Justin Trudeau’s existential problems with oil and gas: Jack Mintz

From the MacDonald Laurier Institute

By Jack Mintz

Squeeze the industry to please his party’s green base or keep output, revenue and high-paying employment flowing?

Talk at the latest climate-change shindig in Dubai has centred around the future of the oil industry and whether countries should pledge to phase out oil and gas production entirely or simply transform the industry in decades to come. Canada always talks a deep-green game at these affairs but are we really ready to nail shut the oil and gas coffin?

Maybe not. In Dubai Canada announced a cap-and-trade approach to oil and gas emissions but argued it won’t actually stop oil and gas production outright. The provinces, who yet again weren’t consulted, may not agree. Besides, promises are one thing. The record is another.

It also emerged in Dubai that the Emirates, seventh largest oil producer, is expecting to increase its production by a million barrels a day (mbd) by 2030. This is not a new trend. According to the U.S. Energy Information Service, the UAE increased production of oil and hydrocarbon liquids like coal oil by 15.3 per cent between 2015 and 2022, from 3.7 mbd to 4.2, fourth-most of all oil-producing economies. That’s much faster than world output, which was up only 3.6 per cent since 2015, reaching 100.1 mbd last year.

The irony — maybe even the hypocrisy — is that three countries in the Americas have increased their petroleum output even more than this Middle Eastern oil sheikhdom has: the U.S., Brazil and, yes, us: Canada.

The Biden administration, which is promising 2030 emissions will be half 2005 levels, has so far failed to stymie oil and gas development. U.S. petroleum and liquids production has soared by 33.9 per cent since 2015, reaching 20.3 mbd in 2022. Two-fifths of the increase has been on Biden’s watch. The U.S., not Saudi Arabia, is now the world’s leading oil producer, accounting for fully 20 per cent of global supply.

The Trudeau government has pledged that 2030 oil and gas emissions will be 42 per cent lower than in 2005. This has led to tensions with the oil- and gas-producing provinces, which are resisting emissions caps for oil, gas and electricity. Ottawa’s opposition to liquefied natural gas sales even as the U.S. and Qatar are making great inroads in the world market has had industry leaders scratching their heads. Even so, since the Liberals came to power in 2015, Canada’s oil and gas production has grown second fastest globally, at 26.7 per cent, to reach 5.6 mbd last year. Much of this growth is due to big investments in the oil sands before 2015 but the production increase has been accommodated by pipeline expansion, with the federally-owned TMX soon to come on stream.

Neither Biden nor Trudeau is attending COP28 but Brazil’s president, Lula de Silva, stormed in at the head of a delegation of 2000 to repeat a pledge to cut 2030 emissions to less than half 2005 levels. Much of reduction results from reforestation, however, not phasing out oil and gas. And, to the surprise of attendees, Lula announced that Brazil will align itself more closely with OPEC. No shock there. Since 2015, Brazil’s oil and gas production has risen by 20 per cent, making it the 8th largest producer in the world at 3.8 mbd last year. It now evidently sees itself as a player.

Besides the U.S. Canada, Brazil and UAE, only Iraq (at 10.4 per cent) and Kazakhstan (at 4.5 per cent) have seen their oil production grow faster than the world average since 2015. The rest have had little growth, with seven countries registering declines, including 22.4 per cent in Mexico and 36.7 per cent in Nigeria, the biggest drop anywhere.

The standstill or even loss in oil and gas production in many oil-producing countries since 2015 is due to several factors. Oil prices dropped by three-fifths after 2014 and the pandemic caused another crash. More recently, Saudi Arabia and Russia have persuaded OPEC+ to constrain production and push prices to over US$80 per barrel — mainly in order to replenish their treasuries. In some places, including Ghana, the U.K. and Norway, old fields are depleting. Elsewhere, but especially in Africa and Mexico, crime and political instability continue to discourage development. Finally, in the face of lagging demand, investors have encouraged companies to distribute profits rather than invest in greenfield oil and gas projects.

But top producers like the U.S. and Canada are not holding back and governments aren’t stopping them. Phase-out is all short-term cost in pursuit of climate gains that won’t be realized for decades, if at all. Nor are politicians willing to eliminate the tax revenues and high-paying jobs the industry generates. With energy security crucial in an increasingly dangerous world, oil-consuming countries are finding that intermittent renewable energy and other high-cost energy sources are no substitute for fossil fuels.

