This is Part 2 of a bulletin trilogy. Part 1 reviewed the history of Canadian nationalism in the context of Canada's relationship with the United States. Part 2 now turns to oil and gas, documenting its role in sustaining nationhood in countries like Canada, which are endowed with vast oil reserves. These reserves, in the case of Canada, exceed those of Russia and the United States combined.
The National Dream and oil discovery
Pierre Berton's book, The National Dream, published in 1970, sustained the wave of Canadian nationalism initiated by Lament. It documents the grandiose vision for making Canada a nation by building a transcontinental railway as critical infrastructure, to exploit the vast natural resources of Western Canada, much of which lay in the lands Canada purchased from the Hudson's Bay Company shortly after Confederation. These resources included lands that could be used for agriculture, various minerals, forestry and fisheries. Western Canada's oil reserves had not been discovered yet. The value of oil was known, however, as the first oil well in North America was drilled in 1858, in what would become Ontario. Like Canada's national game, the oil industry in North America originated in Canada. The realization that Western Canada had vast oil reserves came with the Leduc Oil discovery of 1947.
Global role of oil in nationalism
Before addressing the important role that oil has played in sustaining and advancing Canada's nationhood, it is worth considering the role of oil globally in the pursuit of nationalism and its importance in confronting nationalism when one nation challenges the independence of another.
USSR and Russia
The Union of Soviet Socialist Republic (USSR) collapsed after a decade of depressed oil prices in the 1980s. The Marxist values of the USSR proved unsustainable without oil revenue. The recovery of oil prices through the 1990s, peaking in 2008, put Russia back in a position that it thought it could return to its own vision of a golden age. For the last three years, Russian oil wealth has been deployed and depleted in a special operation of conquest – justified not only in order to return to a golden age but as an act of defiance of Western democratic values. In response to this act of aggression, the West has tried to stem the tide of Russia's oil and gas revenue. The West's ability to do so has been made possible by accessing the oil and gas production of countries such as Norway.
Norway
On the European continent, Norway's oil reserves are second only to Russia's. Though Norway's oil reserves are only a fraction of Canada's, it has aggressively drilled its arctic waters, and its oil production rate, relative to its oil reserves, greatly exceeds Canada's by orders of magnitude. This aggressive approach to developing its oil and gas endowment has led to the creation of a sovereign wealth fund currently valued at $2.7 trillion. This level of wealth gives Norway the financial capacity to achieve its important national values and has placed it in a position to be able to materially assist Europe in confronting Russia's latest imperialist ambitions.
Canada's oil wealth, national decisions and free trade
To put Norway's sovereign wealth into context, Canada does not have a sovereign wealth fund. To the extent that Canada has tapped its oil and gas reserves, most of the wealth generated has been deployed in the continued realization of the National Dream, with only $25 billion (two orders of magnitude less than Norway) being set aside by Canada's largest oil producing province.
Canada has a history of turning to the development of oil and gas resources in times of crisis. The 1973 Arab Oil Embargo shook the global economy. Both Canada and the United States relied on oil imports at the time. Although western Canadian oil production was sufficient to meet demand in the West, Eastern Canada remained dependent on oil imported from the Middle East. Riding the cresting wave of Canadian nationalism that followed the publication of Lament, Canada made a very important decision to exploit its oil sands resources with the goal of achieving national energy security. At the time, there was an insufficient business case for developing the oil sands. Although operations of the Great Canadian Oil Sands Limited commenced in the late 1960s, they had not proven the commercial viability of oil sands production. Syncrude Canada Ltd. had been working on bringing a much larger project forward, but in 1975, it lost the support of a large American oil company and was not able to convince a large European oil company to replace it. With the future of Canada's oil sands hanging in the balance, the governments of Canada, Alberta and Ontario stepped in and picked up the interest that the American and European oil companies declined. For Canadians who need to validate the historic significance of this decision, they can look to the front page of the New York Times, that fully covered the story in detail within its pages.
