he reelection victory of Premier Alison Redford’s Progressive Conservative Party over Danielle Smith’s Wildrose Party in Alberta’s provincial election will have implications as far away as Washington, D.C.
Alberta’s oil sands have a high profile in the United States, and the Keystone XL pipeline project has become a political football between President Barack Obama and Republicans in the 2012 elections. The Obama administration has resisted congressional attempts to force approval of the project until 2013; Obama’s rival, the Republican Party’s presumptive nominee for president Mitt Romney has said he’d build the pipeline himself, if he had to.
Energy prices, and in particular, gasoline prices, are on the rise and are expected to spike this summer. Voters who pay little or no attention to debates about the federal debt ceiling and entitlement reform understand gas prices, and understand that they are highly regressive (that is, the poorer you are, the more of your income is swallowed by a jump in the price at the pump). This takes an already volatile election issue, and makes it even more flammable.
In Ottawa, Prime Minister Stephen Harper finally seems ready to back his threats with action to build the Gateway pipeline to the west coast. He told a Washington audience at the Woodrow Wilson Center on April 2 that both Canada and the United States were concerned for energy security, but while for the United States this meant security of supply, for Canada this meant security of demand. He added that Canada was growing tired of getting a discounted price for its oil in U.S. markets, a discount that was partly the result of being captive to a single export market and relying on that market to refine all Canadian oil.
Based on the Wildrose Party energy platform issued last May, had the party won, it planned to push these debates farther and raise the stakes for the United States. Smith favors plans to build a new bitumen refinery in Alberta and a second refinery that has been proposed by a consortium including First Nations aboriginal leaders. A Wildrose government also might have rescinded the increase in provincial oil royalties imposed by the government of former Premier Ed Stelmach—a tax grab that was unpopular with many in the provincial energy sector. Cutting provincial royalties could spur additional investment in production, supercharging capacity—and the potential for additional sales to the United States if needed infrastructure is built.
Premier Redford is a reelected incumbent, but nonetheless represents a change in the traditional Albertan approach to the United States. In March, Redford gave her own address at the Woodrow Wilson Center in Washington. Unlike her predecessors, she emphasized Alberta’s efforts to address environmental concerns, citing technology partnerships with GE and other U.S. firms. She dismissed some criticisms of the oil sands as “exaggerated” but argued that Albertans were not happy with the environmental status quo either. Redford cited more than $6 billion in high tech investment related to energy committed to be spent in the province between 2010 and 2015.
The reelected Alberta government is putting a velvet glove on an iron hand: Technology investments and strong environmental regulation in Alberta represent a concession to coastal sensibilities in North America, but Redford supports the responsible but steady development of the province’s oil resources.
Increased oil production in Alberta could lower prices at the pump for Americans if it comes on the market. Why? Because oil is a commodity whose price depends on available supplies; the more supply, the lower the price on world markets. As FedEx Chairman Fred Smith noted recently, every major recession and economic downturn in recent history has been started by a political decision to constrain oil supplies and push prices up. Americans know that dodgy Middle Eastern, African, and Latin American countries might be tempted to try to manipulate oil prices; increased Canadian production may not prevent this, but it provides a welcome cushion for American consumers.
President Obama hoped to play for time when he delayed a decision on the Keystone XL pipeline to 2013; Republicans goaded him into a trap by forcing him to act publicly against Keystone so that they could blame him for high gas prices all summer. Stephen Harper raised the cost of delay further by declaring that Canada would aggressively pursue other customers.
Alberta’s election result was a reprieve for the Obama administration. The reasonable Redford government will temper somewhat Harper’s enthusiasm for petroleum realpolitik. Had the Wildrose Party won the election, Washington would have been in for a wild ride—a dramatic escalation in the pressure to act fast to secure access to Canadian oil before China and other markets can gain access to it. Instead of the Wildrose bad cop Danielle Smith might have been, Alberta voters chose to stick with Alison Redford the good cop to complement the bad cop role being played by Ottawa since the Obama administration delayed Keystone.
From Congress to the White House to the campaign trail across America, the Alberta election will add fuel to the electoral fire over gas prices that is about to become red hot this summer.