Free Custom «Canada?s History of Oil Policies» Essay Paper

Free Custom «Canada?s History of Oil Policies» Essay Paper

In 1858, Canada made a significant breakthrough in the oil industry by digging its first oil well. Furthermore, this was the first oil well in the northern America. By 1870, the country had constructed more than 100 oil refineries. This achievement place Canada among Europe’s great oil exporters. However, with the decline in its oil production due to the shallow wells, the country has severally reviewed its oil policies to preserve its considerably important oil reserves.

In 1914, oil explorations revealed that Canada’s Turner valley, in Alberta, contained significant gas deposits. However, Canadian investors and the government were unconcern with this development. Thus, the United States’ subsidiary companies took advantage of the situation to operate in the region. During this time, the lack of appropriate regulations and policies led to the wastage of 90 per cent  of the gas collected from the mined field due to the use of inappropriate technologies. With the right policies, the country could save billions of dollars from this project. In 1930, crude oil was discovered beneath the Turner gas fields to the west of the gas gap. Despite this discovery, geologists noted that less than 13 per cent  of this oil could be extracted, since the area has depleted its reservoir drives when they flared off their gas deposits. In this regard, the Alberta provincial administration realized huge levels of waste and in 1931, the administration passed The Oil and Gas Well Act. A few days later, the Canadian government declared The Oil and Gas Well Act as unconstitutional leading to more damage and wastage from the burning of the gasses. Nevertheless, in 1938, the Alberta provincial government successfully established the Alberta Petroleum and Natural Gas Conservation Board. The board defined appropriate strategies and policies to concern the conservation. With time, the body became the best provincial regulatory body geared towards the environment’s conservation. It became a model to other oil producing provinces across Canada.

In 1945, Canada imported most of its oil from the United States However, the 1947 successful imperial oil drills in Leduc, drastically reversed the situation leading to a huge surplus of oil in the Canadian market. As a result, the federal government oversaw the building of a pipeline to Superior (Wisconsin), in the US, to export the surplus oil and earn extra revenue. In this regard, several controversial issues emerged among the Canadian citizens who questioned the criteria behind the government building a port in the American territories rather than in Canadian. The federal government`s main interest was to improve the country’s exports and enhance Canada’s trade balance with the US.

The National oil policy

After Canada’s oil discoveries in the early 1950s, the US became considerably interested in the Alberta oil fields. The US realized that the Canadian oil fields were more secure than the Texas and Alaska oil fields. Thus, the US government treated the Alberta oil policies, as if it they were their own policies. This resulted in enhanced relationship between the Alberta oil producers and the US government since they offered competitive prices. Thus, the Canadian government, backed by the Montreal refineries, and the Quebec administration, drafted a restriction that led to the 1961 National Oil Policy. The policy caused division among the Canadian oil producers. Moreover, it gave them exclusive privileges to sell their products to the west line refineries. The oil refineries to the east were allowed to process imported oil. Earlier, in 1959, the National Energy Board (NEP) had been formed to regulate the Canadian energy sector. The NEB regulated the oil industry by licensing all the long-term and short- term industries in Canada’s jurisdiction. In addition, it oversaw the construction of most oil facilities and international pipelines.

Overtime, the Canadians in the east thought that the 1961 National Oil Policy facilitated the high oil prices in the western parts of Ottawa. In reality, the disparity in the gasoline products was because of fluctuating market prices. The disparity among multinational corporations prices with the parent companies cause the price fluctuations. The parent companies encountered lower operational cost initiating the high oil prices in Montreal.  

Canadian energy companies

In 1970, the Quebec provincial government established a petroleum company. Two years later, the Canadian government in collaboration with the Gordon Commission proposed the formation of the Canada Development Corporation that would supervise several multinational oil companies. The organization successfully blocked the selling of the Canadian Controlled Home Oil Company to the Americans. The popularity of the new policies in Quebec spread all the way to Alberta, which also embarked on reviewing its oil policies to preserve its reserves. With the conservatives’ victory and ascension to power in 1971, the new oil policies were viewed as the only way to achieve improved revenues, and prosperous economy in the province.

Energy crisis

During the energy crisis between1973 and 1979, the Canadian oil regulatory body had already changed its policies. Across Canada, inflation became a national concern attributed to the skyrocketing oil prices. On September 1973, the government requested the western provinces to reduce their oil prices, and 10 days later, it imposed more tax on all the exported oil to bridge the widening gap between Canada’s domestic and international oil prices. The government used the revenue collected from these taxes to support the eastern oil refineries imports. Consequently, Ottawa subsidized the gasoline prices to its eastern consumers reducing revenues in the production industry. In this regard, the Alberta administration proposed to review its oil policies to favor the international market.  

On 6 October 1973, the war broke out between Israel and the Arab states. OPEC exploited the situation and doubled its oil prices. Similarly, Saudi Arabia and other Arab states imposed heavy duties on the oil exports to Israel’s allied countries resulting in exorbitant global oil prices. These occurrences provoked tension among the Canadian leaders resulting in counter-measures by the Canadian oil producers. Throughout the war, the Canadian oil industries underwent federal- government conflicts because of the global conflicts.

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Between 1980 and 1985, the National Energy Program drafted policies that aimed at redistributing wealth from the oil resources and increasing the ownership of oil companies among Canadians. With the implementation of these policies, the federal government took over the control of Canada’s oil prices leading to fair oil prices and export duties. However, the federal government encountered several challenges in the creation of an authentic national oil program. The first challenge resulted from the federal government’s jurisdiction rights over the natural resources, which fueled conflicts. Similarly, Canada was a chief importer and exporter of oil across the globe. It imported part of its oil supplies from the Middle East, while exporting some of its oil to the US. This program caused resentments in the oil industries.

In 1985, Petro-Canada, a federally owned oil company, acquired the ownership of several oil companies in Canada. Economists noted that the company had paid elevated prices to acquire their properties and that they had overestimated the country’s oil productivity. During the formation of the company, the government anticipated the company to lower the consumer gasoline prices. However, it failed to do so since its operation costs were more than those of its competitors in the region. Therefore, the company has continuously been disadvantaged in the oil industry.




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