As the federal Liberals sink in the polls, they face a many-ways existential choice. Do they pursue their climate promises and phase out oil and gas? Or do they secure the benefits of oil and gas production for years to come? Or, a third option: do they say one thing but quietly do the other? Is it all, as Shakespeare would say, “much ado about nothing”?

Related Topics:#CapAndTrade #JackMintz #JustinTrudeau #MacdonaldLaurierInstitute #OilAndGasProduction

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Federal government’s GHG reduction plan will impose massive costs on Canadians

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Federal government’s GHG reduction plan will impose massive costs on Canadians

Published on July 26, 2024

Todayville

From the Fraser Institute

By Ross McKitrick

Many Canadians are unhappy about the carbon tax. Proponents argue it’s the cheapest way to reduce greenhouse gas (GHG) emissions, which is true, but the problem for the government is that even as the tax hits the upper limit of what people are willing to pay, emissions haven’t fallen nearly enough to meet the federal target of at least 40 per cent below 2005 levels by 2030. Indeed, since the temporary 2020 COVID-era drop, national GHG emissions have been rising, in part due to rapid population growth.

The carbon tax, however, is only part of the federal GHG plan. In a new study published by the Fraser Institute, I present a detailed discussion of the Trudeau government’s proposed Emission Reduction Plan (ERP), including its economic impacts and the likely GHG reduction effects. The bottom line is that the package as a whole is so harmful to the economy it’s unlikely to be implemented, and it still wouldn’t reach the GHG goal even if it were.

Simply put, the government has failed to provide a detailed economic assessment of its ERP, offering instead only a superficial and flawed rationale that overstates the benefits and waives away the costs. My study presents a comprehensive analysis of the proposed policy package and uses a peer-reviewed macroeconomic model to estimate its economic and environmental effects.

The Emissions Reduction Plan can be broken down into three components: the carbon tax, the Clean Fuels Regulation (CFR) and the regulatory measures. The latter category includes a long list including the electric vehicle mandate, carbon capture system tax credits, restrictions on fertilizer use in agriculture, methane reduction targets and an overall emissions cap in the oil and gas industry, new emission limits for the electricity sector, new building and motor vehicle energy efficiency mandates and many other such instruments. The regulatory measures tend to have high upfront costs and limited short-term effects so they carry relatively high marginal costs of emission reductions.

The cheapest part of the package is the carbon tax. I estimate it will get 2030 emissions down by about 18 per cent compared to where they otherwise would be, returning them approximately to 2020 levels. The CFR brings them down a further 6 per cent relative to their base case levels and the regulatory measures bring them down another 2.5 per cent, for a cumulative reduction of 26.5 per cent below the base case 2030 level, which is just under 60 per cent of the way to the government’s target.

However, the costs of the various components are not the same.

The carbon tax reduces emissions at an initial average cost of about $290 per tonne, falling to just under $230 per tonne by 2030. This is on par with the federal government’s estimate of the social costs of GHG emissions, which rise from about $250 to $290 per tonne over the present decade. While I argue that these social cost estimates are exaggerated, even if we take them at face value, they imply that while the carbon tax policy passes a cost-benefit test the rest of the ERP does not because the per-tonne abatement costs are much higher. The CFR roughly doubles the cost per tonne of GHG reductions; adding in the regulatory measures approximately triples them.

The economic impacts are easiest to understand by translating these costs into per-worker terms. I estimate that the annual cost per worker of the carbon-pricing system net of rebates, accounting for indirect effects such as higher consumer costs and lower real wages, works out to $1,302 as of 2030. Adding in the government’s Clean Fuels Regulations more than doubles that to $3,550 and adding in the other regulatory measures increases it further to $6,700.

The policy package also reduces total employment. The carbon tax results in an estimated 57,000 fewer jobs as of 2030, the Clean Fuels Regulation increases job losses to 94,000 and the regulatory measures increases losses to 164,000 jobs. Claims by the federal government that the ERP presents new opportunities for jobs and employment in Canada are unsupported by proper analysis.

The regional impacts vary. While the energy-producing provinces (especially Alberta, Saskatchewan and New Brunswick) fare poorly, Ontario ends up bearing the largest relative costs. Ontario is a large energy user, and the CFR and other regulatory measures have strongly negative impacts on Ontario’s manufacturing base and consumer wellbeing.

