Crude Realities: Unpacking the Politics and Power of Oil
This week on the podcast, our guest is David Detomasi, an associate professor and distinguished faculty fellow in international business at the Smith School of Business at Queens University. He is also the author of “Profits and Power: Navigating the Politics and Geopolitics of Oil.”
First, Jackie and Peter discuss the potential impact of the Canadian government’s proposed cap on oil and gas emissions on smaller oil and gas producers. A reminder that the deadline for providing feedback on the Federal Government’s “Regulatory Framework for an Oil and Gas Sector Greenhouse Gas Emissions Cap” is February 5th, 2024.
Next, Jackie and Peter interview David about his perspectives on the politics and geopolitics of oil. Here are some of the questions they asked him: Why is the expanding conflict in the Middle East having little impact on oil prices? Do you expect additional sanctions on Iran? Will the United States continue to protect the Middle East and critical waterways despite having less dependency on the region’s oil versus the past? Describe the United States and Saudi Arabian relationship and how it has been changing. How would you describe Donald Trump’s energy policy from 2017 to 2021? How should we think about the geopolitics of oil from a Canadian perspective? How can Canada balance climate goals with producing gas and oil?
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Episode 226 transcript.
Speaker 1:
The information and opinions presented in this Arc Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Speaker 2:
This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast, I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian, welcome back. We are recording on a Monday morning. I’m looking across at Jackie and she’s looking really quite stressed. It’s camping season and she’s trying to get her reservation while she records a podcast. Jackie, tell us about the trials and tribulations of the camping scene here in Alberta.
Jackie Forrest:
Yeah. For those people that are trying to get federal campsites, across the country, it started last week, so Thursday morning, Friday morning, now this morning, if you want to get campsites, you got to be logged on by …
Peter Tertzakian:
Would you say there was something like 35,000 people in line or.
Jackie Forrest:
Yeah. On Friday I was trying to get a site. I waited a half hour in the queue. I was assigned 42,000 in the queue. It took over an hour and a half for me to get in, and this is for a site in Banff. And then because I had to wait so long, I did get a site, but it wasn’t the best site, but I was just happy to get it. It’s stressful. You got to plan your July and August in January. This week they’re doing more and then after that, good luck getting a campsite in the Banff parks or any of the federal parks for the summer.
Peter Tertzakian:
Well, that’s certainly changed. I just remember you didn’t have to reserve anything, you just show up and away you go, whether you’re back country or whether you’re camping in a campsite. It was first come, first serve, and there never really was a crush of people, but hey, that’s what happens.
Jackie Forrest:
Yeah. I’ve thought about it a lot. I think there’s a couple of things, especially for the Banff parks, is the population of Alberta has grown a lot but the number of sites haven’t. And then Covid really got more people interested, and so the demand is higher. Yeah, it’s a totally different thing than it was even five or six years ago to get these sites.
Peter Tertzakian:
Yeah. Well, that’s a theme I’d like to further discuss on a podcast, and that is that the population growth not only here in Alberta but in Canada at large, means that our total energy consumption is going to go up because our energy consumption per capita here in a wealthy country is really quite high. The stresses and strains on infrastructure and therefore on the energy pull and then therefore emissions as well, is quite noticeable.
Jackie Forrest:
It is. And I was actually just at a conference in Ontario on electricity markets and everybody’s saying, “Hey, demand for electricity is growing. And it’s growing probably at a pace that’s faster than we’re predicting.”
Yeah, that’s definitely …
Peter Tertzakian:
And we have to throw in the whole AI data center electricity pull phenomena too, because I’m just reading more and more, and we talked about this on a podcast last year, but I think we have to revisit that as well.
Anyway, let’s talk oil today. We want to talk a little bit about the small oil and gas producers in Canada. I know Jackie, you wanted to talk about the emissions cap as it relates to that, but we also have a special guest to talk about the global oil situation, which we’re very excited about.
