New USMCA deal favors U.S. with Canadian oil

Think before you speak and read it before you sign it. These will be my words of advice to the thundering herd of currently employed and pensioned politicians as they scamper back to their ridings waving their… “remember me?” signs!

Elizabeth May’s Green Party is beginning to find its sea legs. Agreed. But her most recent declarations were made on shaky grounds.

It is said by the Greens, in order to save the world from climate change, we Canadians must get off oil by 2050. And, we must also drop the importation of foreign oil by, let’s say, 2030. Ms. May will allow bitumen to be used, but only for the petrochemical industry for the production of such things as plastics, paint, and rubber. That will make hockey pucks a protected species! But the petrochemical industry, as the name implies, is joined at the hip with the refining of crude oil. You can’t refine any type of crude oil just to produce her shopping list. Refining a barrel of crude produces an alphabet soup of products we use every day. You can’t just dump a bunch of bitumen in a pot, heat it up and shout, “Presto!” who wants a gallon of paint.

It looks like the real plan is to shut down not only imports of crude, but also the production of crude. If that’s correct, then someone better tell Foreign Affairs Minister Chrystia Freeland before she signs a new and improved (as she and the prime minister call it) NAFTA contract, because something has been forgotten in the last two years of negotiations. What she and Justin Trudeau didn’t change in the newly named USMCA, is the bit where we can’t shut down exports of crude oil to the U.S. This is Article 605, the Proportionality Clause, which gives the U.S. unfettered first and continued access to Canada’s energy pool.

This means that Canada is obliged to maintain the export of a fixed percentage of its oil and natural gas to the U.S. and cannot reduce these levels even if we experience an energy shortage or have environmental concerns requiring us to cut back on our own energy production. This also means if we decide that we want to export to markets other than the U.S., they must first give their OK for us to do so, but the percentage of our energy total to the U.S. remains fixed at the average over the previous three years.

Did the other partner in this agreement — Mexico — go along with this part of the deal? Nope, only Canada did.

Another kernel of concern that Ms. Freeland and our Climate Captain have overlooked, is the export of refined products such as gasoline and diesel to the U.S. The U.S. wins this one as well since within the terms of the agreement the Canadian domestic price of any exported refined product cannot be lower than the U.S.-landed export price of those same products.

And so, what about our supposed Pan Canadian carbon tax?
Here’s Article 604: “No Party may adopt or maintain any duty, tax or other charge on the export of any energy or basic petrochemical good to the territory of another Party.”

So, the Pan Canada carbon tax is panned when it tries to cross the border. Someone better tell Ms. May.
Let’s see if I have this right:

We are forced (or is it obliged) to pay a carbon tax while the U.S. consumers don’t have to?

Any refined product we send to the U.S. must be lower in price for the U.S. consumer than the same products we refine and consume here in Canada?

Then of course, the U.S. has an almost inalienable right not only to uninhibited access to our energy reserves today, but also for as long as they deem suitable for their needs?

To our foreign affairs minister and head negotiator: Give your heads a shake! Read it before you sign it, because you can’t rip it up after you do — and to the Canadian consumer: Read it and weep.

~ The Grouch

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Roger McKnight is the Chief Petroleum Analyst with En-Pro International Inc.
Roger has over 25 years experience in the oil industry, and has held senior marketing management positions responsible for national and international accounts. He is the originator of the card lock concept of marketing on-road diesel that is now the predominant purchase method of diesel in Canada. Roger's knowledge of the oil industry in North America, and pricing structures has resulted in his expertise being sought as a commentator by local, national, and international media. Roger is a regular guest on radio and television programs, and he is quoted regularly in newspapers and magazines across Canada.

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