By Michael J. Armstrong

The United States and Israel have repeatedly boasted about airstrikes in their current war with Iran. In Week 1, they claimed the destruction of 75 per cent of Iran’s missile launchers. By Week 2, they had reduced Iranian missile fire by 90 per cent and said the war was “already won in many ways.”

And yet, Iran keeps damaging refineries and blocking tankers from crossing the Strait of Hormuz.

The country has certainly suffered many tactical losses. But its missiles and drones have been strategically successful.

Iran so far has launched at least 5,400 such projectiles. Surprisingly, less than a tenth of them have targeted Israel, its traditional rival.

Missiles over Israel

Israel faced about 450 Iranian missile attacks during the war’s first four weeks. The rate of fire fell rapidly after the first weekend but has never halted.

Some missiles carry several hundred kilograms of explosives, enough to destroy an entire building. The rest instead dispense dozens of cluster bombs over wide areas. Those are less powerful but still lethal.

Israel’s long-range Arrow interceptors engage the missiles first. Its mid-range David’s Sling and short-range Iron Dome interceptors provide backup. (The country’s Iron Beam lasers are not being used.) Together, they’ve reportedly intercepted 92 per cent of incoming missiles.

But interceptors sometimes miss. And their supply is limited. Consequently, at least nine large warheads and 150 cluster bombs have hit populated areas.

These numbers imply that almost all Iranian missiles are accurate enough to need interception. By contrast, during Israel’s earlier conflicts with Gaza in 2008, 2011 and 2014, less than a third of incoming rockets were so accurate.

Meanwhile, more than 90 per cent of Iran’s missiles and drones have targeted Arab countries in the Persian Gulf.

Drones across the Persian Gulf

Saudi Arabia, Jordan, Iraq, Kuwait, Bahrain, Qatar, Oman and the United Arab Emirates (UAE) collectively reported around 4,900 Iranian attacks during the first four weeks. Only one fifth were missiles: the rest were drones.

These countries have stated they are neutral in the war. However, they do have defence agreements with the U.S., and some host American military facilities.

These countries defend themselves using weapons like the U.S.-made Patriot and Israeli-made SPYDER interceptors. Drone experts from Ukraine now advise the defenders too.

For example, the UAE reported attacks by 1,835 drones, 378 ballistic missiles and 15 cruise missiles. As of March 10, it claimed to have intercepted 94 per cent of the drones and 99 per cent of the missiles.

The deadliness of these attacks has varied.

Continuing lethality

In Israel, Iranian missiles have killed 20 people, implying roughly 4.1 deaths per hundred missiles arriving.

That’s less than the 5.1 the country saw during its 2025 war with Iran. But it’s four to 40 times higher than the rates it suffered from rockets in earlier Gaza and Lebanon conflicts.

In the Persian Gulf, Iranian projectiles have killed at least 15 civilians, 13 U.S. soldiers and seven merchant sailors.

There were about 0.6 deaths per hundred Iranian attacks in Kuwait, Bahrain and the UAE combined. That’s much lower than Israel’s rate, presumably because those countries were attacked by drones and short-range missiles carrying smaller warheads.

Interestingly, although the quantity of Iranian attacks fell after the first week, their lethality did not. Death rates per projectile in Arab countries showed little change week-to-week. In Israel, the rates were highest in Week 3.

In fact, Iranian missiles keep hitting precise targets, like U.S. military aircraft parked beside runways.

This implies Iran’s government has recovered from its initial surprise. It’s likely benefiting from Russian intelligence and Chinese technology too.

Tactical U.S. vs strategic Iran

So, U.S. and Israeli warplanes have bombed thousands of targets, killed thousands of civilians, and slowed Iran’s missile fire. But they haven’t stopped it.

That’s not surprising. Airstrikes alone didn’t stop rocket fire during Israel’s previous conflicts in Gaza and Lebanon. Ground invasions were needed for that.

U.S. President Donald Trump can post jingoistic mashup videos and “bullshit” about having “militarily won” the war in Iran. But he hasn’t achieved strategic outcomes like “unconditional surrender” from Iran or regime change there.

By contrast, Iran’s missiles have been strategically effective. They’ve damaged Persian Gulf refineries and halted tanker traffic. They’ve forced Trump to relax sanctions on Russian and Iranian oil, and on Belarusian fertilizer. And they’ve shown Arab monarchies that U.S. defence agreements have limited value.

Trump recently, and inadvertently, admitted this weakness. While discussing Iran’s closure of the Strait of Hormuz, he said “it would be great if we could do something, but they have to open it.”

This strategic failure despite tactical success is reminiscent of the Vietnam War. U.S. units had overwhelming firepower as they killed enemy soldiers. But body counts by themselves indicated little about strategic progress.

Some historians rank that war as the second worst U.S. foreign policy decision ever. The 2003 invasion of Iraq was ranked the worst.

Trump talks about being the greatest U.S. president in history. So, perhaps his Iran war will make him the new leader on that policy failure list.

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by John Duncan

The Iranian regime is certainly brutal. But it’s also powerful as it continues to project its might after a month of illegal air strikes by the United States and Israel.

Read more: Iran’s attacks drone on, with the U.S. at risk of losing the war

Iran is in the top 10 per cent of countries by size and population, has the third largest proven petroleum reserves and controls strategically crucial geography.

Furthermore, both the regime and many ordinary Iranians are prepared to defend the country. Since 1953, when the U.S. helped orchestrate a coup to overthrow Iran’s democratically elected Prime Minister Mohammad Mosaddegh, Iranians have understood they’re in America’s crosshairs.

This was especially true after the 1979 Islamic Revolution that overthrew the shah and during the U.S.-backed Iraq war against Iran that killed a million Iranians in the 1980s. As a result, Iran has spent decades beefing up and decentralizing its military capability.