Jackie Forrest:
Well, let’s start with the letter for the oil and gas emissions cap. I know that everyone knows it’s February 5th, the date that you need to give your feedback. I thought I would talk a little bit. We’re affiliated, we’re the research arm of ARC Financial. ARC Financial invest in small producers, so we do look at things through that lens, and we are very concerned about how this type of policy could harm small producers. If you put a cap on oil and gas emissions, well, small companies generally need to grow each year, so they may need to acquire more emissions allocations than larger companies that are more flat. It could cause the cost structure for small companies to be higher than other companies, which is obviously not good. The other thing that is a problem is for these small companies that need to grow to become sustainable and have the economies of scale so that they have decent profit margins. They also need visibility to how much they can grow. And if there’s uncertainty about how many allocations they can acquire, these allocations will be scarce, that creates a whole other level of uncertainty around their ability to predict and forecast and even raise capital.
Peter Tertzakian:
Yeah, the whole oil and gas industry has gone from a very entrepreneurial small company game to one where you need to be much larger because the cost burdens, including regulatory reporting requirements and so on and so forth, financial reporting requirements, has raised the bar in terms of the minimum size you can be to be able to handle that bureaucracy. Now, on top of that, we have the bureaucracy that may be forthcoming where you are going to have to figure out carbon allowances and trading and everything else. It’s definitely worth highlighting these points in submissions, and it is very important to submit your concerns if you’re a small producer or a stakeholder in the Alberta energy business, to submit a letter.
Jackie Forrest:
Yes. And small companies are very important because they create a lot of innovation. They go into areas of Western Canada that big producers just don’t go into. Then they developed new plays, they’ve created new innovations like in the Clearwater, the East Duvernay, the Charlie Lake, these are plays that big producers aren’t going to go in because the reserves look too small. They don’t look like they’re going to add enough production, but small companies will go in there and provide benefits to small communities. I just want to give you a very interesting stat. We pulled data from geoSCOUT, and there are over 200 companies from 500 barrels a day, BOE per day, to 50,000 BOE per day. How many companies do you think are over 50,000 BOE per day in this space?
Peter Tertzakian:
50,000? I’d probably say 25.
Jackie Forrest:
That’s a good guess, 27.
Peter Tertzakian:
Wow, okay.
Jackie Forrest:
And by the way, there’s even more companies under 500. We’ve got hundreds and hundreds of companies below this 50,000 BOE per day that represent if they’re average greenhouse gas intensity, about one-fifth of emissions. I would argue you should exclude that group because …
Peter Tertzakian:
These are very important companies. If you look at the operating costs of the industry, the operating costs are about 70 billion dollars in aggregate. That’s a gigantic amount of money, and those operating costs recycle into the economy all the way from Northeast BC, all the way down actually into the corner of Manitoba. The small producers that are spread out across Western Canada are vital to the local economies, as you mentioned, Jackie. It’s critical that stakeholders submit their letters. When is it due?
Jackie Forrest:
February 5th.
Peter Tertzakian:
Okay.
Jackie Forrest:
Yeah. You got to get going pretty soon to get your letter in.
Peter Tertzakian:
Great, good. Well, from the very small to the global scene, we are delighted to have an author here in Canada who’s writing about the global oil and gas scene, the geopolitics, someone whose book is close to my heart because I wrote a book 2006 called A Thousand Barrels a Second, but David Detomasi, associate professor and distinguished faculty fellow and international business at the Smith School of Business, has written the book Profits and Power: Navigating the Politics and Geopolitics of Oil. He wrote the book in 2022, we are delighted to have him here in 2024 because the subject is more relevant than ever given what’s going on in the Middle East. Welcome, David.
David Detomasi:
Oh, thank you both for having me, looking forward to our talk.
Jackie Forrest:
Great. Well, before we start, why don’t you tell our audience a little bit more about yourself? How did you come to be a professor at the Smith School of Business at Queen’s?
