Vive Le Canada

What your Mama never told you about NAFTA
Date: Sunday, November 27 2005

What your Mama never told you about NAFTA

A look at Canada’s oil, Chapter 11 and how it affects you

Signy Holmes, Staff

What came with NAFTA and the FTA (a Canada-U.S. free trade agreement) was the obligation to sell over 60 per cent of the fuel produced in Canada to America.

Let’s get one thing straight: NAFTA is boring. Sure, it would be nice if everyone took the time to understand Canada’s most important trade agreement, but let’s be honest here: wading through pages of legal jargon? Not on most people’s to-do list.

All the same, the North American Free Trade Agreement affects all of our lives, whether we’re big business owners or not. Softwood lumber and its associated drama are just the tip of the iceberg — the aspects of our lives influenced by NAFTA run the gamut from the price you pay for gasoline to the neurotoxins you breathe and the services our government is allowed to provide.

What’s mine is yours

It may or may not have struck you as interesting that, although Alberta has oil reserves estimated to be in excess of 1.6 trillion barrels, our gas prices are skyrocketing along with the Americans’. We aren’t the ones with an oil shortage, so why are we paying the price?

What came with NAFTA and the FTA (a Canada-U.S. free trade agreement) was the obligation to sell over 60 per cent of the fuel produced in Canada to America. Our oil prices are also tied to theirs — we are unable to charge Americans a different price for our oil than we charge Canadians. We have surpassed Saudi Arabia to become America’s main supplier, but we exert nowhere near the influence over oil prices that OPEC countries do.

Saudi Arabia and Venezuela, along with other oil exporting countries, give their own citizens a better price for oil and gas than they charge for export. The fact that we are unable to do the same started to become a nuisance around the time gasoline prices first pushed over the dollar mark.

The great American energy drain could pose an even greater problem in the future. “Peak oil,” the point at which the demand for fossil fuels such as oil is greater than the capacity to produce it, is a growing concern, both nationally and globally. The United States — having reached this point with domestic production in the 1970s — is currently the world’s largest net oil importer.

So what will happen when Canada reaches this point? We will still owe the Americans over 60 per cent of our oil production, even if we need that oil for ourselves. Canada could be forced into a shortage situation even if we were producing enough oil to meet our needs, simply because of agreements signed by past governments.

This scenario aside, many would oppose a change in trade patterns. A major advantage of trading with the Americans is shipping costs. John Palmer, economics professor at the University of Western Ontario, has stated that “we would force Canadian producers to pay more to ship oil to China instead of the United States. In the process, we would further strain Canada-U.S. relations while donating cheap oil — by probably subsidizing the transport costs — to China.”

[Proofreader's note: this article was edited for spelling and typos on November 27, 2005]

This article comes from Vive Le Canada

The URL for this story is: