Natural Gaslighting: the Canada-Alberta Pipeline MOU is Built on a Blatant Pack of Lies

Since 2014, Canada and Alberta together have faced two historic disruptions in oil prices - one low, one high - that were driven entirely by Saudi Arabia and OPEC.

Last week, with some fanfare, the Government of Canada and Prime Minister Mark Carney signed an MOU with Alberta Premier Danielle Smith, which commits to building a pipeline from landlocked Alberta, through the province next door, to the BC coast. This is being presented as a moment of national healing for Canada, with one oil industry lobbyist, Heather Exner-Pirot, gushing that perhaps this would “end Western Alienation”.

As for Danielle, Smith, she effused to the Annual General Meeting of her party, the UCP that

“This complete turnaround of Canadian policy direction and public opinion was unthinkable just a few short years ago,” she told the crowd.

“No one thought it was possible; no one, except right here in Alberta, where we know that all things are indeed possible.”

Smith drew some applause while listing what she saw as the benefits of the deal: a suspension of federal net-zero power regulations, potential exemptions to the West Coast tanker ban, and the non-implementation of the federal emissions cap, which the province has described as a de facto production cap.

“Now, I know full well that so many of you here tonight have been justifiably, like me, frustrated and angry with Ottawa. Trust me. I get it. We have been abused and taken for granted repeatedly over past decade,” she said.

Smith called on members to lower their fists and roll-up their sleeves for what she said could be the beginning of a new relationship with Ottawa.

“Let us not throw in the towel and give up on our country just as the battle has turned in our favour and victory is in sight,” she said.

First, I agree wholeheartedly that lots of people in Alberta and Saskatchewan and workers in Canada’s oil industry have suffered terribly at least since 2014, but the idea that Alberta was abused or taken for granted - or that the federal government is to blame at all - requires ignoring two massive global events of historic significance.

Smith’s entire narrative that the Federal government “abused” and “took Alberta for granted” is built on a pack of blatant lies, because what happened to Alberta - and Canada’s oil industry - had nothing to do with the Canadian government of any stripe: it’s not the Canadian government that was to blame.

In 2014, Saudi Arabia Launched a global oil price war that crashed the price of oil by 70%

In 2014, OPEC - Saudi Arabia in particular - decided to launch a price war.

This Vox article from November 28, 2014 shows how the price of oil dropped off a cliff. The impact was swift and devastating, in ways that have never really been fully appreciated.

It came as a total shock. The price of oil had been over $100 a barrel for several years, and no one could imagine it going down. To give you an idea of how much money was flowing into Canada, the economy of the Province of Alberta was growing faster than China was.

Many people in the oil patch experienced a Depression that blew a hole in their economy and their lives.

People and businesses went bankrupt, provincial governments cut back, and hundreds of billions of dollars in investments were cancelled because they were being built for $100 a barrel oil, for years into the future.

To show just how unexpected this was - and how the Canadian Government did not expect it to last, this is a chart from Canadian Business in September, 2015, showing that year’s Federal Budget oil Price projection (in red) which was that oil would go back near $80 a barrel. The futures market was under $70.

The reality ended up being much worse: oil went below $50.

Oil Patch Depression: When a Boom Ends, the Debt Deflation is Crushing

Banks were also caught by surprise. The boom drove up the cost of everything - wages, real estate, you name it. They were writing plenty of very big mortgages thinking that the oilfields worker would keep making $150K+ for years to come. That meant that people were left “underwater” on their houses - no job, huge mortgage, and if you sell you have no house and you still have debt.

A lot of people in the oilpatch suffered through the kind of bad times that are associated with Depressions.

Not only that, but the benefits of the boom, when it happened were overwhelmingly flowing to the top in Alberta.

Some of that is the nature of Alberta’s trickle-down-on-steroids politics, and some of it is the structural nature of the business itself: oil is capital intensive, not labour intensive.

• Even before the crash, a 2013 study by the City of Edmonton’s Economist suggested that “Adjusted for inflation, wages for 99 per cent of Edmonton residents haven’t increased one bit over the last 30 years” and that “In Calgary, wages have actually declined. The vast majority of people in Calgary can buy less with their paycheque today than they could in 1982.”