Canada’s stagnant income and output levels are matters of serious policy concern. The Trudeau government has signalled it wants to fix this, but its climate plan will make the situation worse. Unfortunately, rather than seeking a proper mandate for the ERP by giving the public an honest account of the costs, the government has instead offered vague and unsupported claims that the decarbonization agenda will benefit the economy. This is untrue. And as the real costs become more and more apparent, I think it unlikely Canadians will tolerate the plan’s continued implementation.

Author:

Ross McKitrick

Professor of Economics, University of Guelph

Economy

Kamala Harris’ Energy Policy Catalog Is Full Of Whoppers

Published on July 25, 2024

Todayville

From the Daily Caller News Foundation

By DAVID BLACKMON

The catalog of Vice President Kamala Harris’s history on energy policy is as thin as the listing of her accomplishments as President Joe Biden’s “Border Czar,” which is to say it is bereft of anything of real substance.

But the queen of word salads and newly minted presumptive Democratic presidential nominee has publicly endorsed many of her party’s most radical and disastrous energy-related ideas while serving in various elected offices — both in her energy basket-case home state of California and in Washington, D.C.

What Harris’s statements add up to is a potential disaster for America’s future energy security.

“The vice president’s approach to energy has been sophomorically dilettantish, grasping not only at shiny things such as AOC’s Green New Deal but also at the straws Americans use to suck down the drinks they need when she starts talking like a Valley Girl,” Dan Kish, a senior research fellow at Institute for Energy Research, told me in an email this week. “To be honest, she’s no worse than many of her former Senate colleagues who have helped cheer on rising energy costs and the fleeing American jobs that accompany them. She doesn’t seem to understand the importance of reliable and affordable domestic energy, good skilled jobs or the national security implications of domestically produced energy, but maybe she will go back to school on the matter. No doubt on her electric school bus.”

During her first run for the Senate in 2016, Harris said she would love to expand her state’s economically ruinous cap-and-trade program to the national level. She also endorsed then-Gov. Jerry Brown’s harebrained scheme to ban plastic straws as a means of fighting climate change.

Tim Stewart, president of the U.S. Oil and Gas Association, told me proposals like that one would lead during a Harris presidency to the “Californication of the entire U.S. energy policy.” “Historically,” he added, “the transition of power from a president to a vice president is designed to signal continuity. This won’t be the case, because a Harris administration will be much worse.”

But how much worse could it be than the set of Biden policies that Harris has roundly endorsed over the last three and a half years? How much worse can it be than having laughed through a presidency that:

— Cancelled the $12 billion Keystone XL Pipeline on day one.

— Enacted what many estimate to be over $1 trillion in debt-funded, inflation-creating green energy subsidies.

— Refused to comply with laws requiring the holding of timely federal oil and gas lease sales.

— Instructed its agencies to slow-play permitting for all manner of oil and gas-related infrastructure.

— Tried to ban stoves and other gas appliances.

— Listed the Dunes Sagebrush Lizard as an endangered species despite its protection via a highly-successful conservation program.

— Invoked a “pause” on permitting of new LNG export infrastructure for the most specious reasons imaginable.

— Drained the Strategic Petroleum Reserve for purely political reasons.

As Biden’s successor for the nomination, Harris becomes the proud owner of all these policies, and more.

But Harris’ history shows it could indeed get worse. Much worse, in fact.

While mounting her own disastrous campaign for her party’s presidential nomination in 2020, Harris endorsed a complete ban on hydraulic fracturing, i.e., fracking. She later conformed that position to Biden’s own, slightly less insane view, but only after being picked as his running mate.

Consider also that while serving in the Senate in early 2019, Harris chose to sign up as a co-sponsor of the ultra-radical Green New Deal proposed by New York Rep. Alexandria Ocasio Cortez. It is not enough that the Biden regulators appeared to be using that nutty proposal and climate alarmism as the impetus to transform America’s entire economy and social structure: Harris favors enacting the whole thing.

As I have detailed here many times, every element of climate-alarm-based energy policies adopted by the Biden administration will inevitably lead the United State to become increasingly reliant on China for its energy needs, in the process decimating our country’s energy security. By her own words and actions, Harris has made it abundantly clear she wants to shift the process of getting there into a higher gear.

She is an energy disaster-in-waiting.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.