Canada's Economic Security and Wellbeing

by Maj (ret'd) CORNELIU E. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East As the war in Ukraine continues, the issue of energy is on the minds of many people. This is especially true in Europe where countries are heavily dependant on oil and gas provided by Russia. There is an obvious connection between economic security and secure sources of energy, but some leaders, including ones in Canada, are dreaming high. Their fancies run to other, more expensive and less reliable sources of energy than oil, gas and nuclear. Canada, which could be especially well positioned to resolve the energy problems of European allies, presently lacks appropriate infrastructure to deliver, despite its enormous available reserves in energy. We need not wonder at this, if we consider that Canada's energy policy has been mired in decades of neglect, contradictions, mismanagement and obvious incompetence. We are not even able to resolve internal energy demands with our own oil, and are importing oil from abroad. We are watching energy prices skyrocket at home as Russia invades Ukraine and sanctions are applied on Russian exports. Downstream, this shows up directly in higher consumer costs at the gas station and in home heating bills. Indirectly, since energy costs are embedded in everything we consume, it manifests as widespread inflation in all the other consumables that we take for granted in modern society. For example, rising natural gas prices lead to shortages in fertilizer which in turn results in reduced crop yields and higher grain prices. Economic security depends on energy security. History has shown repeatedly how easily rampant inflation can bring down a government and destabilize a country when the cost of living exceeds the ability of the citizenry to pay. There are many examples of such economic collapses. Look at Venezuela and the Arab Spring, which erupted mostly due to food price inflation. Wise politicians understand that periods of high inflation are toxic for their political careers particularly when an election is in the offing. Consequently, we are beginning to see surprising policy reactions to this recent round of energy inflation. Ontario is sending cheques to car owners for registration rebates, and making promises of provincial tax relief on gas at the pumps after the election. Other Canadian provincial premiers are also debating the suspension of provincial gas taxes, at least for a period of time. But left-leaning politicians in Canada like the Liberal NDP coalition, are still sleeping and dreaming of renewables. For the record, let us look at the situation reasonably. Many of the people suddenly concerned about energy affordability inflation are the same ones who have been putting up barriers to increasing supply and introducing carbon taxes. The whole point of these policies was to increase prices, thereby diminishing demand and leading us into the clean energy nirvana. In the meantime, ordinary people are paying the costs of some ill conceived, untimely and insensitive policies. The idea that energy security can be neglected and postponed, and that we could painlessly transition to renewables without incurring any risks, was a comforting narrative when we thought we had reached the end of history and had a nice global village. But if anything, history teaches us that things can change abruptly, as has happened with the war in Ukraine. Now, the world is quickly waking up from a thirty-year stupor and re-discovering that there are still bad actors out there who pose a threat to our way of life. This exposes all the bad decisions we have made that increased our dependence on those, it turns out, we cannot trust. Perhaps it wasn't such a great idea for Germany to rely exclusively on Russia for its natural gas and close its nuclear power plants. Perhaps it wasn't such a great idea for Canada to rely heavily on China for pharmaceuticals and PPE in the event of a pandemic. Perhaps it wasn't such a great idea for Joe Biden to cancel the Keystone XL pipeline so that he'd have to go begging dictators in Venezuela, Saudi Arabia, and Iran for supplies after applying sanctions on Russia, and even resorting to tapping into US strategic reserves in desperation. For that matter, perhaps if Canada had built pipelines to tidewater or at least used the rail to the port of Churchill and upgraded the oil terminal there, and built LNG terminals, we'd be able to export Alberta oil and gas to help Ukraine in a tangible way. Instead, we are reduced to merely protesting against the villain, Russia, and convening talks to which nobody listens. We are getting a hard lesson and a rude awakening in geopolitical reality; the world remains a dangerous place and many people are at risk of starving or freezing due to the reprehensible actions of an autocratic world leader, and Canada is by no means safe. Even a quick resolution to the Ukraine conflict wouldn't change the fact that the Western world has now learned that it cannot be dependent on despots in Moscow, Beijing, or Riyadh and Teheran for critical inputs that drive our modern life. Due to bad mistakes made by a succession of Western politicians, including Canadians, it will take years to build alternative supplies and re-store abandoned supply chains. These actions will be necessary, however, if we wish to ensure our economic security. By now it seems clear that the three-decade experiment with globalization, if not dead, is certainly under siege, and needs to be reconsidered as a concept. For example, the Russian central bank cannot be deleted from the Western financial system as easily as the freezing of finances of a Canadian trucker, because alternative forms of financial transactions are available today, that don't require the cooperation of Western governments. We can already see this occurring in actions like India arranging to purchase Russian oil in rupees, in China's replacement system for the SWIFT system (CIPS), and in Russia's demand to be paid for natural gas in roubles. Certainly our adversaries are building alternatives to the Western financial system. Now the question is: where is our alternative to the critical commodities we source from them? Perhaps money isn't really what the Federal Reserve or the Bank of Canada should be printing in enormous quantities. Perhaps we are discovering that the actual currency is oil, natural gas, wheat, uranium, fertilizer, gold, etc.; real assets that we need that cannot be printed or otherwise wished into existence but that are gladly accepted in any country. To that end, it never made any sense for green politicians and environmentalists to advocate destroying our fossil fuel supply chain without first building its replacement. Energy transitions always take decades. Electricity from renewables can make an important contribution but needs to be backed up with natural gas, coal, or nuclear energy. The cost of upgrading the North American electrical grid will run into the trillions. The quantity of minerals required to convert the world's automobile fleet to EVs away from internal combustion will be enormous and most of the known deposits are controlled by countries we can no longer rely on. Battery technology is nowhere near ready to meet our needs. We finally need to learn that Bad things happen when reality collides with platitudes. What do you think?