• During the boom, the top 10% of the population was earning 50% of the income. In Alberta, 139,000 people, or 7.1% of the population work directly in the oil industry. In turn, they produce 25% of that province’s GDP, 33% of the provincial government’s annual revenues, and 50% of the province’s exports. Alberta’s economy grew quickly after 2000 because the price of oil increased, but between between 2000 and 2009 (though this includes a sharp recession after 2008) Canada as a whole lost 500,000 manufacturing jobs.

The oil industry has an incredible capacity to generate wealth: but it doesn’t spread it as well as other kinds of businesses.

This next chart shows 30 years of historic events affecting the price of oil and gas in Canada, from the Government of Canada’s page about 30 years of crude oil prices. Labelled “OPEC Fights for Market share, you can see the incredibly sharp drop-off starting in 2014, the year before Trudeau was elected. The price of oil started going up steadily in 2002, and though there was a mighty drop during the global financial crisis, it picked back up and went to over $100 a barrel for about five years. So people in the oil patch had been seeing prices go steadily higher for more than a decade.

What this chart demonstrates, in very clear terms, are the direct impacts that conflicts and political events have on the price of energy, which is included in inflation. It’s not government spending money, and it’s not taxes.

The fact that politicians, think tanks and the media are all, apparently, unaware of this historic and seismic event in Canada is because rather than deal with reality, there was a deliberate political propaganda campaign to blame the new, Liberal federal government for everything, which is largely driven by oil companies and the politicians and think tanks they fund.

This OPEC-crafted crash is the reason for the crisis, not the Federal Government.

The economic pain and devastation was real: however, in the last ten years, Alberta and Canadian oil companies also experienced the highest profit levels in history.

In 2021-22, OPEC restricted production, driving Global and Canadian oil prices and profits to the highest levels in history

In May 2024, the Federal Trade Commission allowed Exxon a merger but barred a U.S. oil executive, Scott Sheffield, from sitting on the board, because of evidence that in hundreds of private text messages as well as in public statements, had worked with OPEC to keep the global price of oil high.

The way they did so was by sharing information to and not embarking on new investments in production.

The result were the highest oil industry profits in history, including in Canada: the result was

• A huge jump in inflation for all consumers.

• No new hiring or investment in production

• Massive payouts to shareholders and bondholders

Matt Stoller calculated that the oil price fixing efforts accounted for all of “27% of All Inflation Increases in 2021” in the U.S.

In late 2021, I noticed that the increase in corporate profits in aggregate was responsible for 60% of inflationary increases, using this chart and doing a bunch of rough calculations that have since mostly been borne out. The jump in profits in 2021 was about $730 billion, or $2,100 per person.

How do you aggregate just the oil industry? Well, it’s pretty clear that in 2021 and 2022, the industry did fantastically well, with the “the top 25 companies [making] more than $205 billion in profits in 2021,” and an “even more astounding” amount in 2022. Of course, not all profits are due to price-fixing, but $205 billion is just the top 25, not the whole industry. And profits got much much better the next year.

In Canada the same pattern happened.

And from Statistics Canada:

In 2021, oil prices reached their highest level since 2015. As a result, the industry looked to recover the losses that were incurred during the COVID-19 pandemic. Total gross revenue in the oil and gas extraction industry increased 85.7% to $174.0 billion in 2021 from $93.7 billion in 2020. According to the Raw materials price index, the price of crude oil and bitumen increased by 70.8% from 2020, while the price of natural gas increased by 15.8%. Total production for crude oil rose by 6.2%, while total natural gas production increased by 3.9%.

In 2022, total revenue for the Canadian oil and gas extraction industry rose 53.6% to $269.9 billion, following an 87.5% increase in 2021. The 2022 increase was attributable to increased economic activity and increased demand for energy products.

According to the Raw materials price index, the price of crude oil and bitumen in 2022 increased by 49.0% from 2021, while the price of natural gas increased by 25.6%. Total production for crude oil rose by 2.3% in 2022, while total natural gas production increased by 7.3%.

From a CBC report August, 2022

In January, the oilpatch was expected to produce record-high after-tax cash flow of $99 billion this year, according to a report by the ARC Energy Research Institute. That same organization is now expecting the Canadian oilpatch to rake in $147 billion.