In contrast, Dan Caine, chairman of the Joint Chiefs of Staff, warned U.S. President Donald Trump in February that the U.S. was short on both munitions and allied support for a war against Iran. Israel, America’s partner in war, is also short, especially in interceptor munitions. Trump and Israeli leader Benjamin Netanyahu dismissed the concerns, which suggests they planned a short war.

What are Trump’s options?

Critics have accused Trump of dragging the U.S. — or allowing it to be dragged — into a “forever war.” Those critics include those in his MAGA base, a problem for Trump as he anticipates November’s mid-term elections.

One unconventional option that might expedite victory, discussed during Trump’s first term, is to use nuclear weapons against Iran. Trump has said nukes won’t be used, but he’s well-known for erratic reversals.

A nuclear strike might expedite surrender, but it took two strikes on Japan in 1945 before the Japanese surrendered, and, failing an Iranian surrender, several strikes might be required to destroy the military capability distributed across Iran’s 31 provinces. Because many Americans would be appalled by a nuclear attack, putting the mid-terms at risk, the nuclear option is unlikely.

Much of the concern about Trump’s election machinations heading into the mid-terms is focused on the manipulation of procedures and officials. The legacy of the Jan. 6, 2021 attacks on the U.S. Capitol is one extreme possibility, as is manipulating the Iran war to achieve electoral gains.

Trump will probably lean into his rhetorical strengths and try to convince Americans the U.S. has won when it hasn’t. Claiming victory in the face of its absence is not new to him. Even in his second term, Trump continues to push the false claim that he won the 2020 election.

Consider the bizarre drama that started on March 21 when Trump and Iran exchanged dire threats. Then, out of the blue, Trump declared the existence of peace talks, which Iran denied. Perhaps they are imaginary talks on the way to an imaginary victory for Trump.

Read more: Why Donald Trump is such a relentless bullshitter

Mission accomplished?

It seems clear Trump is planning to declare victory well ahead of the mid-terms — and in part because of them. Such a strategy would involve baiting opponents into “forever war” criticisms, only to ridicule them in stump speeches, generating the image of a president who finishes his wars.

A declared victory in Iran and a timely exit, in addition to the liberation of Venezuela and a possible Cuban coup, might all coalesce into potent election messaging for the Republicans.

Soon enough, Trump may announce something akin to former president George W. Bush’s premature proclamations about the Iraq War in 2003 by saying something like this:

“Major combat operations in Iran have ended. The United States and Israel have prevailed. We do not know the day of final victory, but we have seen the turning of the tide.”

If successful, he will secure two more years “like nobody’s ever seen before” of Republican congressional dominance.

Major obstacles

The battle for November will feature a few competing narratives in the U.S. But there are four major hurdles for Trump in particular.

• Information: For voters to be convinced that Trump is a decisive crusader against evil rather than another “forever war” president, right-wing media must sell yet another big lie, mainstream media must continue to pull its punches and the Democrats must continue to flounder.
• Affordability crisis: Trump also has to ensure he doesn’t “win” in Iran while losing on affordability at home. Most American oil comes from the U.S., Canada and Mexico, so the U.S. is protected from global supply disruptions, but global markets push up prices everywhere. Trump’s mere declaration of talks recently brought oil prices down, but only temporarily.
• Allies needed: Because voters will want to see a significant military withdrawal, Trump needs other countries to manage the chaos he’s created. But after disrespecting allies for months, he is struggling to establish a “coalition of the willing” on which to offload the conflict.
• Iranians must co-operate: But because the U.S. and Israel have twice attacked Iran during diplomatic negotiations, Iran needs other stakeholders in the process. Without them, Iran will not be incentivized to stop fighting and nothing will belie an imaginary Trump victory more than ongoing Iranian attacks.

Democracy waning

Whichever scenario prevails, Americans will likely lose. Their complete war costs could include repercussions from the unprecedented illegal bombing of Iran, as well as from unnecessarily turning regional allies into targets.

All of this is tied to what many Americans regard as increasing Israeli aggression, including the killing of 70,000 people in Gaza, which the U.S. has facilitated with funding, political cover and its widely mocked Board of Peace.

America’s democracy, economy and credibility are waning as Trump shamelessly pursues self-aggrandizement and self-enrichment.

“That makes me smart,” he might say, but only a failed leader serves his own interests at the expense of his country.

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By Gaye Taylor

Senior Chinese officials arrived in Davos, Switzerland this week speaking the language of multilateralism. They ended the week correcting the United States president after he dismissed wind power and doubled down on oil and gas.

During his keynote address at the World Economic Forum, Donald Trump ranted that China has no working domestic wind farms, or more specifically, that he hadn’t “been able to find any” beyond a handful that he claimed were marketing backdrops used to sell wind turbines to “stupid people.”

China was swift to bat away Trump’s disinformation, noting at a press briefing that it has been the global leader in installed wind capacity for 15 consecutive years, reports Reuters.

“China’s efforts to tackle climate change and promote the development and application of renewable energy in the world are obvious to all,” foreign ministry spokesperson Guo Jiakun said, adding that the country’s exports of technologies like solar and wind have helped other countries reduce their carbon emissions by over four billion tonnes.

“As a responsible developing country, China is willing to work with all parties to continue to promote the global green and low-carbon transformation,” Jiakun said.

Vice-Premier He Lifeng had spoken at some length on this theme during his own main stage address, some 24 hours before the American president arrived.