Syncrude proved to be a tremendous success, delivering on the promise of Canadian energy independence and generating tremendous wealth. By the early 1980s, however, the federal government was again intervening in the oil and gas industry, but not in a positive way. In 1981, the federal government established the National Energy Program (NEP), which was a scheme based on having the Americans pay global prices for Canadian oil while setting lower domestic oil prices to shelter eastern Canadian oil consumers from rising global oil prices. In some respects, the NEP was consistent with the national policy behind the National Dream, which encouraged east-west trade by building a high tariff wall between Canada and the United States.
The NEP proved to be economically disastrous. It scared off both
domestic and foreign capital, freezing development of the Canadian
oil and gas industry. The wave of Canadian nationalism that started
to build in the 1960s following the publication of Lament came
spilling on to the beach. For Canada's western oil producing
provinces, the National Dream had become a nightmare, raising
national unity concerns. However, the NEP did not last long. A
change in government in 1984 marked a period of decline in Canadian
nationalism and the beginning of an era of free trade with the
United States.
The decline in nationalism and the advent of free trade with the
United States did not, however, diminish the importance of oil and
gas in advancing Canadian interests. As I discuss in "NAFTA, Alberta Oil Sands Royalties and Change: Yes
we Can?" (2009), the energy provisions of Canadian free
trade agreements, which ensured American access to Canada's
energy resources, were an important incentive for the Americans to
reach agreement on the terms of trade.
United States oil production had peaked in 1970 and had been in steady decline, while its oil consumption rapidly increased. Unlike Canada, which invested in the oil sands following the 1973 embargo, putting it on a path to energy independence going into free trade negotiations in the mid-1980s, the United States was reaching the peak of its energy insecurity. Americans were more vulnerable than they were in 1973. The United States' desperate need for energy security gave Canada leverage in its negotiations. Without the leverage of oil and gas, Canada would have been far less likely to have secured trade agreements with the United States on advantageous terms.
The 1988 federal election was fought over the issue of the ratification of free trade that had been negotiated but had not yet come into force. The Liberals picked up Diefenbaker's cause of Canadian nationalism and campaigned on the thesis of Lament, that free trade with the United States would fulfill the prophecy of Canada's annexation by the United States. The Liberals lost and Canada went forward with free trade with the United States.
The final example of Canada's use of its oil and gas resources to advance the cause of Canadian prosperity and unity followed the 1993 federal election that brought the Liberals back to power under the leadership of Prime Minister Chrétien. The country was heavily indebted and the Canadian dollar was rapidly declining. National unity was at an all-time low, resulting in an eastern separatist party winning the role of Canada's official opposition in Parliament and a party based on western alienation winning the majority of seats in the western provinces. In 1995, a sovereignty vote had almost resulted in the breakup of the country. It was in the context of these fiscal and unity crises that the federal government joined the National Oil Sands Task Force at the invitation of the Alberta Chamber of Resources. The task force resulted in the establishment of a provincial/federal fiscal framework for oil sands development that was the catalyst for the rapid expansion industry, putting Canada on the path to becoming an energy superpower. Investment poured into the oil sands from all over the world, taking production from approximately a half-million bpd to over 4 million bpd.
Current challenges and future prospects
Now in 2025, we find ourselves going into a federal election in a fiscal situation similar to where we found ourselves in 1995. The country is heavily indebted and our dollar is trending toward record lows. We have spent the last decade pursuing a federal energy transition policy intent on phasing out oil and gas production. New capital investment in oil and gas has stalled and Canadian oil and gas companies have been returning capital to their shareholders, the majority of which reside outside of Canada. Capital flight has contributed to the devaluation of our currency, plummeting productivity and rapidly escalating federal deficits. We do not, however, have a national unity crisis threatening the continued existence of the country. Rather, we face a crisis in our free trade relationship with the United States, whose President is threatening to annex our country. We are once again a nation in crisis. In the past, we have found the will to turn to the development of our natural resources for prosperity and the preservation of our national identity. Canadians, therefore, should have the will to make Canada an energy superpower by establishing new trade corridors to move our oil and gas to markets beyond the United States.
The third and final bulletin of this Lament trilogy will provide a roadmap for the way this can be done at speeds many don't think possible.
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