~ in Calgary ~
The oilsands may be back sooner than expected. Oil prices are rising from their low late last year. Labour costs are down. Steel is cheaper. And today the shareholders of Suncor and Petro-Canada are expected to approve a merger of the two companies, creating Canada’s largest energy company, valued at some $46-billion.
Suncor, which was an oilsands pioneer back in the early 1960s, is betting that the new larger company will be able to accelerate oilsands projects recently thought not to be viable. The merged company will be a genuine Canadian energy giant, not only producing oil and natural gas upstream, but with refining and retail downstream.
This will not be greeted as good news by all, particularly those who judge the oilsands to be morally troublesome. Suncor has been named by environmental groups as an egregious greenhouse gas emitter, and oilsands production in general is considered by many — not just those in the environmental movement — to despoil the Earth and irresponsibly waste water and energy. Those questions will likely return with greater force as oilsands production recovers in the years ahead. All of which makes the oilsands a fascinating example of competing moral agendas.
For a long time, increasing energy independence — more oil produced and refined in Canada — was thought to be a national good. Indeed, the very Petro-Canada that is about to be taken over by Suncor was created precisely to favour that public policy outcome. In recent years, security and human rights concerns have been added to the mix. Most places where oil is plentiful, cheap to produce and relatively less environmentally damaging are home to rather unsavoury regimes. Pumping oil out of the Arabian desert doesn’t leave much of an environmental footprint; stick a straw in the sand and up it comes. However, the human environment is rather less benign in Saudi Arabia — or Iran or Russia or Venezuela– and what such regimes do with their petro-dollars foments instability and insecurity around the globe.
On other issues of trade and investment such points are often taken into account, as they should be, for investment decisions are always, at least in part, moral decisions. Where to invest is a choice, and choices manifest our values, our principles and our ethics. That’s the argument made by those who inveigh against goods made in Chinese sweatshops or in favour of fair trade Latin American coffee. It is the argument made by activists who try to persuade pension funds and university endowments not to invest in ethically suspect regimes. It was fashionable 20 years ago in regard to South Africa. One hears similar exhortations today in regard to companies working in the West Bank, Latin American mining operations, or African producers of bottled water. Of course the oilsands themselves have become a symbol in some quarters of ethically suspect energy production.
What then to make of the counterargument that Canadian oil is ethically cleaner than Russian or Iranian or Saudi oil? It’s an argument heard mostly at the margins of the debate today, and as long as the oilsands are limping along it will remain at the margins. Should the oilsands return to greater production in the face of vigorous environmental criticism, this counter argument will be amplified. How does one stack up tailing ponds in northern Alberta against human rights violations in the Saudi desert kingdom? Can one compare carbon emissions in Canada to the slave-like labour conditions in the Gulf states?
From a strictly economic point of view, one does not really get to choose. Oil is sold at a world market price, and the laws of economics do not permit customers to buy the more costly oil first. Higher oil prices give us the option to produce oil in Alberta; those same high prices mean superabundant returns to the oil sheiks and oligarchs. Low prices mean fewer Canadian jobs; they also mean less Russian bullying or state-sponsored terror in the Middle East.
For commercial reasons, the new Suncor is widely expected to sell off Petro-Canada’s holdings in Libya and Syria in order to focus on Alberta production. Does that make Suncor a better company on moral grounds? That’s a question we will be asking more often in the years ahead, for ethical questions about the oilsands are sticky too.