As expected, Premier Rachel Notley announced tonight that her government will order an oil production cut of 325,000 barrels a day, 8.7 per cent of the province’s production, to squeeze some of the air out of the bitumen price differential that has bedevilled Alberta for several years.
The short-term production cuts, permitted under the province’s legislation, will take effect on New Year’s Day, the premier said. They will remain in place, dropping over time, until a backlog of about 35 million barrels of already processed oil has been shipped to market, which the government expects to take three months.
Production controls will impact both bitumen and conventional oil producers, although some of the smallest companies will be exempt.
It barely took Ms. Notley 10 minutes of her live-streamed news conference, which began at 6 p.m., to prove that even in this neoliberal era governments can act, and do so decisively. Twenty minutes if you count a few questions from reporters.
As political theatre, it was brilliant.
Ms. Notley looked positively prime ministerial. She was steely-eyed and – dare I say it? – at some moments evocative of Margaret Thatcher on the eve of that war at the south end of our then-still-chilly planet. She even offered an acknowledgment to the neoliberal zeitgeist of our era: “One never wants to begin by reaching into the market and telling people they have to produce less …”
But so she did.
In addition to her government’s plan to manage the supply of Alberta oil to narrow the yawning gap between oilsands bitumen and the sweeter crude found closer to the U.S. Gulf Coast, she promised more rail cars would be coming on line next year and that there will be no end to the province’s push for more pipeline capacity.
As political strategy, Ms. Notley’s newser wasn’t bad either. Whatever its other impacts may be, taking immediate action to raise the price of Alberta crude by limiting supply is likely to see some results because it acknowledges the most basic law of economics.
But Ms. Notley certainly did this in the knowledge prices will rise relatively soon anyway as U.S. refineries now partly closed for maintenance come back on stream. When the Enbridge Inc. Line 3 starts pumping at the end of next year, that too will increase demand and raise prices – although too late for the NDP’s electoral strategy.
Ms. Notley made sure in her brief remarks that the principal opposition parties – the United Conservative Party and Alberta Party – were implicated in her plan. Indeed, it soon became clear to anyone listening thanks to a reporter’s question that the Opposition UCP had demanded even deeper production cuts. This will be useful for voters to know in the event jobs are lost in some places as a result of the limitations in supply ordered by the government.
And the premier showed enough steel to demonstrate she has no problem pushing around the few billion-dollar oil companies that made it clear they don’t want supply management of their output, seeing as they’re making out like bandits already with things the way they are.
While praising her main opponents in the Alberta Legislature, Premier Notley put the blame for the current state of affairs right where most Albertans seem to think it belongs: On the federal government for not approving the pipelines we have now persuaded ourselves will solve all our economic problems.
She also made sure the blame was shared between the current Liberal federal government and the past Conservative one – in which Opposition Leader Jason Kenney was an influential minister.
So, Premier Notley’s short news conference tonight was a bravura performance.
However, whether this will play in Peoria – or, rather, Ponoka – remains to be seen. This is especially true if companies with their own U.S. refining capacity like Husky Energy Inc., Imperial Oil Ltd. and Suncor Energy Inc. decide to squeeze their own workers till the pips squeak to punish the government for reducing their profit expectations for the greater good.
Similarly, while oilsands giants like Cenovus Energy Inc. and Canadian Natural Resources Ltd. will likely be happier, it’s far from clear whether this will translate into anything that helps the NDP’s political circumstances.
And there is no sign whatsoever that any method developed to ship Alberta oil – whether in the form of rail cars, new pipelines or rehabilitated old ones – will not eventually be used to its fullest capacity, with predictable impact on global climate change.
When it comes to market failures – which Ms. Notley spoke of tonight and Mr. Kenney did recently too to justify interfering in the market – the problem is that the biggest market failure of all is climate change.