“China will work with all other parties to fully and effectively implement the United Nations Framework Convention on Climate Change and the Paris Agreement, uphold the multilateral process on climate change, and actively promote global green and low-carbon development,” he said, just a couple of weeks after Trump withdrew the U.S. from the UNFCCC and five dozen other international fora. Earlier in his address, the vice-premier had pledged that “we are committed to building bridges, not walls,” vowing to “work with all parties to foster closer partnerships for green development.”

For his part Trump “pronounced last rites on American leadership of the liberal democratic order” in his address, as the New York Times put it. He prompted multiple analysts to compare his speech to mob boss language, declaring that “Canada lives because of the United States,” and that “after the [Second World War], we gave Greenland back to Denmark. How stupid were we to do that?”

He derided the energy transition as “the green new scam,” belittling Europe for its continuing efforts to decarbonize.

“Natural gas production is at an all-time high by far and oil production is up by 730,000 barrels a day, and last week, we picked up 50 million barrels from Venezuela alone,” Trump said.

Trump followed a pronouncement about America’s global lead in artificial intelligence with the claim that all AI facilities built on U.S. soil will be powered by brand-new oil and gas plants. “They’re even going coal, in some cases.”

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“This is not energy policy, it is Donald Trump-style, grievance-fueled populism pandering to the frustrations and anger of an industry that thinks it is under siege.”

Jason Kenney, Andrew Scheer, and Scott Moe speechified at the Energy Relaunch conference in Calgary Thursday and if this is the state of conservative thinking about energy issues and policy, Alberta is big trouble.

Before we discuss what the three conservative leaders actually said, let’s consider what they should have said. Or, more accurately, the elephant in the room they didn’t address.

Last week, heavyweight international consulting firm Wood Mackenzie released a thought piece entitled, Thinking global energy transitions: the what, if, how and when. The article is a companion piece to other studies that examined how the energy transition – from fossil fuels to electricity generated by low or no-carbon technologies – will affect super-major oil and gas companies (for instance, that Peak Oil Demand will arrive around 2036).

“The two primary drivers – renewables and electrification – are out of kilter. Renewables growth is well ahead of electrification trends but, in time, the two will converge. This is the ‘point of singularity’, when the world rings out the old and rings in the new,” according to the thought piece.

“We think this point of singularity will happen by 2035, less than 20 years away.”

That’s the elephant.

Alberta is looking at global oil consumption peaking in the mid-2030s to mid-2040s, well within the planning time horizons of oil sands projects, for instance.

And let’s not forget a key point from Wood Mackenzie: during periods of rapid technology change, such as the one we’re in now, technical disruptions can come out of left field and significantly speed up market disruption.

The energy transition is real and it’s heading this way fast, but you wouldn’t know it listening to the speeches and comments from Kenney, Scheer, and Moe.

Kenney, in particular, is just a broken record of bad policy ideas. He set out a fight back strategy whose components he has been talking and tweeting about for some time.

The UCP leader is proposing five tactics that are aimed squarely at the grievances aired in the board room of the Canadian Association of Petroleum Producers and the lounge of the Calgary Petroleum Club:

1) an “energy war room” to retaliate against industry critics using advertising and social media;

2) the Alberta government will fund legal challenges against Canadian charities that oppose pipelines and expansion of the oil sands, such as the David Suzuki Foundation;

3) a Premier Kenney would call the CEOs of major Canadian oil and gas firms (read Suncor, Cenovus, CNRL that supported Rachel Notley’s Climate Leadership Plan in 2015) and instruct them to replicate Resolute Forest Products’ lawsuit against Greenpeace in the United States (which was dismissed in 2017);

4) the Alberta government and its agencies will boycott companies – he specifically mentioned HSBC, which did not in fact boycott Alberta energy companies – it thinks are punishing industry;

5) “real consequences” for other provinces that don’t support energy infrastructure projects that benefit the Alberta industry, specifically mentioning BC Premier John Horgan.

“I am serious about defending the vital strategic interests of Alberta using every tool at our disposal,” Kenney said.

Then, for good measure, he repeated the frequently heard complaint about how Alberta contributes so much to the federal equalization plan but gets no political support from receiving provinces for its pipeline projects. Just for good measure, he once again called out industry executives he claims foolishly embraces activists like the oft pilloried Tzeporah Berman.

This is not energy policy, it is Donald Trump-style, grievance-fueled populism pandering to the frustrations and anger of an industry that thinks it is under siege.

This is vengence, not vision.

Let’s put Kenney’s angry populism into a global perspective.

In a recent podcast, Chris DeLucia of IHS MarkIt explained the different approaches toward the fast emerging low-carbon economy of the majors (Shell, Exxon, BP and in the Alberta context, oil sands companies)  and the independents (US shale drillers, for instance, and in Canada the junior and midcap producers).

For the independents, “they compete really as pure play oil and gas companies. They don’t really have scope for more direct involvement in the low carbon sector. But for the global integrated oil companies, and with them we’re really talking about the majors here, for those companies it’s really a different story given that they maintain more diversified portfolios beyond just the upstream segment.”

The majors are quickly – well, quickly for corporate giants – tacking to the new reality of the transforming global energy system, while the independents are focused on the nuts and bolts of their business after three years of downturn and the current uncertainty and volatility.

The same dichotomy is playing out in Alberta.

The big oil sands players are integrated (little exposure to the WCS/WTI differential), profitable, and deeply committed to being “cost and carbon-competitive” – the sector’s new mantra.

This is Notley’s sandbox. Oil sands CEOs helped develop her energy policies and they are the biggest beneficiaries.

The juniors and midcap producers are suffering mightily. Many have failed, a large number of those remaining are highly exposed to price differentials and still losing money, and they are barely hanging on.

Kenney represents their grudges, just like Trump represents the grudges of his political base. And Scheer and Moe echoed Kenney.

