purchase of that nation’s oil means that the already beleaguered Canadian oil sector will continue to be hit hard.
The oil that Canada produces from the Alberta oil sands and from those provinces where oil and natural gas are extracted by means of fracking (shale oil extraction) will continue to be negatively impacted as Iran gears up to sell its lower cost raw petroleum products on the world market, joining neighbouring Saudi Arabia whose raw oil at recent budget prices has already directly impacted the Canadian products whose extraction costs, and hence selling prices, are much higher than their middle eastern competitors based on the lower wellhead production costs in the middle east.
Our dollar has, daily, less purchasing power because of the continuing decline in this particular resources sector so the world’s new open door policy with respect to Iranian oil is not good news for the Canadian economy, in particular that of Alberta and other oil producing regions of our country.
Saudi Arabia, by lowering the international prices of its raw crude oil, has brought this situation about singlehandedly. Iran’s product, which will of necessity be priced competitively, will just add to our domestic problems.
It is tempting to conjecture that Saudi Arabia is dumping its oil with an eye on the day when the world has moved to a less carbon-dependant economy and is intending to “make hay while the sun shines” before their product falls completely out of favour and is replaced by renewable energy sources as the nearly 200 nations participating at the November climate change conference in Paris agreed to do.
Whatever is going on, Canada’s higher-priced crude oil products will be out of favour for the foreseeable future and thus this sector of our economy will be dislocated in the long term.
The world will, however, continue to run on energy whether it’s green or “dirty” and it makes sense for Canada to read the tea leaves and work now to become a world leader in not only the development of but, more importantly, the manufacture and export of green energy technology and systems.
The new federal government cabinet is meeting just now in New Brunswick in preparation for its first budget.
Government revenues have fallen, and continue to fall, in response to Canada’s idle oil production industry and the lack of customers for our pricier products.
Pipeline proponents will argue that improved transportation of the raw petroleum product, whether east- or south-bound, will go a long way towards encouraging greater domestic consumption of Canada’s oil reserves.
That will doubtless be a topic for discussion at this pre-budget cabinet retreat.
But, in the long run, is investment in expensive-to-transport for an expensive-to-extract resource a good idea?
Will it not be a better bet for Canada to partner with the bright minds at work across this country busy developing all manner of alternative energy resources?
Canada has the benefit of a four-seasons climate model and we are also an Arctic nation.
Expertise on green energy, suitable for every region and every season, will not only be in demand internationally but can help to change our economy to one, at least somewhat, based on this expertise and related manufacturing and export opportunities.
Hopefully, those people currently controlling the levers of power will use this influence to bet on the future, and new jobs, and not so much on the past where jobs, as we are seeing, come and go very much at the whim of other nations whose eggs are pretty much exclusively placed in an oily basket.