David Detomasi:
Sure. First of all, I want to give kudos to Peter’s earlier mention of his book, which is a big part of the reason why I ended up writing mine, because it was instrumental in my career here at Queen’s. Now, just to give you a bit more background, I grew up in Cochrane, Alberta, a little outside of Calgary. And oil was literally everywhere. My friend’s parents worked in the industry; they sponsored hockey teams. It was just second nature. I went to Queen’s to do my undergrad, and I graduated in 1992. I did a master’s at the Royal Military College of Canada in war studies, and then I did a Ph.D. at Queen’s in the Department of Politics. And then I joined the Queen’s School of Business, now the Smith School of Business in the year 2000. I’ve been there 23 years, and all that time I’ve been studying the politics and geopolitics of energy, broadly speaking, largely because it was just so inherently interesting but also so inherently important. And that led me to the writing of the book.
Peter Tertzakian:
Yeah. Well, that is more important than ever. And there was this seminal moment where you really felt you had to write this book. Can you tell us about that?
David Detomasi:
Sure. Well, I teach a course at Queen’s called Business, Government and the International Economy, and we talk about how the global economy works, trade and investment, other sorts of things. And I had included and had always included in that course, a week or two talking about global energy markets and more specifically oil and gas, primarily oil. And to me, that was pretty obvious that one would need to do that. But I started getting some really uncomfortable stares from students on the very first day when they were reading the course outline. Normally, it takes them a few weeks to start disliking me, but they were doing it within an hour. The reason was, I found out later, is they didn’t want to study oil and gas. In fact, I had one individual, and I start the book with this, chastise me for making them do it. And drilling down on speaking with the student, it was clear of two things.
One, they did have this inherent hatred of oil that I seemed to be over and above. We could easily argue other companies have done things that are equally worthy of loathing. Or social media companies, banks, but oil seems to be special in this regard. Two things, they didn’t really know how dependent the world was. They didn’t know anything about how the oil system actually worked, yet they knew they hated it. And they had been taught this. And so, I wrote the book primarily hopefully to spread the message that it’s fine to hate it, but you should, I don’t think it is, you can, but you better know why, and you better know what’s going on. And that’s why I wrote it and said, “This is how the system works.”
Jackie Forrest:
Okay, great. Well, we’ll get into the questions, David. I don’t know if you can see my coffee cup, my Smith School of Business, University of Queen’s coffee mug, because I’m an alumni, I got my MBA from Queen’s.
Peter Tertzakian:
It’s got a plastic lid, too.
Jackie Forrest:
Yeah, some petroleum products in this.
David Detomasi:
Which MBA program? I teach in two.
Jackie Forrest:
Oh, I didn’t have you as my professor at the time, but the executive MBA program.
David Detomasi:
Oh, drat. Okay.
Jackie Forrest:
Yeah. Okay. Well, let’s talk a little bit. Now, your book touched on the major events that shaped the market from the breakup of the Standard Oil Company, right up to the Covid pandemic. And you said from the book, the politics of oil always seemed to matter, and that’s part of why you wanted your students to understand it, because it has a lot of influence in a lot of the world events even today. And we’ll talk about that. Let’s look at what’s going on today through the lens of the oil market. Of course, we have to start with this evolving situation in the Middle East. The war started with Israel and Hamas but now it’s broadening, we’ve got conflict in Yemen, and just yesterday three US troops were killed in Jordan near the Syria border. Where is this all headed, and do you see a potential that this could really broaden into a conflict that starts to affect the oil markets? The oil markets are still taking this all pretty lightly, and we don’t see a big increase in prices for all of the potential risks that is there.
David Detomasi:
Yeah. The Middle East, clearly it does and has always had plenty of tension within it, and it has erupted in periodic times in the past. And those eruptions have had much bigger impact on the oil market, whether we were talking about the Iranian Revolution or embargoes or ongoing conflicts. The geopolitical risk then associated with oil and the spikes in price seem to be more severe then than they are at the moment. Yes, clearly what happened last night is going to affect what President Biden does, but what we’ve seen is the oil market seems to be shrugging this off fairly lightly. Yes, there might be a widening of the war or there might be an intensification, but it’s not playing out as immediately in terms of prices and fears of stability or fears of shortage. But it does seem like the geopolitical risk associated in the Middle East has moderated so much in terms of its impact on what it’s doing in the oil market. That does seem to be a clear trend.
