Canada has oil, the U.S. needs oil

President Barack Obama at the TransCanada Stillwater pipe yard in Cushing, Oklahoma

The U.S. President released a formal finding that there was enough available oil in the world to allow western countries to mount a boycott of Iranian oil, as a means of dissuading Tehran from pursuing its nuclear ambitions.

It was a crucial ruling and a close-run thing. If western countries want to really put the squeeze on Iran’s ruling zealots, it has to be prepared to be cut off from its oil exports. But a mishandled campaign could just push prices higher, helping Tehran more than it would hurt. Or it could lead to a slowdown in the West just as the U.S. appears to be crawling out of its recession.

The decision depends to a large degree on an assessment of Saudi Arabia’s ability to make up for displaced Iranian oil. The White House believes the Saudis have the capacity, but no one is really sure.  “We won’t know what the Saudis can do until we test it, and we’re about to,” told one official.

Reading that, you have to figure the White House must have been declared an irony-free zone for Prime Minister Stephen Harper’s visit on Monday. Here’s Barack Obama, racking his brain for a way out of the country’s persistent oil dilemma, and next to him is Stephen Harper, who’s dripping in the stuff and eager to sell.

Harper: Mr President, can we discuss the Keystone XL pipeline issue for a moment?

Obama: Not now Stephen, if you don’t kind. I’ve got to figure out this oil supply mess.

The pipeline decision was delayed until after the presidential election so Obama wouldn’t have to offend his environmental supporters while he seeks re-election. None of the excuses offered for the delay holds water: The chosen route for the project through a valuable aquifer was no great threat, the project had passed crucial safety tests, and the area is already criss-crossed by a large network of other pipelines.  It was all about politics.

But the result of the decisions is the quandary now facing the president: The U.S. needs oil one way or another. Whatever the long-range attractions of reducing dependency on fossil fuels, the world isn’t going to switch to biofuels and solar power overnight, and a secure supply of oil will remain crucial for decades to come.

The source of that fuel is critical to the U.S. The problems with Iran are a perfect demonstration of that: in the absence of a friendly, secure, reliable supplier, the U.S. is forced to look to places like Saudi Arabia and Venezuela. After Canada and Mexico, the top suppliers to the U.S. are Saudi Arabia, Venezuela, Nigeria, Angola and Iraq. Not one real democracy in the lot, all of them with serious political and stability issues. and none of them right next door.

Canada, on the other hand, is just across the border, is a close friend and ally of the U.S., and is both ready and eager to ensure a reliable increase in supply. But Washington’s willingness to play games with the Keystone project has only served to increase Ottawa’s awareness of the need to find other customers.

“Look, I’m a strong and firm believer in the economic importance of our relationship, the security importance, and the importance of the United States and the world,” Harper told an audience at the Woodrow Wilson International Center for Scholars.
“But we cannot take this to the point where we are creating risk and significant economic penalty to the Canadian economy.”
“And to not diversify to Asia, when Asia is a growing part of the world, just simply makes no sense.”

He noted that in years past Canada has been willing to itself to the U.S. market. But the Keystone decision demonstrated the danger of this in two ways: the price of Canadian oil suffers because Canada is seen as a “captive supplier” to the U.S.; and Canada’s economic health is put in jeopardy by the fact that the U.S. could some day stop importing the oil.

Mr. Obama could have avoided all this by accepting the self-evident benefit to the U.S. of getting Keystone built as quickly as possible. Instead he’s got to juggle Saudi capacity against Iranian vengefulness, and the long-term implications of  a risky sanctions plan that could blow up in the face of its supporters.

Relying on his friends in Canada would have been so much easier.