During the latest quarterly earnings, Imperial Oil posted a $2.4 billion profit, which was a six-fold increase compared to the same three-month period a year ago. Suncor Energy had a $4 billion profit, which was a four-fold increase. Cenovus Energy and Canadian Natural Resources both also collected billions in profit too.

This is biblical, what’s happening- Canoe Financial’s Rafi Tahmazian

“Suncor, CNRL, Cenovus — wow. Big, big windfall,” said Rafi Tahmazian, a senior portfolio manager at Canoe Financial in Calgary.

“Imagine a bank machine that’s broken and it’s spitting out $100 bills and there’s not enough people to pick them up and there’s $100 bills gathering on the ground. This is how profitable these businesses are right now,” he said.

Companies did not invest in new production, and chose to reward shareholders instead, as this article reports:

The industry currently faces a bit of a conundrum, said Jeremy McCrea, managing director of energy research with financial services firm Raymond James: The world’s energy consumption is rising, but companies are reluctant to ramp up spending to dramatically boost oil and natural gas production.

There are many ways the sector could spend those hefty returns, but so far companies seem unwilling to waver from their primary strategy of paying down debt and passing on a good chunk of those profits to shareholders.

It’s also important to note, that contrary to what you might think, Alberta is producing and selling much more oil than it used to. The industry is moving to mechanization and automation: vehicles that used to have human drivers are now automated, but the provincial government itself also keeps cutting taxes, royalties and spending.

Saudi Arabia and OPEC’s Financial Manipulations and Assaults on North American Oil Production Were Historic in Scale, and So Has Been the Harm

When you consider the impacts of the two huge interventions in the oil market by Saudi Arabia and OPEC - crashing the market in 2014, then driving prices sky-high after 2020, both those events were absolutely devastating, with negative impacts around the world in the trillions of dollars. Notably, some of those crashes were at the urging of Donald Trump.

The impacts on these actions - which were global and utterly beyond the control of the Canadian government, no matter what party was in power.

When Saudi Arabia and OPEC are making a sustained effort to bankrupt Canada’s domestic oil industry, that tends to lead to challenges in scraping together financing for a new pipeline.

The fact that the entire discussion around oil and pipelines in Canada is so untethered from reality is beyond cause for concern, on multiple levels.

I’m not anti-oil or anti-pipeline, but I am absolutely anti-bullshit.

And a lot of what I can’t tolerate about the entire Alberta Separatist mentality is that Danielle Smith and others aligned with her have been lying to Albertans and lying to Canadians, and lying to themselves about the real problem here.

When Danielle Smith talks about Albertans being “abused” I find it morally repellent. It’s genuinely a kind of hatemongering. It wasn’t other Canadians attacking Alberta. That’s a colossal, and incredibly harmful lie, and it has gone unchallenged, and because it has been repeated so much, it has shaped public opinion, and fuelled the flames of rage, threats, and separatism.

The reality - which she should know - is that the problem was caused by Saudi Arabia and OPEC in 2014, and again after 2021.

What’s more, it’s not regulations or provinces or Indigenous people in Canada that have been the obstacle to oil and gas development. It’s been the market conditions, distorted by a global oil cartel that sets prices that we are forced to take.

The fact that we are not acknowledging this undeniable fact tells you just how divorced from reality our political debates now are.

The MOU is crafted for one purpose - to juice returns to investors - many of them foreign - at the expense of all Canadians.

This pipeline - which may not even be feasible is supposed to be so valuable that it is in the national interest.

There’s an old question people used to ask - “Who speaks for Canada?”

In this case, who was negotiating for Canada and Canadians’ interests? Because it appears no one was. If a project is in the national interest, it’s because it’s delivering national benefits. That’s not what this agreement does, at all.

It does one thing, and one thing only, which is not maximizing return on investment for Canadians, it is maximizing return for the very small part of the population that is lucky enough to own most of the shares in those oil companies - quite literally, at the expense of everyone else.

Not only does the MOU offers to trample and suppress the democratic rights of millions of Canadians, including First Nations, it is also anti-business, anti-competitive, anti-innovation, anti-efficiency.

For all the complaints about how Norway, a country of about 5-million could create a national sovereign wealth fund than Canada, there are a number of key reasons, which is they did the exact opposite of what Alberta has done, and what Alberta and Canada are proposing.