If Wood Mackenzie is right about the global energy transition barreling down toward the oil and gas sector, Alberta has much bigger threats to worry about than the David Suzuki Foundation.

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By Ed Hirs, energy economist, University of Houston

Trade deficits keep your mortgage rates low. Trade deficits help you buy your cars. Trade deficits pushed the U.S. stock and bond markets higher until the recent call for increased tariffs on aluminum and steel slammed markets.

The Trump administration claims that these tariffs are to protect American jobs and to benefit national security. This is backwards. Our trading partners are our leading investors, and trade deficits keep the U.S. out of war.

The world economy is a network of flows — capital, goods and services going from one trading partner to another to another. Disrupting these flows will have consequences that many Americans do not readily see.

In 2017 the U.S. trade deficit was $566 billion, which means that we spent more on foreign goods and services than our trading partners spent with us. It also means that we can afford to make the purchases. But where did that $566 billion in dollars go once it was abroad? The answer is that for it to be valuable to the recipient — think China, Russia, South Korea and other large trading partners — those dollars were exchanged for other currencies. Larger trade deficits mean more dollars abroad, which will drive down the value of the dollar making our goods more competitive abroad.

If left alone over time, trade deficits can be self-correcting as the value of the dollar falls. But our trading partners and currency traders do not want to hold a depreciating asset. They ultimately exchange these dollars by purchasing U.S. real estate, stocks and bonds. The U.S. Treasury estimates that foreign investors hold more than $18.4 trillion in U.S. stocks and bonds alone.

The world’s largest issuer of securities is the United States, and we will soon have $21 trillion in debt outstanding. As of November 2017, our trading partners held $6.3 trillion of that debt. Without our trading partners supporting federal deficit spending, interest rates and the cost of borrowing in the U.S. will rise. Sales of homes and cars will plummet as interest rates rise across the board.

If the foreign investors exit U.S. stocks and bonds, the additional carnage will be legion as all asset prices will begin to fall. Imagine the Dow Jones Industrial Average falling below 10,000.

No one argues that the U.S. has a level playing field with our trading partners. Incremental gains from renegotiated trade deals can be realized and can be pursued. But the broad, sweeping unilateral imposition of tariffs by the U.S. will hurt us even more than it will hurt our trading partners.

To the extent that our trading partners are unable to match the tariff increase with a further price decrease, demand for their steel and aluminum will fall and their economies may enter recessions. If so, they will buy fewer U.S. goods and services, erect their own retaliatory trade measures to protect their domestic economies, and liquidate their holdings of dollars and U.S. assets. We will enter a vicious economic spiral not seen since the Smoot-Hawley Tariff Act of 1930 plunged the U.S. even deeper into the Great Depression.

If the administration makes good on its tariffs proposals, the fiscal irresponsibility of the recent tax cut bill ($1.5 trillion in added debt) and the recent spending bill (which added $500 billion more in debt) will come home to roost during the current administration with increased interest rates, increased unemployment and a staggering recession.

The administration argues that the new proposed tariffs are also for national security. Strategically speaking, which one of our trading partners would attack the U.S. while owning trillions of dollars of U.S. real estate, stocks and bonds? That these partners have found investment opportunities in the U.S. that dominate what they could earn in their own economies means that they are invested in the future of America. Even if we pick one aggressor who is not invested in U.S., its trading partners certainly are. It is a networked world economy. Having more foreign investments in the U.S. should lessen the risks of war.

The administration’s cable news presentations of soup cans do not change economic history and cannot change economic realities. Choking off one part of a network will wreak damage to all who are part of the network — allies and foes alike. The proposed tariffs should be dead on arrival. Let’s have larger trade deficits instead. Our trade partners are invested with us.

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The Conference Board of Canada’s Chief Economist Craig Alexander believes the Canadian economic growth cooled off in the second half of 2017 and “softened” heading into this year, which could compound the risks created by US trade and tax policy, according to a press release.

The pace of economic growth in 2018 will likely struggle to achieve two per cent and the pace of job creation is expected to be modest.

Canada experienced strong economic growth in 2017 for the year as a whole, but the pace of expansion slowed considerably in the second half.

Real GDP grew at an annualized pace of 1.7 per cent in the fourth quarter of 2017, a result below market expectations for a gain of 2.0 per cent and well below the 2.5 per cent the Bank of Canada forecast in the January Monetary Policy Report.

Meanwhile, the Canadian economy faces future downside risks from U.S. trade protectionism, difficult NAFTA trade talks, and competitive challenges from lower U.S. corporate tax rates. These factors are likely to make the Bank of Canada cautious in delivering further rate hikes.

“Canada posted three per cent growth in 2017, the strongest in the G7. However, the pace of expansion lost momentum in the second half of the year and entered 2018 on a soft note,” said Alexander.

“This cooling in Canadian growth comes at a time when there are a host of downside risks to the domestic economy from abroad, particularly U.S. trade and tax policy.”

It is encouraging that business investment delivered a strong increase of 9.5 per cent in the fourth quarter, with broad-based gains in machinery and equipment, residential and non-residential investment, according to Alexander.

However, the details raise questions about the sustainability of the gains. For example, some of the strength in real estate activity reflected increased resale activity in advance of new mortgage regulations.

Meanwhile, machinery and equipment rose primarily because of outlays on aircraft and transportation equipment, areas that tend to be very volatile. Real exports increased by 3.0 per cent, but this fell well short of a 6.3 per cent increase in imports.

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On Monday, Canadian Big Oil released the first of seven “economic reports” outlining industry’s public policy issues and its “four-part vision for the oil and natural gas sector that creates jobs for Canadians and national prosperity.” Frankly, the Canadian Association of Petroleum Producers needs to try harder. This isn’t so much a report or vision as a laundry list of complaints tarted up in a glossy brochure.

