Canada Obsessed With Yesterday's Energy, Says Pembina Institute

[00:00:00] Speaker 1: Energy media has been arguing for a long time that Canada is having the wrong energy conversation. Well, it looks like the Pembina Institute agrees. Chris Severson-Baker, the executive director, and a couple of colleagues wrote a very interesting op-ed in the Globe and Mail on June the 3rd. The world is moving off fossil fuels as Canada continues to live in the past. Chris, if you could give me an overview of your argument in that op-ed, please. [00:00:26] Chris Severson-Baker: What we're trying to do is, you know, because we're having conversations within Canada about energy pipelines and expanding oil and gas, but what's happening outside of Canada is the world is reacting to yet another much bigger supply crunch, supply crisis with the Strait of Hormuz closing, and they're drawing the obvious conclusion that they need to move away from fossil fuels as quickly as possible. And so what we're seeing is countries cancelling very, very significant projects that would have relied on LNG as the fuel, so natural gas facility in Vietnam, for example. And they're very quickly moving to wind and solar and batteries, and they're not likely to go back, right? There's been a series of these supply crises. They know that this one is the mother of all supply crises, and it's going to be with us for many years to come. And Canada needs to recognize that fact as well. It's going to affect our own domestic prices for energy, and we ought to be looking to compete on the ability to produce low-cost clean electricity, which is really our natural advantage globally as well. [00:01:45] Speaker 1: Chris, one of the things that strikes me about the Canadian conversation is that all we talk about is supply. We can extract oil cheap and get it to market, and there will be buyers for it. We can extract gas, turn it into LNG, and there will be buyers for it. And nobody ever bothers to ask, are there going to be buyers for it? Who are those buyers? At what price will they buy? What regions of the world might be interested in that? And that, I think, is characteristic of oil and gas exporting nations. [00:02:27] Chris Severson-Baker: Well, I mean, I think we've, yeah, for many years we've been told that, you know, there's more demand for oil and gas from Canada than we're able to meet, right? There's this sort of assumption that somehow we're constraining our exports. And Alberta has framed this as a great wrong that the rest of Canada has done to Alberta and to the Alberta industry. And the reality is we're actually very close to a point in time, especially with the Strait of Hormuz supply crisis, where countries are going to be moving even faster away from relying on oil and natural gas to power their economies. And we're simply not going to have growth in demand for Canadian oil and gas products. I do expect that some companies are going to figure out a way to take advantage in the short term of the supply crisis. Because the supply crisis is so big and it's not going to be over quickly like some of the other ones that we've had in recent years. However, what's going to happen after that is we're going to start to go down that very slow, gradual decline curve for the demand for fossil fuels. And so, and I think that's part of the reason why, you know, you're not seeing a huge stampede from industry to invest in new oil and gas infrastructure. They're being quite conservative about it. You know, they're, they're talking about tweaking existing projects and getting more out of existing pipelines and things like that. It's the province that, you know, it's the premier of Alberta that's talking about doubling and tripling of supply. It's not the industry. [00:04:10] Speaker 1: Yeah, it's, it's very interesting how Canada has a very, we have a, an odd view of, of the world. Uh, and one of them is this notion of energy security, because we define energy security as an adequate supply of oil and gas at a reasonable price. But more and more, uh, countries like China and Southeast Asia, India are defining it in terms of energy sovereignty. If we buy, uh, uh, clean energy technology like wind, solar batteries, and then electric vehicles and heat pumps, we pay for it once it performs for decades and there, and then we have control. And we don't have to keep buying all the time, buying the fuel that, that creates our, you know, runs our economy. And we, we, this is a discussion that's been going on for a long time. It's sped up because of the, uh, crisis around the Strait of Hormuz and Canada, we just seem to have entirely missed it. [00:05:13] Chris Severson-Baker: Yeah. And I totally agree with that. I think, um, I mean, in some ways we, we, we sort of seeing some examples of it in Ontario right now, right. Where, um, not necessarily with a clear intent, the Ontario government is, is, uh, has held a series of, uh, um, auctions for our RFP processes for new supply of, of, uh, of electricity. And what's coming is, uh, uh, um, wind and solar and now batteries. We're not seeing, uh, gas proponents proposing new projects in Ontario. And so, you know, what's going, what that is going to result in energy, increase in energy sovereignty in Ontario. We're going to have, uh, more money is going to stay within the Ontario economy rather than paying for natural gas that actually comes from the United States. And it's going to start to create more of the, of, uh, uh, the supply chain or the basis for, you know, batteries to be built in Ontario. It'll, it'll start to create, um, market for recycling of, of those types of things at the end of their life, uh, so that we don't have to ship it out of country to, to, to get the, you know, to recycle the critical minerals out of, of those things. And so we are starting to see it, but not in a very, it's like, like national, it's kind of a strategic manner in the same way that we're seeing other countries adopting that approach. [00:06:39] Speaker 1: And, and I can, I can hear my readers asking, well, why are we not? And I can hear my readers asking, well, why are we not going to