I wrote about Norway’s experience, and it’s not just taxation: Norway’s entire approach to oil development, and how it avoided the “oil curse” was told in a 2011 interview with NPR’s Planet Money. It was “a feat due in large part to the work of an Iraqi geologist named Farouk Al-Kasim.” Al-Kasim moved to Norway in the 1960s with his Norwegian wife, to seek medical treatment for their child, who had cerebral palsy.

At the time, Norway had discovered oil - but hadn’t announced it yet. Al Karim and a colleague wrote a proposal for how to do it right:

One radical solution aimed at preventing the oil money from destroying Norway’s existing industries: Limit the amount of money the country made from oil in the short term. Don’t drill everything at once.

“It was received with skepticism by the industry, who wanted Norway to go full-speed ahead,” Al-Kasim said.

Despite the industry pushback, Norway handed out just a couple drilling permits a year.

In an even more stunning act of self-restraint, the Norwegians decided not to spend most of the oil money. Instead, they put it in an oil trust fund that’s now worth hundreds of billions of dollars. The government only spends the interest that the fund generates.

In addition, to prevent local inflation and distortion in the Norwegian market, the fund invests outside of Norway.

Reality-Based Policy & the Insolvency Crisis Breaking Canada

Instead of acting like Norway, Alberta and Canada, under a huge amount of influence from Alberta and academics, have pursued policy that is the opposite of Norway’s. Minimum barriers, maximum development.

Carney and Smith are two supposedly “free market” politicians proposing a plan - to have government help enforce a monopoly by making it harder for Canadians to buy energy unless it is oil or natural gas.

Given the most recent budget, this is quite literally the Government of Canada and the Government of Alberta picking and choosing winners and losers in ways that I happen to think are political, economic and democratic malpractice.

Canadians are being told that in order to save Canada and keep Alberta from separating, we just have to permanently agree to weaken our laws and suppress Indigenous rights for a plan that ensures the maximization of oil industry profits, to largely American owners, while suppressing competition and access to other forms energy.

I can’t emphasize strongly enough that policies that aren’t remotely based in reality are doomed to fail.

There is no doubt that Canadians have spent the last decade swamped with political messaging that distorted the the issue. It’s one thing for the general public to be deceived, but there should be experts, policymakers and senior officials including Premiers and the Prime Minister should be able to sift between what’s propaganda and what’s practical.

There’s no denying the seismic global events that have disrupted Canada’s economy - so why are Carney and Smith denying them?

They could always plead ignorance. Ironically, I was on a Liberal Party of Canada policy panel just over a year ago, in November 2024. Carney presented before me. He did more talking than listening, touted AI and energy projects, and sadly left before he could hear my pearls of wisdom.

That warning - which I shared with his campaign, his office and as a submission to the department of finance and Finance Minister - explained exactly the cause of Canada’s oil doldrums.

I also argued that Canada and the world are facing a colossal 1929-esque global asset collapse, which is underway right now. The current waves of job losses are because the global economy is collapsing under the weight of private debt.Among the warnings I delivered to the Liberal Party of Canada a year ago was that the world is in a collossal asset superbubble, being held aloft by AI, and that if the market reverted to the mean (as it tends to do) losses could be in the trillions.

That is another reason why Carney’s diagnosis of the Canadian economy is wrong, and why the budget is a catastrophic failure. The Global Financial Crisis was caused by private debt and mortgages, and so is this crisis. The government is either sitting idle or actively making bankruptcies worse through cuts. The very first piece on this substack was a plea by William White for central banks to change their policy and a warning that normalizing interest rates would crash the global economy.

Money is the one thing that former central bankers like Carney and Rachel Reeves should know about more than just about anyone in the world. Reeves, who is currently ruining the UK economy as Labour’s Finance Minister, were both central bankers at Bank of England. That is the problem. Their economics is 50 years out of date, so they’re feeding the crises they’re supposed to put out. It is sheer economic malpractice.

Carney and Reeves are highly intelligent people. According to their theories, everything they are doing is correct. The issue is that their theories and vision of the economy - are flatly contradicted by civics and the operational statements of central banks.

We are in one of the worst crises in my lifetime, and it is being made immeasurably worse by people clinging in panic to the wreckage of a sinking idea. Not only are there positive alternatives, Canada and CD Howe already did them all in the past, doing the opposite of what Carney is doing.

Bring on the brand new renaissance.

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