Barack Beware of the “Friendly Barrels” of Oil Sands

As many part of the world celebrated an Obama victory last week, his resounding success would have caused deep concern to the Canadian oil sands industry and Canada’s Prime Minster, Stephen Harper.

During the campaign, Obama condemned US reliance on “”dirty, dwindling and expensive oil,”  and his campaign team singled out oil sands as a potential problem for Obama.

In June this year, Jason Grumet, Obama’s senior energy adviser, said. “If it turns out that those technologies don’t advance . . . and the only way to produce those resources would be at a significant penalty to climate change, then we don’t believe that those resources are going to be part of the long-term, are going to play a growing role in the long-term future”.

Statements like these would have produced a cold-sweat down the Stephen Harper’s back. So within days of Obama’s victory, Harper phoned the President-elect and pledged to cooperate with him on a variety of issues, including climate change and, of course, “energy security”.

During the phone call, Harper reiterated Canada’s desire to be a “secure” supplier of energy to the U.S. At the the same time Harper proposed a new climate-change pact with Obama that would protect Alberta’s oil sands projects from potential new U.S. rules. So for “secure supplier to the US”, read “a license to destroy the planet by exploiting oil sands.”

Harper’s offer gives Obama a real dilemma.  On the one hand a ban on the import of oil sands would be seen as a “green commitment” by Obama, but it would seriously annoy a close ally and neighbour.

Moreover, the Canadians are arguing that oil sands are the only viable alternative to Middle Eastern oil, by which the US will avoid the coming energy-crunch. I am sure they will point to the International Energy Agency’s latest World Energy Outlook that argued that “some 30 million barrels per day of new capacity is needed by 2015. There remains a real risk that under-investment will cause an oil-supply crunch in that timeframe.”

Just today, one of the leading oil sands producers. Canadian Natural Resources, is arguing that they do not expect Obama to implement policies “that would crush Alberta’s oil sands industry”.

Réal Cusson, senior vice-president of marketing, argues “There’s always a difference between what’s been said in a campaign versus the realities of governing. We believe the Canadian barrels are friendly barrels right next door that can be delivered in a very reliable way to the U.S. refiners, and it should continue to be that way.”

But Obama should not be deceived by Harper’s snake oil offer of “friendly oil”. Jeffrey Simpson, writing in the Globe and Mail, argues that Harper’s offer “hides more agendas than it reveals”, in that it “sounds very grand, but it actually reflects both a form of aggressive defence to protect Alberta’s oil-sands production and implicitly acknowledges the incoherence of Canada’s own climate-change policies.”

And completely contradictory they are too. You cannot have climate protection at the same time as oil sands exploitation.

The IEA estimated the world needs investment of more than $26 trillion in the next 20 years to ensure adequate energy supplies, an increase of more than $4 trillion form last year. This would be more than enough to kick start a truly green revolution. What an amazing legacy Obama could leave to future generations if he said to Alberta that they would not take their “dirty and expensive” oil and they should leave it in the ground.