A global energy crisis has gripped nations worldwide, and it may get worse before getting any better. Families are being hit by huge price hikes, businesses are shutting down over unpayable energy bills, and elected leaders are struggling to tackle high inflation.
According to Daniel Yergin, Vice Chairman of S&P Global and renowned energy expert, it's a crisis that is years in the making. And it didn't start with the 2022 war in Ukraine, but rather last year when energy demand surged as the world emerged from the global pandemic.
Insufficient investments were made in maintaining new oil and gas supplies and refinery capacity. China then ran short of coal supplies, shooting prices upward. A shortage of wind power in the U.K. also caused a larger pull on natural gas, while the global liquefied natural gas (LNG) market tightened with prices rising alongside crude oil benchmarks.
In times of high prices, major energy producers like Saudi Arabia and Russia are typically keen to boost exports due to potential revenue gains. But despite having the capacity to increase natural gas exports to the European Union (E.U.), Russia stuck to its pre-existing supply contracts in a move that looked like an attempt to force prices to go higher.
Today, we now know that Russia also had other plans.
According to Yergin, the global energy crisis is likely going to get much worse before it gets better for several reasons, summarized below:
#1 - The high likelihood that Russia continues to restrict energy flows into the E.U. to sow socio-economic discord and political unrest.
#2 - The seemingly low likelihood of a new nuclear deal with Iran, thus sanctions will not be lifted and Iranian oil will not flow into global markets anytime soon.
#3 - Saudi Arabia, the UAE and other OPEC producers seem to be short on spare production capacity that could stabilize global oil markets; additionally, other oil-exporting countries are having trouble returning to previous production levels.
#4 - China's demand for oil has significantly dropped due to its "zero-COVID" lockdowns, sharply curtailing economic activity.
#5 - Lack of refining capacity for essential products such as gasoline, diesel and jet fuel, plus the high complexity of the global refining system. According to Yergin, Russia was refining products and shipping them to Europe, while Europe was sending gasoline that it didn't need to the U.S., and so forth.
Canada is another major oil and gas producer and exporter that has seen huge revenue windfalls from energy exports over the past several months.
In the words of Francesco Sorbara, Member of Parliament for Vaughan-Woodbridge in Ontario:
"Last month 30 per cent of all money that was earned in this country came strictly from oil and gas sales… so it continues to be a significant sector for our economy, and a significant sector for the nearly 800,000 to 900,000 Canadians who depend on it for their livelihoods."
Meanwhile, Alberta – Canada's energy powerhouse – has also seen massive revenue windfalls from boosted oil export capacity and high energy prices. Last month, the province recorded its first budget surplus of $3.9 billion in seven years on the oil price surge.
Alberta is also the largest contributor to Canada's wealth. According to a study by The School of Public Policy, the province contributed $3,674 per capita annually between 1961 and 2017 and $5,576 annually between 2010 and 2017.
Overall, Alberta made an oversized contribution to the Canadian federation to the tune of $631 billion between 1961 and 2018.
While global energy producers are seeing huge revenues from surging prices, we must consider what those revenues are being used for - and more importantly, what nations we want our energy coming from.
First, think about current events in Ukraine.
Would you choose to source your energy from highly democratic, transparent and regulated producers like Canada, or other countries that often have much weaker protections for human rights and the environment?
Canada is a bastion of democratic principles, human rights and environmental protection – three things we can all get behind. The same cannot be said for most other energy producers globally, where you'll find state-owned enterprises often run by autocratic regimes.
Canada is one of the few major energy producers that could still boost production.
According to Yergin, "Canada – the world's fourth-largest oil producer, after the U.S., Saudi Arabia, and Russia – could provide extra barrels in collaboration with its major market, the U.S."
With its vast petroleum reserves, Canada needs to step up and start providing global markets with increased energy supplies. That starts with expanding Canada's energy export infrastructure for oil and natural gas, which will help Canada become both energy independent and a preferred energy supplier on global markets. Doing so will also ensure energy security and stability for our trading partners worldwide.
Global demand for oil and natural gas is still rising. Additionally, Canada is one of the most transparent, regulated and environmentally conscious producers on the planet.
For the sake of Canadian prosperity, global energy security and the environment, it's time Canada increases its energy export capabilities to reach Europe and Asia.
Who you conduct trade with matters. What values do you support?
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