do that? And I can hear my readers asking, well, why are we not going to do that? And I can hear my readers asking, well, why are we not going to do that? And I can hear my readers asking, well, why are we not going to do that? And I can hear my readers asking, well, why are we not going to do that? And I can hear my readers asking, well, why are we not going to do that? I emailed the federal energy minister, Tim Hodgson, his, his media people. I interviewed, I emailed Adrian Dix in BC, their energy minister. And I know very well where Alberta falls on this, but I asked what oil demand and LNG demand modeling studies underpin your minister's bullish comments about the future of oil and gas. And they came back and they said things like Exxon Mobil, OPEC, Shell, U.S. Energy Information Administration, all the bullish forecasting and modeling. Those are the ones that our politicians and our industry leaders are, those are the ones they listen to. And so it's no wonder they think that we're heading into the golden age of oil and gas is because they don't look at the other more pessimistic, more bearish kinds of modeling. And, and I think that that has been, uh, has served when we look at the world, the energy future through that lens, we get a distorted view of what that future will look like. [00:07:57] Chris Severson-Baker: Yeah. And I, and I think, you know, the other side can be sometimes accused of looking at the most, uh, uh, uh, optimistic sort of forecast. You really need to look at the, at this whole spread and do a bit of averaging. And what you'll see is that we're not going to see a growth in, in, uh, demand for, for oil. Um, we're going to see a bit of growth in demand for natural gas for a period of time and then both peak and then start to decline fairly gradually. Um, and it's obvious what's driving that, right? It's, it's, uh, the main thing that affects oil demand in the world is, uh, electrification of transportation and, uh, I think, you know, Canadians are just really struggling to get their heads wrapped around how quickly it's happening in other parts of the world, because we don't see it as much, right. It's not as visible for us, but, you know, China is putting 37,000 electric vehicles on the road every single day. Um, and, uh, you know, the, the rate of, of EV adoption in other countries where, you know, that have more of a supply, uh, crisis, uh, hitting them than, than we already do are, uh, ramping up electric vehicle usage very quickly, uh, and we're, we're seeing it here at home in Canada, even though we have, you know, fairly limited, uh, uh, availability of electric vehicles. A lot of the electric vehicles that are on the market are really quite expensive. Um, you know, once that starts to change and there's more inexpensive models and more secondhand vehicles available, you're going to see more and more people adopting them. And that's partly because we are going to be locked in for years to higher energy prices in Canada. And, and, uh, it's going to affect not just the cost of transportation, but every aspect of our daily lives. Uh, and, and the only way to find relief from that over the longer term is electrification of demand and, and, and lower cost forms of energy, electricity. [00:09:51] Speaker 1: Chris, what should Canada do? [00:09:54] Chris Severson-Baker: Well, I think Canada, I mean, to me, it makes sense to allow industry. To make investments in fossil fuel exports. If they are able to, you know, if, if, if it makes economic sense to them and they're willing to pay the full cost of it, right. Take on the full risk of it. Um, I think what we should be focusing on as a country, however, is, is, is creating the type of, uh, uh, economy that we want for the future. One that's based on low cost, uh, electricity, it's low in emissions as well. Um, and, uh, and that's really going to be the way that we, uh, continue to provide low cost energy to Canadians, which is what Canadians become really accustomed to. It's how we're going to attract investment, uh, into Canada, right. Our ability to provide abundant, reliable, low cost, uh, energy, and which will be in the form of, of electricity. Um, and, and what, uh, going back to the minute or enter can minister. I mean, I listen very closely to what he says in speeches, he tends to talk about taking advantage of, you know, what's happening in terms of, uh, global demand for fossil fuels. That's been amplified by supply crises. Um, he talks about nuclear and critical minerals. He just doesn't talk about the rest of the, of the story, which is, you know, protecting Canadian consumers from rising energy prices by taking advantage of the fact that we can produce a lot of really low cost electricity domestically, and we can use it to electrify everything. Um, the prime minister, uh, has been talking about the electricity strategy and, and very strongly signaling that that's where he sees, uh, his government going in terms of economic growth and in terms of the mission reductions. Right, uh, right now we're being asked to believe that all of the emission reductions that we need to get to net zero can be achieved through the electricity strategy. Um, it's, it's not, it's not going to be that easy. Uh, we're going to wish that we had a stronger industrial carbon price as we roll out that electricity strategy, but unfortunately that, uh, that may not be the case for a while. Um, so hopefully the minister of energy can, who is responsible for the electricity strategy, um, gets the, the message from the prime minister about where he sees the economy going and where he sees the mission reduction opportunities. And, uh, and we get a really robust electricity strategy implementation plan and a whole bunch of money allocated to, uh, investing in clean energy across the country. [00:12:29] Speaker 1: Well, Chris, as always appreciate your insights and we will be having more conversations about this in the future, I am sure, because this is going to be front and center on energy, uh, Canadian energy discussions. Thank you very much. [00:12:42] Chris Severson-Baker: My pleasure. Talk to you then.