Before Premier Jason Kenney headed to Houston this week to speak with global oil and gas leaders, he had an energy message to deliver — to those at home and abroad.
It’s tied to energy security and economic strength.
In Alberta, he wants consumers to know the province has the financial strength to provide consumers some cushion to surging gasoline prices and power bills. After all, the government could see a $10-billion gusher of extra royalties at today’s high oil prices, if they hold this year.
At the annual CERAWeek energy conference in Texas on Tuesday, he’s hoping to drive home another theme: With the world’s third-largest oil reserves, Canada has the ability to help fill the gap if Russian energy exports are cut off by western sanctions.
U.S. President Joe Biden took that significant step on Tuesday, announcing a ban on all imports of Russian oil and gas, mirroring a decision Canada took last week.
The United States should look north to meet its energy security needs, instead of seeking additional production from OPEC kingpin Saudi Arabia or relaxing sanctions on Iran or Venezuela, Kenney said.
“Here is my pitch to President Biden. Instead of flying to Riyadh, fly to Calgary. Instead of begging the Saudis to produce more conflict oil, come to Calgary,” the premier told reporters Monday.
“I hope to open discussions with American policymakers. If they are serious about the energy crisis, we are the solution.”
Kenney’s message included his ongoing desire to restart the now-dead Keystone XL pipeline.
His speech Tuesday at the high-profile conference arrives at a moment of great instability in global energy markets following the invasion of Ukraine by Russia, one of the world’s largest oil exporters.
U.S. officials said over the weekend they were considering applying sanctions to Russian oil supplies, prompting prices to shoot up on Monday — and energy markets jumped again Tuesday morning once the president announced the decision.
Prices for West Texas Intermediate crude ended Monday at US$119.40 a barrel, and jumped more than $9 on Tuesday morning to trade above $128.50.
The sudden spike has put a spotlight on the security of energy supply, one Kenney hopes to debate while in the United States this week.
Kenney’s point is the Biden administration should not have nixed the Keystone XL pipeline (which his government invested in) and could still reconsider it, which seems highly improbable given the project’s symbolism south of the border.
Canadian oil already plays a pivotal role in supplying the U.S. Alberta pumped out 3.6 million barrels per day (bpd) of oil in January after achieving record annual output last year.
The U.S. imported 672,000 bpd from Russian oil and petroleum products last year, while Canada provided about 4.3 million bpd.
Alberta has the resource potential to produce more barrels. But it takes years to approve and build new oilsands projects to significantly ramp up output — if producers were so inclined.
Decarbonization efforts aren’t going away and producers remain committed to being financially disciplined and not raising spending.
Yet, smaller expansions and conventional oil and gas production could come on stream more quickly.
“It’s hard for Canada to respond in a pinch, in this crisis, but its presence in this market is material,” said Kevin Birn, a vice-president with energy consultancy IHS Markit.
“Can it produce more oil? Yes it can … Canada presents a long-term viable solution to continental energy security.”
That message needs to be stressed as the U.S. examines its energy future in an uncertain world with rising commodity prices.
A report by energy analytics company Enverus on Monday said $150-a-barrel oil is not out of the question if a ban on Russian oil imports comes to fruition.
With additional pipeline capacity now available from Enbridge’s Line 3 and crude-by-rail options, Alberta can increase its output, Kenney said, while also pushing to see Keystone XL reanimated.
“If the U.S. administration wanted, instead of going cap in hand to the Venezuelan, Iranian and Saudi dictatorships to replace Russian conflict oil, we could turn this (Keystone XL) around, I believe, in less than a year,” Kenney added.
Rising energy prices are already hitting consumers on both sides of the border.
Gasoline prices in Canada are sitting at an all-time high at $1.79 per litre.
Alberta Power Pool prices have averaged almost $100 per megawatt-hour this year, in part because of higher natural gas prices, said Duane Reid-Carlson, chief executive of electricity consultancy EDC Associates.
Kenney announced Monday the government will use its growing royalty revenues to provide more than $1.5 billion of relief to consumers.
If WTI crude prices stay above $90 a barrel, the province will eliminate the full provincial gasoline tax of 13 cents a litre, as of April 1. But if oil is at less than $80, the full levy will stay in place.
Alberta will also give consumers $150 in electricity rebates over three months to help offset rising power prices.
On the other side of the ledger, if oil prices average over $90 a barrel for the budget year that starts in April, the province will see an extra $5 billion in revenues; oil over $100 a barrel for the year would add $10 billion, Kenney said.
Economist Kent Fellows at the University of Calgary’s School of Public Policy said it’s difficult to get policy design perfect in such a short timeframe, but the gasoline rebate will provide “relatively minor relief” to consumers as prices spike.
“If you are living paycheque to paycheque, this is a big problem and one you’re hoping the provincial government can solve quickly,” he said.
There are not many options for the government to soften the blow of soaring pump prices, other than use its expected revenue bonanza to lower such taxes, said fuel market expert Vijay Muralidharan, director of consulting at Kalibrate.
“Alberta can do it — we’re getting windfall oil prices,” he added.
“We have the capability. We have the excess money in the bank account.”
Chris Varcoe is a Calgary Herald columnist.
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