Faster transition to renewables will get Canada off fuel price roller-coaster, economist says

While Canadians pay record high prices at fuel pumps, fossil fuel companies have been taking in record profits.

Calgary based Suncor tripled its earnings in the last year from $821 million to $3 billion.

The cost of producing petroleum-based products like gas and diesel hasn't increased, according to Jim Stanford, an economist and the director for the Centre for Future Work, a Vancouver-based labour think-tank.

Stanford said energy companies are profiting from high prices at the pumps that are unrelated to their cost of production.

"What it means is in Canada, we have tied our energy prices to this roller-coaster of the global energy market," he said. "And that means when that roller-coaster goes up, we pay a lot more."

Stanford spoke with CBC Radio Information Morning host Portia Clark about how renewable energy could bring relief from the high prices. Their conversation has been edited for length and clarity.

Is there no chance to get off of that roller-coaster, or are we tied to this arrangement?

We haven't always been tied to the world oil price.

Canada, like many countries in the world, used to regulate its oil prices until about the mid-1980s. And that was because we are a major producer of oil. In that regard, there's no requirement that we pay world oil prices, given that the vast majority of the oil we consume is produced here in Canada.

In the 1980s, though, the government — in its wisdom at the time — decided the private market knows these things best and government should get out of the way. We deregulated prices, we tied our energy price to the world oil price, and we also got rid of most of the rules regarding foreign investment in Canada's oil patch. 

The outcome of that [is that] most of these super profits ... are going to foreign owners because the majority of the Canadian industry is foreign-owned. In that regard, it doesn't even necessarily benefit Canadians. 

Even in this situation we're in now, are you hearing much about rethinking this arrangement since it's not serving most Canadians unless they're shareholders?

Well, there's kind of a minimal and a maximum approach to how do you deal with this.

The maximum approach would be to rethink how we're setting energy prices for petroleum products.

Our electricity, for example, is still regulated. The electricity bills that we pay are tied in some way to the cost of producing electricity through the regulatory system. I think that's probably a long shot. That would be a huge change in our energy policy. It would take, I think, some years to debate and put into place.

Why don't we collect an extra tax on the oil and gas industry while it's making these super profits and use that money for something useful?

One potential use would be accelerating the transition to renewable energies.

We all know that the fossil fuel sector is going to erode over time because of climate concerns and moving to a net zero economy. And the faster we do that, the less we're dependent on that global roller-coaster. So those would be some things that could, I think, reduce the overall harm of what's happening without having to rethink the entire energy price system. 

Do the oil companies need to be strong-armed into investing in renewables? Are they doing any of that on their own now with some of this windfall?

No. There's a few oil companies that have, I would say, kind of side projects in some of the alternative or renewable energy arrangements.

But for the most part, they aren't even reinvesting in conventional oil and gas production.

We should not expect that this big upsurge in oil prices and oil profits is really going to spark another oil boom in Canada for various reasons.

Number 1, the companies are distributing most of these excess profits to their investors and their owners. They're not putting it into anything.

Number 2, the companies themselves know that the outlook for fossil fuels in the long run is constraint.

We're moving to a net zero economy, and this is an industry that's eventually going to disappear.

We will see some new projects announced with all this money, but for the most part, it isn't even going to translate into more activity in the oil and gas sector, let alone in renewable projects. 

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