Energy Self-sufficiency: "project Independence"?
Authors: Slagorsky Z.  Charles 
Published: March 2010

Energy Self-Sufficiency: "Project Independence"?

The issue of energy self-sufficiency in Canada really comes down to self-sufficiency in crude oil, because we already have an over-abundance of: electricity, natural gas and coal. Also, prospects are that we will continue to produce more than we consume of all energy forms except crude oil well into the foreseeable future.

Self-sufficiency in oil became, and continues to be, a myth following the oil crises of 1973–1974 precipitated by the Arab-Israel war of October l973.ln the U.S., President Nixon then declared "Project Independence", which was to make the U.S. completely self-sufficient in all fuels by 1980. It turned ant that in i980, the U.S. consumed some 14.5 million barrels of oil daily, of which about 5.7 million were imported, implying only about 61 per cent self-sufficiency. In Canada, we have been only slightly more cautious in our predictions. We first aimed at (not very well defined) self-reliance in oil in the late 1970s. Yet, in 1980, Canada imported about 23 per cent of its oil requirements. The controversial National Energy Program of October 1980 has established our own "Project Independence" to come to fruition by 1990.

We can all agree that Canada has the potential to become self-sufficient in crude oil. The all-important step from myth to reality, however, is turning out to be more difficult than has been thought. To attain the objective within the time frame specified, both producers and consumers of petroleum must "cooperate". It is expected that consumers will react to generally much higher prices by reducing demand, and, to the extent possible, by switching from the use of crude-oil-derived products to alternatives. This should not be a great problem because domestic oil prices have risen considerably in recent months and are scheduled to rise still further in the future. For this reason, a reduction in oil demand (or in the growth of demand) can be expected.

Where we are running into difficulties is on the supply side. There is, first, the problem with the oil industry's insufficient cash flow resulting from the revenue distribution of the scheduled price increases. Second, there are unresolved jurisdictional issues surrounding offshore oil production serious enough to warrant a Supreme Court action and the calling of a provincial election. Third, we seem to have serious difficulties in getting previously eager potential oil sands producers to keep up their enthusiasm in the light of current fiscal arrangements. Fourth, it now seems clear that, for the near-term at least, the world oil price levels projected in the recent Ottawa-Alberta energy agreement are significantly out of line with reality. These are only some of the difficulties on the supply side; however, each one is serious enough to reduce expected oil production levels and put the self-sufficiency objective out of reach.

As if these difficulties weren't serious enough, the move from myth to reality via a "Project Independence" calls for a sober consideration of why the myth became a desirable objective in the first place.