Peter Foster: U.S. Oil Boom Undermines Obama’s Climate Posturing

  • Date: 15/02/14
  • Peter Foster, Financial Post

U.S. oil boom undermines Obama’s climate posturing on eve of next week’s North American  leaders summit

The Keystone XL issue will cast a frosty pall over next week’s encounter between Prime Minister Stephen Harper and President Barack Obama at the American Leaders Summit hosted by Mexican President Enrique Pena Nieto.

Mr. Harper is not known for his loose lips, so when he told Bloomberg, in an interview reported this week, that the building of Keystone XL is “inevitable,” and that “It takes a lot of energy to repress and to block a decision that is clearly and overwhelmingly in the national interest of the country,” he clearly wasn’t sending a Valentine to the White House.

Mr. Obama has been writhing over what should have been a relatively straightforward decision, had it not become the focus of a vast campaign of hysterical misinformation masterminded by environmental NGOs and supported by their Hollywood and billionaire cohorts. He is also predictably coming under attack from his Republican opponents for putting green posturing above jobs, a stance that doesn’t sit well with many Democratic senators either in the run-up to this year’s mid-term elections.

Mr. Harper has recently become more aggressive in his stance on emissions controls on the oil industry (albeit that such controls would be climatically pointless without a global agreement, and probably pointless even then). He has noted that it would be suicidal for Canada to establish unilateral restrictions, whatever green zealots or useful idiots in the Canadian corporate community may say (At least former environment minister and current CIBC vice-chairman Jim Prentice appears to have seen the light. In a speech this week he rejected unilateral carbon pricing and looked forward to a post-Obama administration).

What strengthens Mr. Harper’s climate policy hand, even as it threatens his superpower aspirations, is the U.S. technology-based petroleum boom.

Canadian oil production rose by a modest 91,000 barrels per day (bpd) between November 2012 and November 2013, to 3.5 million bpd.  At the beginning of December, U.S. oil production was up a whopping 1.2 million bpd over the previous year, to 8 million bpd. That’s thirteen times the Canadian increase.

Even allowing for the higher emissions from oil sands oil, these figures confirm that all the placarding and protesting against Keystone XL is ridiculous, at least if climate is the real issue. The atmosphere doesn’t recognize emissions from “dirty” oil.

Let’s pile on a few more ironies. The U.S. has in fact achieved the most significant emissions reductions of any advanced country since President Obama came to office, but that has nothing to do with his stubborn commitment to subsidizing non-economic alternatives. It is due to the boom in shale gas that has enabled electricity production to switch from coal, and in the process lower manufacturing costs. And what has happened to the displaced coal production? It is being shipped to Asia and Europe.

It would be a mistake to imagine that the boom means that the U.S. doesn’t need Canadian oil. In fact, the refineries of the Gulf Coast, where the Keystone system winds up, are uniquely suited to the heavy oil sands product. Most of the increased domestic U.S. production is light oil for which new refinery capacity would be needed. That takes time, so there is increasing pressure from U.S. producers to allow crude exports, which have been banned since the OPEC crises of the 1970s.

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