What this document does make clear is that CAPP really, really doesn’t like the current Canadian approach to energy development.

CAPP presumably does like American President Donald Trump’s “Energy Dominance Doctrine,” which mostly consists of federal deregulation, enormous tax reductions, and every scrap of support the Administration can provide for the oil and gas sector, which is beginning an enormous bull run that has already made the US the most powerful energy nation on the planet – and the envy of every Canadian energy executive.

The new report doesn’t mention Trump by name, but it doesn’t have to.

When one of the four points of the proposed vision is, “Any climate plan must be comparable to other jurisdictions competing for the same global capital,” and then goes on to say that the US has become Canada’s “No. 1 energy
competitor,” it’s not hard to do the math.

The United States is where Canadian oil and gas companies get a lot of their annual $20 billion-plus capital from American investors and there have always been strong ties between Texas, the epicentre of the American industry, and Calgary.

The problem with this document is that the Canadian industry does have legitimate complaints, like an overloaded pipeline system that is the principal cause of low prices for Canadian producers even while world prices are well over $60/b, that need to be addressed in short order.

Impediments to market access are costing oil producers a lot of money and should be CAPP’s highest priority.

Ben Dachis of the CD Howe Institute examined the policy costs a representative producing well would face in various jurisdictions within North America. His findings were instructive.

“Canadian energy producers are at a competitive disadvantage relative to producers in the United States. Much attention has been paid to carbon taxes, but a lack of market access for oil and taxes on investment – not emissions prices – are the main policy-induced competitiveness problems for conventional energy producers in Western Canada,” said Dachis.

Industry saw the differential between US oil prices and those received by Canadian producers widen from its historic $10 to $15 level to over $35/b after the Nov. shutdown of the Keystone pipeline after a leak.

I interviewed Dachis about his research and asked him to rank the top five policy-induced costs for Canadian producers. Number one was obviously pipelines, by a long shot.

Number two would be corporate income taxes, number three would be royalties, and number four would be [municipal] property taxes. 

“Number five would be emissions taxes. A distant five,” he said.

Then why the obsession with climate policies, like carbon tax?

“When it comes to a price on carbon … we really stand alone,” he said. “If you look at the world’s top 10 energy producers, none of them have a price on carbon,” CAPP President Tim McMillan said at the Ottawa press conference to release the “vision,” as reported by the Financial Post.

“If we put policies here that are so inconsistent with our competitors, we will achieve nothing other than loss of jobs and investment in Canada, only to see that production increase in Iran and Venezuela and Saudi Arabia. We are not talking about what could happen, we are talking about what is happening.”

McMillan conveniently ignores that production in Venezuela has declined dramatically as its national economy implodes and the Saudis have cut back as part of the pact with OPEC and Russia to rebalance global oil markets. So, no, we are not talking about what “is happening.”

Is CAPP arguing for no carbon pricing? asks Dennis McConaghy, a former vice-president of TransCanada Pipelines and author of “Dysfunction: Canada after Keystone XL,” and an advocate for carbon pricing.

“What CAPP should have done is accept unequivocally carbon pricing as the sole instrument for Canadian carbon policy, but insist that the stringency of that carbon pricing over time cannot be higher than the carbon price imposed directly or indirectly by Canada’s major trading partners,” McConaghy said in an email.

“And to be blunt about that formulation, it distills down to the US.”

Ed Hirs is an energy economist with the University of Houston and the managing director of Hillhouse Resources, an oil and gas producer. He brings both an academic and industry perspective to carbon pricing, which he studies within the American context.

While there is no national US carbon tax, dozens of states already have cap-and-trade carbon pricing regimes in place, he says, and more are likely in the coming years.

At this point, the American focus is on lowering the carbon-intensity of regional electrical grids and much less on pricing carbon for the upstream and midstream oil and gas sectors, which mostly produce light sweet crude oil with relatively low greenhouse gas emissions.

But some states, like California, are regulating the carbon-intensity of gasoline and diesel by requiring refineries to blend light sweet crude oil with heavy crudes to meet a state-defined carbon-intensity benchmark, which declines over time.

Hirs point out that even though the United States is taking a very different approach to carbon pricing, that doesn’t mean there is no carbon pricing.

But Hirs does agree with CAPP that, in theory, Canadian carbon pricing could affect Canadian access to capital.

“To the extent that the carbon price reduces the rate of return for Canadian producers, that will be factored in just like any other cost, and if the carbon tax causes diminished returns relative to shale plays like the Bakken or the Permian or the Gulf Coast, then we will expect to see less capital flowing to the Canadian industry,” he said in an interview.

This is essentially CAPP’s argument.

“Canada is falling behind other countries in attracting oil and natural gas investment to create job and national prosperity for Canadians,” CAPP president Tim McMillan said in a press release.

But the key qualifier for Hirs is “to the extent.” If Dachis is right, and carbon pricing of emissions is a trivial cost to Canadian producers, then CAPP’s argument is weak and we should expect to see Alberta-based companies continuing to invest.

Suncor CEO Steve Williams illustrates how the Canadian industry tries to have it cake and eat it, too.

Just a few weeks ago, he was in the news saying that Suncor was “having to look at Canada quite hard. The cumulative impact of regulation and higher taxation than other jurisdictions is making Canada a more difficult jurisdiction to allocate capital in.”

“Absent some changes and some improvement in competition, you’re going to see us not exercising the very big capital projects that we’ve just finished,” he told the Financial Post.

Ok, then how does Williams explain Suncor’s decision, as reported Tuesday in Energi News, to spend $920 million to buy another five per cent of Syncrude? Suncor acquired a controlling interest in Syncrude in 2016 following a hostile takeover.

