Cory Morgan: Canada Should Think Twice Before Using Oil and Gas for Leverage in Trade War - Aman Shanti News

Pumpjacks draw oil and gas from a wellhead near Calgary on May 6, 2025. The Canadian Press/Jeff McIntosh

Commentary

As Canada’s trade war with the United States continues, more voices within and outside Alberta are proposing using Western Canada’s resources as leverage in trade negotiations. The federal government can impose export tariffs or even curtail oil and gas exports to pressure the USA. But using Alberta’s oil as a bargaining chip in a trade war would be economically risky and politically explosive.

The problem is that Canada has limited pricing power. The costs would land first on Canadian producers and consumers, and the political memory of the National Energy Program (NEP)—the last time Ottawa tried to conscript Alberta’s energy wealth—is still raw.

Pierre Trudeau’s Liberal government announced the NEP on Oct. 28, 1980. Its stated aims were energy security, greater Canadian ownership of the oil industry, and a way to help unify the nation as an economic unit.

Alberta, however, did not experience it as nation-building. Drilling collapsed, and industry accounts say more than 100 rigs left for the United States within months. Unemployment in Alberta rose from 3.7 percent in September 1980 to 12.4 percent by 1984. The provincial bankruptcy rate jumped by about 150 percent. House prices cratered; some owners sold for a dollar. Economist Robert Mansell later estimated that federal taxes and price controls transferred on the order of $50 billion to $100 billion out of Alberta between 1980 and 1985.

Albertans opposed the program by roughly five to one. Bumper stickers and early separatist talk followed. Brian Mulroney’s Progressive Conservative government dismantled the core of the NEP in the 1985 Western Accord. Forty-six years later, “NEP” is still a three-letter epithet in Alberta, not a footnote. With unity on the ballot in Alberta on Oct. 19, few things could increase support for provincial independence more effectively than raising the spectre of the NEP.

Aside from threatening national unity, meddling with the oil and gas industry could also cause serious economic hardship within Canada. North American refining is tightly integrated. Most of Alberta’s crude goes to U.S. Midwest plants built to run heavy oil. The oil that is refined in Sarnia, Ont., travels from Alberta through the United States and back up into Canada. In B.C., much of the oil shipped through the Trans Mountain Pipeline goes into Washington where it is refined, then sold back into B.C. as diesel, gasoline, and aviation fuel.

That integration is exactly why Canada’s energy leverage is weaker than it looks. Imagine if Canada were to tariff or curtail oil products exported to the United States. Washington could quickly respond by adding export tariffs on refined products coming into Canada. The result would be people in Ontario, Quebec, and B.C. paying much higher prices for home heating fuel and gasoline, while pressure within the USA would be limited. The United States keeps a strategic oil reserve it could tap into during such a trade battle. It also has domestic oil production, and steady oil supplies coming into multiple ports around the country. The USA is much better placed to withstand an energy battle.

If it came to curtailment of products, it would be disastrous. The Vancouver International Airport relies on aviation fuel from Washington state refineries and only has about a week or two of fuel supply on hand. Tanker barges from Washington refineries are integral for delivering fuel to B.C.’s island communities. If supplies were cut, it would be a catastrophe for Canada’s West Coast.

Alberta Premier Danielle Smith has called an oil export tax “disastrous” for the same reason. Even analysts who want a tougher federal posture concede that Canada lacks the market power to weaponize barrels without cutting its own throat. Saskatchewan Premier Scott Moe echoed Smith’s position and added that Saskatchewan’s potash is not on the table either. Resource ownership is a provincial power under the Constitution, and current premiers will not let that authority be eroded without a fight.

There is a legitimate national-interest case for a coordinated energy strategy, export diversification, pipelines to tidewater, and a federal government that does not treat Alberta’s production as a problem to be managed. Due to a decade of obstructionism from the Trudeau government against Alberta pipelines, the USA remains virtually the only customer for Canadian oil and gas. Prime Minister Carney has indicated support for pipeline approvals, but there are still no shovels in the ground.

Canada is in a tough position, with a U.S. president determined to get the best deal for his country. The instinct for Canada to push for its own interests in negotiations is only natural, but using oil and gas as leverage would only harm the Canadian economy and could fracture the nation.

Whatever tactics may be considered in trying to settle the trade war, it is hoped that the federal government understands that Western Canadian oil and gas should not be on the table. The cost for such an incursion would be much higher than many realize.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.

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