Jackie Forrest:
Yeah, that so much more oil is coming from other places in the world. And I think there’s also just a lot of supply today still.
Peter Tertzakian:
Well, there’s a lot of supply. I think the geographic focus of the conflict at the moment is in Israel and Gaza and the west side of Yemen and the Red Sea. If it goes to the east side and over by Iran directly and the Strait of Hormuz, that’s the big choke point. And at the moment, that whole area I personally think is in a very delicate and sensitive balance because of all the different allegiances between Saudi Arabia, UAE, Bahrain, Iran, Iraq, all the countries that border. And they’re all using that very narrow choke point but if something upsets that delicate balance, then I think it’s a whole different game.
Jackie Forrest:
Yeah. And let’s talk about that. The US has been enforcing sanctions on Iran, but they really haven’t been very strictly. In fact, the country’s been increasing its production over the last year. I will call this a proxy war. A lot of what’s going on is backed by groups that Iran is supporting, even though Iran isn’t directly involved. Do you think the US with what’s going on, is going to have to start enforcing these rules and these sanctions against Iran and being tougher on them?
David Detomasi:
Yes. In fact, if we’d had this podcast two days ago, I might have been more moderate in my response, but from what happened yesterday, when you have the deaths of US military personnel from an Iranian backed drone, and President Biden today even said there will be a response. Even by the time this podcast ends, there might have been something happening. Biden, you’re right, has been much more relaxed about Iran over the past three years than most of us would’ve expected him to be. And the response hasn’t been I think what he had hoped for, which was a moderation of Iranian behavior. Instead, Iran seem to be emboldened, and what they seemed to be doing is probing and pushing around their allies in the Middle East, basically to see what they can get away with and using the money that they’ve got from oil and gas to fund it. That was an interesting side note I just wanted to mention about oil, is it seeps. That’s the interesting thing about it. It infects everything or affects everything. In this case, a lot of it’s the money that is generated from oil sales and where that is actually put, maybe we talk about that a little bit later. But I would argue the United States probably is going to be a lot tougher today than it was yesterday. And going forward, it’ll probably keep going.
Peter Tertzakian:
Going back to the Strait of Hormuz and the Red Sea and the whole area, historically the US has had its aircraft carriers and fleets around the Strait of Hormuz, even in it presumably, I don’t exactly know where the locations were, but that they were the guardians of that choke point. Now, they have to along with the British and other western nations, but dominantly the British, protect not only the Red Sea but the Strait of Hormuz in the event that flares up. There’s, it seems to me, to be almost an expansion of the whole theater.
David Detomasi:
And you could expand that beyond the Middle East. Historically, I make this argument in the book, the Americans played the role of guardian of the seas. They essentially allow their navy ensured freedom of movement of goods and services. And part of the reason they did that is so that other countries didn’t have to worry about that. And then for most of oil’s history, that was the Europeans who are more dependent on Middle East oil than the Americans were, and now even more so. The wild card here is two things. One is it’s an indicator of whether or not the Americans are still trusted to play that role generally, whether we’re talking oil or whether we’re talking goods and services. And secondarily, if they’re not, who is going to play that role? And one of the things that we see in the Middle East is increasingly their customer is China, they sell more to China than they do the Americans. We’re seeing this erosion of the US willingness to play this role. And I think this is a real test. President Carter made the national security directive I mentioned to say that we’re going to protect oil. Now, I think it’s a pretty consistent thing.
Peter Tertzakian:
Do you think Trump getting in potentially, who’s more of an isolationist, would be even less inclined to be the protector of the seas in that region because the oil production in the US has gone up so dramatically?
David Detomasi:
Well, one of the things I would make the point is the image of the US has been it’s interested in the Middle Eastern oil and only in oil. In fact, one of the big fears when the fracking revolution happened from the Middle East is, “This confirms our worst fears, that all the Americans ever really cared about was our oil. And once they had their own, they would back off and not pay attention to us.”