The same press release announced an application will be submitted to the Alberta Energy Regulator for the 160,000 b/d Lewis in situ project, which will no doubt cost many billions.

And last year, Cenovus and CNRL paid a combined total of over $32 billion for oil sands assets from departing majors, financed in part by capital raised in the market.

Can we blame those energy ministers for raising a skeptical eyebrow at CAPP’s claims the Canadian industry is having trouble raising capital when the big oil sands producers seem to be drowning in it?

What about companies that aren’t drowning in capital?

Natural gas producers, for instance, are struggling with historically low prices and are trying to fend off the low-cost American shale gas companies from encroaching on their traditional markets in Eastern Canada.

These companies are legitimately struggling with increased costs, including regulatory compliance.

And what about juniors, once the backbone of the industry? The old model of a management team raising a few million bucks from family and friends, developing some leases, and eventually selling out at a healthy profit for all concerned is almost dead, replaced by medium-sized companies that need scale to secure financing and capital.

“Scale matters and is of strategic importance,” says Kevin Birn of IHS MarkIt. One can imagine these companies are probably having trouble accessing capital at reasonable rates.

The problem with CAPP’s report is that it treats all issues as equally a problem and doesn’t differentiate between those industry players that are genuinely suffering from policy-induced non-competitiveness and those that are not.

CAPP would be better served to spend less on shiny marketing materials and more on policy analysts capable of crafting recommendations Canadian policymakers can work with.

CAPP can expect a sour response from energy ministers in Edmonton and Ottawa if it doesn’t do a better job over the next six reports. The Trumpian model of deregulation, no national carbon pricing regime, and low taxes is not the Canadian model.

If CAPP’s strategy is to tough it out and hope Jason Kenney and the United Conservative Party replace Rachel Notley and the NDP in 2019, then industry is gambling that the Canadian government’s carbon price and environmental regulations would be less onerous than Alberta’s.

I wouldn’t take that bet.

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When the Canada-US free trade agreement was negotiated almost 30 years ago, many Canadians worried that deepening our country’s economic relationship with the world’s largest economy might make us too vulnerable to the vagaries of American politics. With the election of Donald Trump last year, and his promises to rip up NAFTA – or at the very least negotiate a much better deal for the US – those concerns are front and centre as the two countries and Mexico finished the fourth round of negotiations late last week in Virginia.

I sat down with Carlo Dade, director of the Trade & Investment Centre for the CanadaWest Foundation, to discuss the key issues for Canada, Alberta, and British Columbia.

Bottom line? Yes, abrogating or gutting NAFTA will hurt. But it may not hurt as much as it could because NAFTA incorporates other trade treaties that would come back into effect. Those agreements may not be as beneficial to Canada as NAFTA, but the consequence of no NAFTA is not chaos.

Despite the hand-wringing over the volatility of President Trump, according to Article 1, section 8 of the U.S. Constitution, Congress, not Trump sets trade negotiating priorities. and Congress, not Trump, will determine the fate of NAFTA.

The Trade Promotion Authority (TPA) process is the most critical element of the negotiation. This is how the House Ways and Means and Senate Finance committees set negotiating priorities and give negotiating instructions to the administration.

This is not a “one and done” process – these committees will constantly be looking over the administration’s shoulder and reviewing progress during the negotiations.

The TPA mandates specific timelines for action. These timelines interact with elections in the U.S. and Mexico, introducing domestic political influences that will significantly affect negotiations in Mexico and the U.S. but not in Canada.

Dairy will be a key issue for Canada in NAFTA talks. New polling shows that Canadians are willing to put dairy and supply management on the table in exchange for concessions in other areas.

By Carlo Dade, CanadaWest Foundation

With 76 per cent of Canadian goods exports (2016) and more than half our service exports (55 per cent in 2016) sent to the U.S., any disruption in our relationship with our largest trade partner would have serious consequences. While Trump’s bluster appears to be a negotiating ploy, it’s worth considering potential ramifications.

Scrapping NAFTA is not as easy as it sounds. Many scenarios could unfold. The four below cover the range of possible outcomes. The bottom line is that under any scenario, a Trump withdrawal from NAFTA is likely to turn into a legal and political mess.

Four scenarios for the U.S. terminating NAFTA

1) The President tries to end the deal but Congress doesn’t agree
NAFTA text is clear that any signatory may leave the pact after giving the other members six months notice of intent to withdraw from the agreement. But there are various opinions in the U.S. as to what would happen if a president unilaterally terminates a trade deal. The U.S. Congress passed legislation authorizing then-President Clinton to enter into NAFTA and integrate the measures into U.S. law. Congress also gave the president authority to withdraw from trade agreements – although it’s unclear that this is Constitutional. Under the U.S. Constitution’s commerce clause, Congress has the sole power to regulate foreign trade. If President Trump terminates NAFTA on his own, there would likely be a legal challenge that would quickly wind up in the Supreme Court. And many congressional Republicans, like Senate Leader Mitch McConnell, support NAFTA. Congress could also attempt to block funding for activities needed to carry out the withdrawal.

2) President and Congress agree to pull out of NAFTA, CUSFTA kicks in
If the president could get congressional approval to leave NAFTA, the deal’s predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), would kick into place. NAFTA essentially rolled over the tariff eliminations made in the CUSFTA with added provisions for trade with Mexico, so there would be little tariff-related change in the Canada-U.S. trade relationship under CUSFTA vs. NAFTA. In this scenario, NAFTA would continue to exist between Canada and Mexico.

