Saturday, October 4, 2008

Harper bitumen plan an economic puzzler

This is from the CalgaryHerald.
Actually in this case Harper makes good economic sense. In fact as I recall Ed Stelmach wanted to ban the export of bitumen period. The reason is that it makes much more economic sense for the province to have value added production by processing the bitumen in Alberta than exporting it to other countries such as the US which then gains the profits from the value added production. However, the US is already a big importer of bitumen and will import even more in the future as facilities are expanded there so Harper takes the politically astute way out of excluding the US from the ban because the US has as good pollution controls as we do. There might be difficulties under NAFTA if Harper were to ban bitumen exports to the US. For this once at least Harper makes good sense both in terms of political astuteness and economic knowledge. I can't say the same for the Calgary Herald.

Harper bitumen plan an economic puzzler
Deborah Yedlin, Calgary HeraldPublished: Saturday, October 04, 2008
For a guy who says he is an economist, Conservative Leader Stephen Harper seems to be lacking understanding in some very basic economic principles.
Take supply and demand as one example.
Many people understand the connection between the two variables: If supply is greater than demand, prices fall. Conversely, when demand exceeds supply, prices rise to what the market will bear while also taking into account the possibility of product substitution.

Conservative Leader Stephen Harper's bitumen pledge surprised the oilpatch.

If Harper truly has a grasp on this concept, why is it that he is prepared to restrict bitumen exports to countries that are not mindful of their greenhouse gas emissions?
Doesn't this statement fly in the face of his promotion of Canada on the world stage as an energy superpower? Much good the 173 billion barrels will do if Alberta has but one export option -- the United States. Applying the rules of supply and demand in this context results in a solution that points in the direction of a cap being put on bitumen prices.

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