I think that was always a mistake. I think US interests in the Middle East run far deeper than oil. They have an interest in protecting the state of Israel, they have an interest in moderate Islamic regimes running the countries in the region. And Saudi Arabia has always been the linchpin for the US to do that. Now, whether Biden is running it or if Trump is running it, they both have worked hard to cultivate a relationship with Mohammed bin Salman.
Peter Tertzakian:
Of Saudi Arabia, yeah.
David Detomasi:
In Saudi Arabia, that’s correct. Regardless of some other things Mr. Salman his alleged to have done, which are not so nice. These interests transcend both oil and the momentary interests of the day.
Jackie Forrest:
Let’s go back to that relationship with Saudi Arabia. Maybe explain a little bit the historical relationship between the two countries, and how is it changing? If we go back to 2022, when there wasn’t enough oil in the market, the prices were high, there was pressure being put on Saudi Arabia to increase production and they didn’t. And now they have this new relationship with Russia that seems to be growing. Is the relationship between the US and Saudi less strong and more fragile than it used to be?
David Detomasi:
Well, arguably it’s more diverse, which is probably a good thing in the sense that if it always was and only was about oil, and the Saudis increasingly are able to make decisions against US interest, which they’ve done a couple of times over the past couple of decades, then the relationship would end then and there. I mentioned in the book that the American fracking industry suffered huge damage from the flood of Saudi oil combined with Russia that was put on the market in 2014, which drove a lot of them out of business and did lots of other things. Clearly that was not something that the Americans had wanted, but the Saudis are independently saying this was necessary for the stability of the oil market and ultimately will serve all of our interests. But the US interest in Saudi Arabia is beyond oil too. Saudi Arabia has been a great market for US arms production. It has allowed the US to stay on its soil when it needed, for example, in the Iran-Iraq war. It has often acted as what we call a bridge between the US and the broader Arab world. That was thrown into a little bit of a challenge in September 11th when most of the terrorists were of Saudi origin. It’s a much more complex relationship from oil, and Saudi Arabia is increasingly flexing its independence from anybody, including the Americans.
Peter Tertzakian:
Well, further to Saudi Arabia on this discussion, talk about OPEC and where you see the OPEC cartel going, its ability to continue to effectively control the price of oil. Is OPEC stronger, weaker? What’s your thinking on all that?
David Detomasi:
My thinking falls along a guy named Jeff Colgan who I follow, when he wrote a recent book on OPEC, and the basic argument runs like this. OPEC was never as strong a cartel as it appears. There is plenty of infighting within the cartel about how much to produce and who is going to produce it. And the only country in this cartel that has significant spare production capacity right now is Saudi Arabia. Saudi Arabia still and to this day by default, really does control the amount of oil or not, entering the system. One of the things that might be more important over the long term, is if we move away from oil, the places that will continue to sell more of it is likely going to be the OPEC folks because they’re much cheaper, but their influence over it will become greater.
Jackie Forrest:
Well, let’s talk a little bit about the 2017 to 2021 period when we had President Trump, and what we can learn from that. There was a lot of things that Trump did. He talked about energy dominance and some things he did helped that, trying to restart the Keystone XL, but many of his actions were counterproductive, like a lot of the trade wars and terrorists. What did we learn from this period? And can they give us any insight into what to expect if in fact he becomes president again in 2024?
David Detomasi:
Well, we learned that chaos is his middle name, and to expect a consistently well-thought, strategic economic policy that was consistently trying to achieve clear objectives. That’s not how he rolls, is I think what we learned on the trade front. He struck out at everybody, including some of his best friends, that being us, where our integration of trade has been able to generate a huge amount of economic benefit for both sides. The second point I would like to argue is I think people focus on the president or leaders a bit too much in terms of how their ability actually is to be able to influence the oil market. President Obama came in promising to harness the wind and the sun and the solar, and he actually did preside over energy independence in the United States, but he didn’t do it the way he thought he would do it. He did it through fracking, huge amounts of increase of oil and gas. And over the last three years, President Biden supposedly is pushing a very heavy environmental agenda, and the US oil production has gone up. As has Canadian oil and gas production has gone up. Presidents can tinker, presidents can set some direction, but the market’s a pretty powerful thing. And if there’s demand there and there’s capital there, it’s going to go. I wouldn’t put too much focus on any one president’s ability to change this aircraft carrier of the global energy system.