3) The U.S. withdraws from both NAFTA and CUSFTA, WTO trade rules govern trade
If the U.S. withdrew from NAFTA, it probably wouldn’t want essentially the same measures to continue governing its trade with Canada, under the CUSFTA. (Although it might, since a lot of its NAFTA concerns, like job losses, are directed at Mexico.) If the U.S. also broke the CUSFTA, then Word Trade Organization (WTO) most favoured nation (MFN) tariff rules would govern Canada-U.S. trade. The U.S. MFN average tariff in 2016 was 3.5 per cent (some goods have a WTO MFN of zero percent). NAFTA would continue to exist between Canada and Mexico.

4) The U.S. withdraws from both NAFTA and CUSFTA, imposes tariffs higher than WTO levels
It is possible the U.S. would impose tariffs higher than the WTO most-favoured-nation levels if it withdrew from NAFTA/CUSFTA. While WTO member countries agreed to reduce tariffs through the Uruguay Round Agreements of the late 1980s/early 1990s, the tariff reductions are not legally binding.

Despite the Constitution’s commerce clause, other U.S. laws give the president authority to impose tariffs during national emergencies and times of war. President Trump has mused about imposing 35 per cent tariffs on imports from companies that move operations out of the U.S., placing a 20 per cent tariff on imports from Mexico to fund construction of a border wall, and proposed a 45 per cent tariff on imports from China. It is unlikely the U.S. would impose tariffs this high on Canada, but it is possible we could face something higher than the 3.5 per cent average WTO MFN, or the 4 per cent average tariffs in place before the CUSFTA was implemented. If the U.S. imposed higher than MFN tariffs, Canada (and Mexico) may decide to retaliate, causing tariff escalation. It is also possible a U.S. withdrawal from NAFTA/CUSFTA would be combined with trade action against other countries, which could have trickle-down impacts on Canadian supply chains.

While it seems both legally and logistically difficult for the U.S. to withdraw from NAFTA, nothing should be taken for granted. It is worth considering the impact on western Canada’s merchandise trade with the U.S. under the scenarios above.

What trade data tells us about how the West would fare

The western provinces have varying levels of reliance on trade with the U.S. In 2016, 86 per cent of Alberta’s total exports were sent to the U.S. About half of B.C. and Saskatchewan’s exports go to the U.S., 53 per cent and 48 per cent respectively last year. Manitoba shipped 67 per cent of total goods exports to the U.S. in 2016.

The following charts show the top 10 merchandise exports to the U.S. for each western province by six-digit HS code, the most granular trade data publicly available. The corresponding tariff under the NAFTA, the CUSFTA and the WTO’s MFN give an idea of tariff barriers western goods exports would face if the U.S. broke both its trade deals with Canada.

This blog post originally appeared on the CanadaWest Foundation site as Analysis: How Trump’s threat to scrap NAFTA could unfold (and what it means for western Canada) on Oct. 11, 2017.

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Pipelines are full, which would mean more oil-by-rail to US Gulf Coast refineries

Global heavy crude oil markets are already tight because of OPEC cutbacks and potential sanctions against Venezuela by the United States could make them even tighter, opening new market opportunities for Alberta oil sands producers with refiners in the Gulf Coast region.

The Trump Administration is considering wide-ranging sanctions against Venezuela as Latin America countries protest President Nicolas Maduro’s plan to create a “constituent assembly” that could effectively make him a dictator. Sanctions could include an outright ban on oil imports by the US. But prohibiting any transactions in US currency by state-run oil firm PDVSA would be most crippling because importers would find it very difficult to do business with Venezuela, according to Reuters.

Either option could work to Alberta’s advantage, says Kevin Birn, director of the Oil Sands Dialogue, IHS MarkIt.

“The United States remains one of the largest oil import market in the world and the largest market for heavy oil,” Birn said in response to emailed questions. “Refiners that have made significant investments to consume heavy oil will seek to consume those crudes to maximize their profits—any contraction in Venezuelan supply could catch those facilities out and hinder their operations.”

The US imports between 700,000 b/d and 800,000 b/d of crude oil from Venezuela into the Gulf Coast.  Total Gulf Coast imports are around three to 3.2 million b/d.

“This is significant.  This crude oil is predominately of similar quality as Canadian heavy oil and competes for refining space in the USGC,” says Birn.

The short answer is that Venezuela sanctions would be positive for Canadian heavy oil grades Western Canada Select and Synthetic Crude Oil, according to Robert Skinner, executive fellow, The School of Public Policy, University of Calgary.

Canadian exports to the Gulf Coast have been increasing because most of the 1.8 million b/d cut from OPEC’s production was heavy crude oil.

“Most recent data from the US Energy Information Agency shows Canadian imports to USGC have breached 400,000 b/d,” according to Birn.

“In the event of an restriction on Venezuelan imports, those heavy refiners will need to secure alternative heavy oil. This may result in stronger demand for Canadian heavy and consequently higher prices (and tighter light-heavy differentials)—benefiting Canadian and other heavy producers.”

Ed Hirs, an economist with the University of Houston, says the Venezuela oil is most likely shipped to the CITGO refinery, which is owned by Venezuela and mortgaged to Russian oil companies.

“The sanctions will stop that oil from coming into the US and likely cause a bit of a headache for Venezuela and CITGO as the supply stream changes.  CITGO may have to pay real cash for its new source of supply,” he said in an email.

Hirs thinks it most likely that traders in the physical market will execute swaps, which will just cost Venezuela additional margin, saving the financially trouble country from having to pay cash.

“Of course, the crude from Canada can be a substitute for the Venezuelan crude at CITGO as are the various heavy crudes available from Saudi Arabia and other producers.  It will all work down to price,” said Hirs.

Alberta heavy production comes from the oil sands, which has a long lead time and flat production profile – arguably some of the least responsive oil supply on the global market, says Birn.

“Oil sands supply doesn’t increase rapidly, but it doesn’t decline, either. For refiners this is an attractive characteristic, making Canadian supply predictable and stable, a stark contrasts to the current situation in Venezuela.”

