It’s tough to see any upside today from the break up – through job cuts, investment pullbacks, project cancellations – of many parts of Western Canada’s energy economy due to the collapse in oil prices.
But political scientist, author and business advisor Ian Bremmer, president of the influential New-York based Eurasia Group, believes Canada has a great future ahead as an energy producer – if it looks beyond the immediate, the obvious and the local.
Indeed, it may have little to do with a recovery in oil prices.
The world is entering a new era of “geopolitical creative destruction,” Mr. Bremmer said, in which: U.S. leadership is declining; new regional powers like Russia, China and Saudi Arabia are carving out their own spheres of influence; instability and danger are increasing; and Canada, with its good government and ample resources, is looking very attractive.
But Canada will also need to adapt to structurally lower oil prices, a fallout from OPEC’s waning influence as well as increasing production due to new technologies, Mr. Bremmer said in an interview in Calgary, where he was scheduled to meet with leaders of several companies – including TransCanada Corp., proponent of the Keystone XL pipeline – and speak about Canada/U.S. relations Thursday at the University of Calgary’s School of Public Policy.
While producing regions such as Alberta and North Dakota are being hard hit by the oil crash, they will eventually benefit from the “unabashedly positive” influence of lower prices on the economy, as well as from North America’s disentanglement from OPEC, he said.
“The idea that the Saudis aren’t as relevant; the idea that the Americans don’t need to worry as much about much more vulnerable and volatile suppliers of energy geopolitically, will change America’s orientation toward its foreign policy,” he said.
“The days where a couple of countries in the Middle East could stick straws in the ground, with virtually no populations and very little technology, and basically hold the rest of the world to ransom, those days are over,” he said.
Mr. Bremmer believes Canada is getting off easy compared to the pain that low oil prices are inflicting on countries such as Venezuela, or even Saudi Arabia, which instigated the price war that caused them to collapse and is now struggling with serious deficit spending.
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Canada’s role in North American energy security will also evolve.
Instead of contributing through increased oil production and distribution, Canada’s strength will come from OPEC becoming powerless, Mr. Bremmer argued.
While it may not feel like it at the moment, due to President Obama’s continuing opposition to the Keystone XL pipeline, Mr. Bremmer also believes the days of antagonistic Canada-U.S. relations are coming to an end.In an unstable world, North America will increasingly become a safe haven, resulting in stronger internal trade relations and reducing the need for Canada to look for new trade partners overseas, Mr. Brenner said.
“The reality is the ability of the Canadians to become a pivot state, hedge their relations away from the U.S., is not a very realistic thing,” he said.
“There is nothing wrong with it at the margins, but fundamentally the orientation of the Canadian economy and therefore the orientation of Canadian politics, in a world that is becoming much more fragmented and regional, means that Canada is going to end up much more attached to the U.S.”
Unfortunately, Mr. Bremmer doesn’t see a positive outcome for Keystone XL until President Obama is out of office.The pipeline turned into a domestic political fight led by the Republicans that caused the Democratic President to dig in, but also highlights his poor handling of a host of foreign policy issues, along with his treatment of Canada as “an afterthought.”
“I understand that in the U.S. you are never going to make Canada the focus of your international outlook, but the fact is that you need to not go out of your way to do stupid,” Mr. Bremmer said. “And that is particularly unfortunate because America has really no ally out there that is more aligned with what the U.S. is trying to accomplish in the world, than Canada is.”