Peter Tertzakian:
Well, let’s move to the geopolitics of the world, to the geopolitics of Canada, since we’re a confederation of 10 provinces and three territories, and there certainly is a lot of geopolitics, as we’ve discussed on this podcast in the past within our country. Talk about the geopolitics of oil in Canada.
David Detomasi:
I just wish we thought of it that way. Canada is a relatively … it’s a rich country, it’s a middle-income country, but it’s not overwhelmingly powerful. Sometimes I think we overestimate our influence abroad. But there is a couple of places where we do punch above our weight and one of them is in energy production. We are the fourth biggest oil producer, fifth biggest natural gas, my recent figures. We don’t play in that league in very many other things. I would like us to think a little bit more about reinvigorating our geopolitical standing through our energy production. The classic example over the last year and a half has been, I’ve been critical publicly, that I thought we should have tried to supply Germany and Japan with natural gas as fast as we could when they asked us for it. They are our allies, we’ve been allies for them for a while. And sometimes the business case for something, you do something even if … I think there is a business case to sell oil and natural gas to them but I also think there is a geopolitical and a moral case.
Peter Tertzakian:
Yeah, I think there is because yes, we’re the fifth largest producer of gas, fourth largest producer of oil in the world, but if you constrain the discussion to what really matters, which is the Western Alliance, we’re the second largest supplier after the United States, and big, we are 20% or something, aren’t we Jackie? We are a big supplier to the Western democracies. And so at a time when that is becoming more and more important and potentially we’ll see how the next few weeks even play out in the Middle East, could become even more vital. I think you’re right. I think we have to think about our stature in the world. In fact, our responsibility to Western democracy in terms of our energy contributions. And I know ultimately we have to wean ourselves off. We need to invest a lot more in renewables, address aggressively the climate challenge. But the here and the now, for those of us that remember the 1970s and the oil price shocks and so on, I find ourselves to be exceedingly vulnerable.
Jackie Forrest:
David, you talked about the geopolitics as in Canada to everywhere else. I’m actually thinking more about our inter-provincial geopolitics. We started off this podcast talking about this oil and gas emissions cap, which is really going to constrain production out of Western Canada, if not shrink it, in my view, and potentially create a constitutional challenge because we’ve got provinces like Alberta and Saskatchewan quite upset about the Feds putting a regulation that could control something that they view to be constitutionally in their wheelhouse. How do you think this is going to play out?
David Detomasi:
Well, it’s going to play out in the world. It’s going to play out here. Now, clearly there is a subset of the Canadian population that will be bearing an overwhelming proportion of the pain associated with transitioning away from oil and gas, if that’s what we’re trying to do. Whereas the benefits of oil and gas, the economic benefits, are actually spread pretty widely throughout the country through the mechanisms of transfer payments, which most Canadians either don’t see or are unaware of. This is another thing that bothers me, is that the rest of the federation often would prefer to hem in and stop oil and gas production, but they’re not very well aware that their own fiscal health depends enormously on that production.
I don’t think we can permanently put the burden of adjustment on one portion of the population. And the hypocrisy will continue to burn. I think leadership has to recognize that fairly powerfully. And secondarily, we have systematically, in terms of working abroad, for example, underfunded our forces, Canadian Armed Forces for decades. We aren’t able to really supply much when the time came. We are consistently being shut out of international meetings because of that. I think we need to step up with our allies to reinvigorate both our international reputation and just to show that we belong at that table. Because we assumed we would always be invited, and we’re not. Those are two things. One is the international side. And two, we need a different approach to managing transitions while recognizing reality.
Jackie Forrest:
Yeah. David, I would just add not only is the rest of the country fiscally dependent on our oil and gas industry, they’re physically dependent on it because oil and gas from Western Canada flows to Ontario and Quebec, and if we constrain production, they actually have no alternative source of supply for the gas and oil they get from Western Canada. That could create energy shortages in Eastern Canada. This really hasn’t been thought out.
