Petro Canada - Oil Common Wealth Lost

By: Richard Pereira, economist and author of Financing Basic Income: Addressing the Cost Objection

People often look with envy and awe at the accumulated financial resources from natural wealth in places like Norway, Alaska or Gulf oil states.  Many public goods are provided to citizens of these nations and jurisdictions, because governments capture the economic rents - or windfall profits - from natural resources for the benefit of people, rather than foreign corporations and shareholders.  While fossil fuel consumption must be reduced significantly and urgently in the twenty-first century, it doesn’t mean that we should give away all this wealth as we scale down consumption.

In Oil, the State, and Federalism, John Erik Fossum details how Canada had all the tools required to capture this vast wealth for the benefit of Canadians, as well as transition our energy mix to a far more balanced and sustainable model.  Petro-Canada was working extensively on researching and developing alternative energy sources in the “national interest” and with an eye to the future, something not common to multinational corporations exclusively focused on the “private interest” or profit motive.  A subsidiary of Petro-Canada, Canertech, was established to develop conservation and renewable energy technology. (155)

While Norway was starting to build its trillion-dollar sovereign wealth fund, and while Alaska was beginning to pay out dividends to citizens from its sovereign wealth, Canada was in the process of dismantling its main institution that could replicate the best practices in both these models.  Many new sovereign wealth funds and similar institutions to Statoil (Norway) have developed in different countries since Canada began the process of privatization of Petro-Canada.  While they have been capturing windfall profits for citizens, we have been squandering them.

Both Fossum and Peter Foster (the latter in Self Serve) show how a unique, often incoherent and ultimately counter-productive political and business ideology combined to destroy what other countries strive for, and what Canada had already put in place with the establishment of Petro-Canada.  If not perfect, one can improve the model, but no need to eliminate and privatize something designed to benefit citizens and the national interest.  Fossum explains how the Mulroney Conservatives made privatization a priority, yet disguised and sometimes hidden, agenda as early as 1983. (236)

Foster’s book is a celebration of this privatizing process, while Fossum’s is far more analytical stemming from a PhD thesis he produced at the University of British Columbia.  Foster writes in a journalistic style having been a journalist for the Financial Post, and one of the strengths in his book is the depiction of the various colourful personalities involved in the making of Petro-Canada – from Walter Gordon to John Ralston Saul and Tommy Douglas, among many others. (13, 17, 59, 85) Foster does not hide his preferences among personalites.

Throughout Self-Serve the book blasts public enterprise and upholds private markets and corporations as carrying the best interests of citizens by pursuing the profit motive (11, 301) – it makes one think of the contrasting examples of Enron versus public hydro utilities as just one of many examples that challenge this notion, or ideology.  How would he compare the ethics, or benefit to citizens, over the last 50 years of a public enterprise like Statoil with those of private sector multinational oil companies like Exxon?  Would Foster advocate to Norway that they fully privatize their public enterprise, or that Quebec reverse its policy of Quebec Hydro and let American entrepreneurs and owners control its energy resources?

Both books and authors capture the history of a maturing and evolving Canada, trying to develop a national institution to safeguard its national interest – energy self-sufficiency, policy independence, reduced control of powerful foreign corporations and cartels in managing our resources and supplies, price and consumer protection.  It is the story of Canada then reverting to a previous immature self, giving away its sovereignty, but only worse this time because it is with eyes wide-open.

These are all highly relevant issues in 2022 as we experience chaotic supply chain disruptions globally resulting in record-high inflation for most Canadians, a war in Ukraine (invaded by Russia) causing energy prices to rise and supplies to be weaponized by a dictator like Vladimir Putin (with the support of China).  Energy, like healthcare, is too important to be left exclusively in the hands of private multinational corporations that care not for the citizens of Canada.  Moreover, Canada does allow public enterprises from non-democratic nations such as China to invest in Canadian energy, while our government sabotages (starting with the Mulroney government) public enterprise options at home.

Norway’s Statoil (now known also as Equinor) also boasts “making significant investments in Canada's” oil industry.  Foreign public or state enterprises are allowed to invest in Canada for the benefit of their citizens, but Canada cannot control its own resources in the same way for the benefit of Canadians.

Both books were written in the 1990s and illustrate the rise and fall of Petro-Canada, with Foster concluding that government should not be in the business of natural resource management for the benefit of its citizens.  Fossum’s work is more analytical in highlighting some of the competing interests and contradictions that arise in Canadian public policy development on energy policy, especially federal-provincial interests.  Since Petro-Canada’s demise at the hands of its own governments, the contradictions have been compounded and sharpened by these foreign investments in Canada’s energy, and the great benefits other citizens enjoy from their national and state governments capturing this wealth – via national sovereign wealth funds, economic rent capture and windfall taxes, and public-state enterprises like Statoil.

The most salient concluding observation comes from Oil, the State, and Federalism by making the point that (certain) provincial interests in Canada were so inward looking and resentful of Ottawa exercising its power in the national interest, that they attempted to not only put provincial interests ahead of national ones, but tried to ensure that Ottawa would be blocked from ever exercising such a national vision or plan again.  This was done by supporting the passage of the FTA and NAFTA free trade deals, that prioritized continental and American interests over a Canadian national vision (267, 284-285).  “This provincial reaction [was]… to involve U.S. government actors far more directly in Canadian energy policy.  This clearly weakened the capacity of the individual provinces, and, even more, of the federal state to operate as coherent actors in the energy field.” (285)

RICHARD PEREIRA

Global Labour Research Centre GLRC (York University, Toronto) and advisor to UBI Works

Author of Financing Basic Income: Addressing the Cost Objection (Palgrave 2017)