PM says Canada is preparing for 'disruptions' tied to U.S. election
The next blow to Canada’s oil patch could come from south of the border, depending on who takes the White House in the upcoming U.S. presidential election.
At stake for the industry is a further decrease of demand for oil, aggressive green energy policies and a halt to key infrastructure projects, according to some energy experts.
The Keystone XL pipeline may be one of the sector's most pivotal issues, as U.S. President Donald Trump remains in favour of the project, though former vice president and Democratic presidential nominee Joe Biden is strongly opposed.
The construction of the pipeline, which would run from Alberta to Nebraska, carries with it the potential for 17,000 Canadian jobs, totalling $2.4 billion in gross domestic output, according to the Canadian Energy Centre.
“A Trump win would be better than a Biden win because a veto of Keystone would be another body blow to investor confidence in Western Canada,” former Alberta Energy minister Ted Morton told BNN Bloomberg in a phone interview.
Canada’s oil patch has seen an exodus of capital and jobs since 2015, which only worsened as the price of oil, along with demand, dropped amid the pandemic, he added.
Among the latest losses include Suncor Energy Inc. shedding 2,000 jobs across the country, totalling 15 per cent of its workforce in October. While TC Energy, the firm that owns Keystone XL, announced restructuring measures to remain competitive in late September.
Through the hard times, there might be a silver lining to a Biden Administration for Canada’s energy sector, according to Morton.
Biden’s proposed reversal of Trump’s corporate tax cuts, and aggressive green policies, could level the playing field for investment on both sides of the border, he said.
Biden’s climate change agenda includes recommitting to the Paris Agreement, a US$2-trillion pledge for clean energy, reducing drilling activities, and a carbon penalty to be imposed on countries that fail to meet their environmental obligations.
The threat of a carbon tariff caught the attention of Jack Mintz, president's fellow of the School of Public Policy at the University of Calgary.
Mintz, who is also a board member of Imperial Oil Ltd., cautions Biden’s proposed carbon tax could become a political tactic down the line – one that could be problematic if aimed at Canada.
“To reduce greenhouse gas emissions in Canada, we don’t have as many low hanging fruits as the United States,” Mintz told BNN Bloomberg in a phone interview.
Reducing emissions in Canada will come down to cutting CO2 levels throughout the transportation sector as well as oil and gas extraction, both of which have the largest regional effects for the country, he said.
Alice Hill, a senior fellow at the Council of Foreign Relations, who served as a climate change advisor to U.S. President Barack Obama, warns there has never been a greater divide on energy policies, both in Congress, and also for the two presidential candidates.
Trump will continue to support fossil fuel development whereas Biden will pursue strict climate change policies, she told BNN Bloomberg in a phone interview.
“If President Trump wins a second term, there may be a delay in green energy policies, but ultimately the reality of global warming will prevail,” she noted.
The pressure on corporations to disclose their carbon footprint and reach climate change goals could be detrimental to oil and gas stocks, warns Randy Ollenberger, managing director of oil and gas equity research at BMO Capital Markets.
The obligations potentially layer on more costs, or make shareholders more reluctant to invest in fossil fuels, he told BNN Bloomberg in a recent phone interview.
"Some companies are aggressively investing in renewables, like Total SE, Royal Dutch Shell, BP PLC, but we’re not really seeing that with Canadian oil and gas," he said.