Well, let’s talk a little bit about the importance of Russia. Your book talks a lot about how the high oil price era pre-2014 really helped embolden Vladimir Putin and increase his power in the country. Russians, of course, have been under sanctions because of the invasion of Ukraine. Just what are your thoughts about Russia? Are the sanctions ever going to impact Russia? Are they going to see a decline in their production because of the sanctions? What’s the future there?
David Detomasi:
No. That’s the quick answer. Russia’s got an incredible ability to tolerate economic pain and other sorts of pain, historically speaking. And they’ve got an incredible ability to adapt when they have to. Don’t underestimate that. Yes, the sanctions hurt for a few months but the Russian ruble is stabilized, the economy has actually bounced back. And now they’re just selling more oil and gas to India and China, who are not particularly worried or concerned about what’s going on in Ukraine. It’s not for them. They’re worried about being able to get cheap energy to fuel their economic growth. What I would say is when countries don’t know what to do but they have to do something, they do sanctions, “We have to do something. Sanctions are something, we’ll do this.”
They’re very difficult to make meaningful bites, and they’re almost impossible to make a country change its behavior based on that alone.
Jackie Forrest:
As we’re seeing real time right now with Iran actually, same situation.
David Detomasi:
Yeah. There you go. They don’t really make a difference when countries are deciding they want to do something, they nibble at the edges at best.
Peter Tertzakian:
Okay. Well, we’ve talked a lot about oil obviously, because your book is about oil and the responsibility of Canada to be a supplier of oil to the world, the western Alliance in a period of geopolitical tension. But let’s address the other elephant in the room, or as we might say in Canada, the moose in the room. And that is climate change and the obligation to decarbonize, meeting our Paris agreement, meeting net zero by 2050. How do you see the trilemma, the affordability of energy, the security of energy and the obligation to clean up energy and emissions, how do you see all those three playing out?
David Detomasi:
That’s great question. My next book is going to be on what should Canada do, given all of what you just mentioned. And this is what I think we ought to be thinking about. One, is we have to realize that the energy transition will take a long time and it will be expensive. And you need to generate enough economic return to be able to pay for it, which I sometimes think my students don’t fully realize, is you have to pay for these things, the road is not yet built. Two, is there has to be a multi-pronged strategy. One is yes, reduce, perhaps use less carbon-based products. Okay, but that’s not all we have to do. How about if we found ways to extract and use carbon-based products in more environmentally friendly ways?
And the technological adaptations currently in the Canadian oil sands, as you mentioned earlier, are driving prices down lower and they’re reducing carbon. I sometimes post this question to my students, “Would you be okay burning oil and gas if you could sequester all the carbon? If you could do that, would you be all right with it?” And sometimes they shrug because they’re just angry at oil and gas, but if we could sequester the bad stuff … you’ll have to sequester that. And the third one is to use some of the surplus from a powerful economy to invest in new technologies that are then going to be cleaner energy, and you can trust the process of innovation of entrepreneurs and venture capital to figure out ways of doing that. I think if you do those three things, you can make tremendous progress along the lines.
Final point I’ll make is just I would like us to calm down. Let’s have a rational discussion based on lots of available options. Let’s not stop pitting our whole sense of purpose and being in the world on whether or not we’ve been … how much carbon we emit. There’s lots of things we have to do. That’s just one of them.
Peter Tertzakian:
Well, David, it’s been a fascinating conversation. Thanks for joining the podcast. David Detomasi, associate professor and distinguished faculty fellow in international business at the Smith School of Business. Thanks again for joining us.
David Detomasi:
Well, thank you both for having me. I’ve really enjoyed this and look forward to seeing you when I can at oil and gas conferences or just wherever it might happen to be. Thank you again.
Jackie Forrest:
And thank you to our listeners. We will post a link to how you can get David’s book on the show notes. His book is Profits and Power: Navigating the Politics and Geopolitics of Oil. If you enjoyed this podcast, please like us on the app that you listen to and tell someone else about us.
Speaker 1:
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