Oil sands output is expected to grow by over 200,000 b/d this year because of projects approved before the late 2014 price collapse. If the Gulf Coast emerges as a market for the extra crude, getting product to customers may be a challenge for Canadian companies.

“Pipeline capacity remains constrained and given anticipated supply growth out of Western Canada, more movements of crude-by-rail should be expected.  Greater movements of crude-by-rail will likely come at a greater cost, but we are also seeing strong demand for Canadian heavy in the USGC already which has led to remarkably tight differentials,” potentially offsetting higher transport costs, says Birn.

“Further restrictions in heavy crude oil availability in the USGC could help exacerbate this situation – to the benefit of Canadian producers.”

Growing American shale oil won’t be a competitive issue for Alberta producers, according to Birn.

“Although oil sands and tight [shale] oil may compete for capital, they are largely complementary from a market perspective, with the oil sands producing predominately a heavy sour crude, and tight a light sweet crude,” he said.

“Tight oil has had a pronounced impact on US imports of light sweet crude, while US imports of heavy crude have remained largely intact.”

According to Reuters, financial restrictions against Maduro’s government have been “raised repeatedly” in recent White House discussions, a senior American official, who spoke on condition of anonymity, and added that no final decisions have been made.

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A new public opinion poll shows that 84 per cent of Canadians think President Donald Trump made a mistake exiting the Paris Climate Accord, and the same percentage want Canada to remain committed to the international agreement to fight climate change. Part of the reason Canadians feel that way is they understand and support the gradual transition from fossil fuels to clean energy technologies.

Even Canadian Conservatives, usually staunch supporters of the reality star president, “are convinced that Trump’s decision was unwise (61%) and that Canada should stay in the deal (62%),” according to Abacus Data.

And that includes a majority of Conservative respondents – 53 per cent –  in Alberta and Saskatchewan, usually the least likely to support climate mitigation policies.

“There are few Donald Trump fans in Canada and his decision to pull the United States out of the Paris Accord on climate change did very little to gain new ones,” says David Coletto, Abacus CEO.

“The overwhelming majority in Canada think it was a bad decision and a similar number think Canada to should press ahead and remain committed to the Accord.”

Trump is so reviled by Canadians that his decision to exit the Paris accord probably forced new Conservative Party leader Andrew Scheer to reverse course and endorse the agreement, according to Anderson.

“Donald Trump, while intending to do the opposite, has possibly done more to galvanize support for climate action than his predecessors in the White House,” says Bruce Anderson, Abacus Data chairman.

But Canadian support for the Paris Accord has deeper roots than just distaste for the American one-man political circus.

Coletto and Anderson argue that “possibly the most important finding in this survey is the growing feeling among Canadians, including many Conservatives and Albertans, that an energy transition is not only good for the environment but probably sensible economic strategy too.”

As a journalist who has reported and written about the Energy Transition for the past five years, that conclusion feels right to me.

The tide is turning for Canadian attitudes about energy. I see it on my social media accounts every day, where the attacks from Energy Transition-denying conservatives are declining and more moderates and political centrists are embracing the idea that as new energy technologies mature and gain marketshare over the course of 50 to 75 years, the global economy will wean itself off fossil fuels.

The spread of this view in Alberta and Saskatchewan is good news, especially for the Alberta-based oil and gas industry.

Why? Because previous Abacus polling demonstrates that Canadians are overwhelmingly willing to support new energy infrastructure projects – like Kinder Morgan’s Trans Mountain Expansion pipeline from Alberta to the West Coast – if governments offset more oil production with climate mitigation policies.

Pipelines (and other energy stuff) for greenhouse gas emission reductions – that is the new social contract that is shaping Canadian energy policy and politics.

Industry groups like the Canadian Assoc. of Petroleum Producers and the Canadian Energy Pipelines Assoc. can use the new energy politics to their advantage in markets like Vancouver, where the political culture is 180 degrees opposite that in Calgary.

The essence of the Energy Transition argument is that oil may not be forever, but while the new technologies are taking hold, which most economists agree will be a lengthy process, Alberta has the moral and legal right to sell its product on international markets and to get that product to tidewater.

Conversely, as long as Alberta is implementing GHG reduction policies like the oil sands emissions cap and fugitive methane emissions reductions, British Columbia has the moral and legal obligation to accede to – if not outright support – the Trans Mountain Expansion project, construction scheduled to begin this Sept.

Decarbonization of existing energy systems while developing clean energy technologies is the grand tradeoff of the Paris Climate Accord.

By rejecting the Accord, Trump is ironically helping solidify support for the Accord – and the Energy Transition and acceptance that oil and gas will be with us for decades yet – in other countries like Canada.

“Trump probably did more to mobilize action for action on climate change in opposing the Accord than any international leader could have done arguing in favour of it,” concludes Coletto.

Carry on, Donald Trump, you magnificent orange bull in a political china shop. Who could have guessed that your staggering incompetence as the so-called Leader of the Free World would stampede Canadians into supporting an international agreement that both builds support for climate mitigation and helps build political legitimacy for the Alberta oil and gas industry?

Survey methodology

Conducted online with 1,518 Canadians aged 18 and over from June 2 to 5, 2017. A random sample of panelists was invited to complete the survey from a large representative panel of over 500,000 Canadians. The Marketing Research and Intelligence Association policy limits statements about margins of sampling error for most online surveys. The margin of error for a comparable probability-based random sample of 1,518 is +/- 2.6%, 19 times out of 20. The data were weighted according to census data to ensure that the sample matched Canada’s population according to age, gender, educational attainment, and region. Totals may not add up to 100 due to rounding.

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