He said Canada needs a healthy Alberta to get through challenging times marred by a “triple whammy”—the CCP (Chinese Communist Party) virus, commonly known as novel coronavirus, the latest crash in oil prices, and an already fragile provincial economy.
“There’s no doubt about foreign interference,” Kenney told reporters after his presentation hosted by the C.D. Howe Institute in Ottawa on March 12.
“Both Russia and Saudi Arabia would like to suppress and, optimally for them, eliminate production from North America. That would be both U.S. shale and the Permian Basin, and Canadian oilsands.”
Kenney said there’s no doubt that this is an opportunity for the Saudis and Russians to inflict maximum damage on North American producers and gain global market share.
“They’re trying to effectively burn down the house of North American energy production. I don’t think that’s good for the world, the global environment for us, if we end up losing a fight for global market share on energy products with Vladimir Putin’s Russia and to the King of Saudi Arabia,” he said.
‘Axe to Grind’
Foreign interference is perpetrated by offending states aiming to protect their own regimes and economic interests. Russia and China were singled out in the National Security and Intelligence Committee of Parliamentarians 2019 annual report tabled March 12. Canada was deemed a good target for exploitation due to the openness of its society.
The types of insidious activities—such as coercion—that the Russians and Chinese were engaging in, as described in the report, targeted politicians, academia, electoral processes, and the media to manipulate and influence for their own national interests.
With oil prices, the antagonism is out in the open.
“When your opponent is down, and you’ve got an axe to grind, it is the time to strike,” he said, adding that the high debt levels of companies in the Permian Basin and lack of refinancing options make them vulnerable.
It’s a three-way price war between the United States, Russia, and Saudi Arabia. And the background of waning demand due to the global economy slowing from the CCP virus threat makes the price war’s impact all the more painful.
Kenney and others have also, in the past, singled out interference from American foundations bankrolled by wealthy left-leaning individuals that want to landlock Alberta oil and gas for environmental reasons.
With the production of American shale increasing supply, geopolitics had taken on a diminished role in influencing the price of oil. But the Russians and Saudis not cutting supply, as had been hoped, is them taking advantage of a systemic drop in demand.
Geopolitics in oil is back, though not in the usual sense.
“We usually talk about geopolitics in a way that it can increase the oil price, but you’re seeing geopolitics play out in a way that it’s decreasing the price,” said Jackie Forrest, ARC Energy’s senior director, on the podcast.
Make a Bad Situation Worse
Financial markets opened deep in the red on Monday, March 9, to reflect the oil price war that started over that weekend.
From the close of business on Friday, March 6, to the close of business on March 17, West Texas Intermediate (WTI), the U.S. oil benchmark, is down 35 percent to below US$27—much heavier losses than the U.S. S&P 500 (15 percent) and Toronto Stock Exchange (21.5 percent). In March 18 trading, WTI fell below US$23 a barrel.
In the last 20 years, US$30 has roughly been a bottom for WTI. But in the sell-off, that level was decisively breached.
Because of the Saudis and Russians, oil is thus facing a demand shock and a supply shock simultaneously.
Expect bankruptcies for U.S. frackers, says Kevin Book, managing director of Clearview Energy Partners, a Washington, D.C.-based research and advisory firm. In a March 13 interview with BNN Bloomberg, he said he doesn’t expect Russia or Saudi Arabia to give in any time soon, calling it a “race to the bottom if everyone keeps faith.”
But U.S. companies are getting some support from the government, which announced on March 13 that it will buy tens of millions of barrels of crude to increase its strategic oil reserves. However, there’s no such demand for Canadian oil.
A new wave of capital spending cutbacks is underway in the Canadian energy sector, and along with it are dividend cutbacks. These drops in business investment severely hurt the Canadian economy in the aftermath of the oil price crash that began in late-2014.
And this is all coming after Teck withdrew its application for the $20.6 billion Frontier oilsands mine for reasons not related to the price of oil.
Kenney touted the Canadian oilsands for its higher environmental standards, support for labour and human rights, and transparent governance. For him, it’s about being given a platform to compete and displace “conflict oil that comes from some of the world’s worst regimes.”
“Do we want to transfer jobs, prosperity, and government revenues that could fund health care and education to Russia and OPEC by allowing them to destroy the energy sector that has done so much for this country? I hope that the government of Canada will join me in saying ‘no,’” Kenney said.
The Epoch Times refers to the novel coronavirus, which causes the disease COVID-19, as the CCP virus because the Chinese Communist Party’s coverup and mismanagement allowed the virus to spread throughout China and create a global pandemic.