Thursday, April 12, 2007

Quebec Business Professor Concludes that West Not Alienated Enough By Quebec

This just in from the Department of Making Mountains Out of Molehills, a professor at the University of Montreal has declared that Canada needs to nationalize the energy sector.

Canadian Business Online: Canada must nationalize its oil and gas industry: Quebec accounting professor
MONTREAL (CP) - Canada must nationalize its oil and gas industry to help lower the cost at the pumps by a third, says a Quebec university accounting professor.
Leo-Paul Lauzon said Wednesday that Quebec could also build a refinery with independent dealers and negotiate directly with oil exporting countries.

Lauzon analyzed annual reports of major oil companies such as Exxon Mobil, Royal Dutch Shell, BP Amoco, Chevron Texaco and Conoco Philipps over a period of eight years with researcher Marc Hasani.
"We can't afford to keep getting poorer," said Lauzon, who teaches at the University of Montreal at Quebec.
Lauzon has been calling for the nationalization of Canada's oil and gas industry over the last several years.
He told a news conference the analysis has shown that major oil companies continue to eliminate their competition by either buying or merging them and most of the profits go to the shareholders rather than investing and building refineries.
"Currently Canada, self-sufficient in oil and gas as the third largest producer of natural gas and the sixth largest for oil, has prices imposed on it due to events that happen in Iran, Irak or Saudi Arabia," he said.
"Among oil-producing countries, Canada is going the wrong way. It's the only western country to privatize this essential resource, largely to foreign interests."
If the federal government can't be convinced to nationalize the industry, Quebec should act with its own governmental bodies, such as pension fund manger Caisse de depot et placement du Quebec, in partnership with independent dealers, said Lauzon.
He suggested they could build a refinery in partnership and negotiate with oil producing countries such as Venezuela, Mexico, Bolivia or Iran.


Just, wow.

I'm torn. I don't know whether to begin by drawing the comparison that if an anonymous blogger made a far-out statement like that, they would be dismissed and ridiculed for shamelessly seeking attention, but when a tenured academic gets polemical, it counts as a news event.

On the other hand, I'm reminded of the aphorism about economics that Macroeconomists are Wrong About Everything, while Microeconomists are Wrong About Very Specific Things.

Nationalizing Canada's oil and gas sector would really only make sense if the core objectives were to strangle the energy sector until production slows to a trickle and replace the profit component of the price at the pump with still more tax.

Mr. Lauzon's focus on annual reports misses the fact that oil companies aren't ramping up more refineries because they are parsimonious, it's because there is enormous civic and environmental opposition to the creation of additional refinery facilities. Everybody wants cheap gas, but nobody wants a refinery in their backyard.

As far as the notion of suckering Caisse de depot et placement du Quebec into building a separate oil refinery for La Belle Province, exactly how would an outlay of billions of investment dollars be a sound decision for a pension fund, and how many years would Quebecois have to pay a higher price at the pump until such a facility was paid off?

I'm looking forward to seeing what Western bloggers who are far more right wing than me have to say about this.

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Anonymous said...

The "let's separate Alberta from the rest of Canada" party made a point of including an article about Lauzon on its website. I rather imagine they were most attracted to the final quote: "I don't give a damn about what Albertans think."

Quebecer Doesn't Give A Damn About Albertans (ALEX DOBROTA, Montreal Gazette, Wednesday, August 24, 2005)

Qualifying the latest surge in gas prices as a robbery, a Montreal accounting professor called on the federal government yesterday to nationalize the oil industry.

"We have to repatriate this resource," said Leo-Paul Lauzon, who holds a chair in social economy at the Universite du Quebec a Montreal.

"Oil companies are making immoral profits on the back of this society."

Speaking at a press conference inside a reconstituted church in the university's building, Lauzon said private oil companies have downplayed the global supply of crude oil to boost prices at the pump.

He based that assertion on his own study of the spending behaviours of three private Canadian-based multinational oil companies over the last 15 years.

Data from annual reports of Esso and Shell show 84 per cent of the companies' profits have gone to shareholders, instead of being reinvested in exploration activities, Lauzon said.

In the case of Petro-Canada, that percentage falls to 15 per cent, Lauzon's study found.

Nonetheless, most of those funds leave the country, as Canadian oil companies are owned mostly by "foreign interests," the professor said.

"There's plenty of oil to be had," Lauzon said.

"But the companies are voluntarily reducing the offer to increase the price."

Wearing running shoes, a white shirt and a tie bearing the logo, "Save our planet," Lauzon spoke loudly at times, animated by his admiration for the president of Venezuela, Hugo Chavez, a coup leader who uses his country's oil reserves as a political bargaining chip.

"Sometimes, you have to shake things up," said Lauzon, who already has been touted by the NDP as a potential candidate in the riding of Outremont.

Oil company officials vehemently denied the professor's allegations.

"Oil companies can't control the price of oil," said Petro-Canada spokesperson Andrew Pelletier.

"It's the international market that decides that."

Besides, Petro-Canada has invested heavily in exploration activities, Pelletier added, citing the Alberta oil sands and Atlantic off-shore platforms as examples.

Shell spokesperson Louis-Philippe Gariepy agreed.

"Only last year, we've invested $1.8 billion in capital and exploration programs," he said.

"I think that speaks for itself."

Neither Pelletier nor Gariepy would comment on the possibility of converting the oil industry from private to governmental control.

The closest Canada has come to such a measure was in 1980, when Prime Minister Pierre Trudeau implemented the New Energy Program amid the 1980s oil crisis.

By heavily taxing oil exports, that initiative was aimed to increase the use of domestic oil, curbing the price of gas at the pump.

It was cancelled four years later, after Alberta's premier challenged it in court.

Asked yesterday whether he thought a nationalization program would create a similar backlash in Alberta, Lauzon simply responded: "I don't give a damn about what Albertans think."

The Department of National Resources and the Department of International Trade turned down interview requests.

Anonymous said...

Alberta needs to annex Saskatchewan as a DMZ, grab BC for a solid pot and mushroom supply (and I hear they have some reasonable hydro-power generating capability and a sweet existing transmission line into the US for exporting power) and then give a large fickle finger of fate to the rest of Kanadastan.