Eastern Canada needs an emergency supply of oil to keep homes warm, cars on the road and the economy running if global sources are suddenly shut off in a disaster or political crisis, argues a report released Thursday.
The east would be vulnerable in any temporary shortage lasting even a few months because Canada is the only industrial nation that never created a strategic petroleum reserve, says the report, entitled Freezing in the dark.
Canada also lacks east-west pipelines to ship Alberta's oil farther east than Sarnia.
"Eastern Canadians are vulnerable to global oil supply shocks," said the report, which predicts easterners will likely experience spot shortages.
The country's status as a net exporter of oil "masks an important regional divide" that 90 per cent of the oil consumed in Quebec and Atlantic Canada comes from overseas suppliers and OPEC members as Algeria, Saudi Arabia and Iraq.
The report was written by Gordon Laxer, a University of Alberta economist, and released by the Parkland Institute he heads and by the Polaris Institute of Ottawa.
At a Parliament Hill news conference, Tony Clarke of Polaris said the abundance of oil in Canada and the lack of national energy policy had left the country unprepared.
"This has not become a matter of policy debate the way it should," said Clarke. "This is a matter of national security. We need to recognize it as such. "
Federal Natural Resources Minister Gary Lunn shrugged off the report, starting with the point Canada is a net exporter of oil.
"We're in a very fortunate position and we'll continue to fully meet all of our international obligations," said Lunn, who took just one question before saying he had to run.
The U.S., the European Union and other Western industrialized nations have all created strategic petroleum reserves (SPRs). The U.S. invested heavily in its reserves after the 1973-74 OPEC oil embargo. New legislation in 2005 directed the energy department to top up the reserve to one billion barrels of oil.
The U.S. northeast has its own strategic reserve of home heating oil because of New England's heavy reliance on it. Its 2 million barrels is equal to about 10 days' supply. The northeast's reserve exists in leased oil tanks in different locales in New Jersey and Connecticut.
International guidelines call for SPRs to have 90 days supply of imported oil, which for Canada would mean about 76 million barrels.
The International Energy Agency would already require Canada, one of its 27 member nations, to maintain a strategic reserve except that it only imposes the requirement on net importers of oil.
Yet Norway, like Canada, a net exporter, maintains a reserve.
Eastern Canada needs reserves in southern Ontario, in Quebec and in Atlantic Canada, ideally near a major refinery, said the report.
One could go near Saint John if more study proves that feasible, said Clarke.
Salt caverns near Sarnia that are 600 metres underground have a capacity equal to 300 large oil tanks.
Siting and designing the reserves would require environmental impacts. Creating them would be expensive and filling them would take time, the report acknowledges. It does not estimate the cost.
In the meantime, the report suggests temporary emergency supplies be created.
Many European countries require their oil industries to maintain emergency inventories to a certain level.
The report says eastern Canadian refineries typically have inventories of eight to 21 days supply.
Clarke said that it wouldn't necessarily take some sort of global apocalypse to interrupt supply. The U.S. had to draw on its strategic reserve when Hurricane Katrina extensively damaged oil rigs and refineries in the Gulf states, for example.
Terrorist attacks or embargoes imposed by oil-producing nations could also disrupt supply.
The Iranian revolution of 1978-79, the outbreak of the Iran-Iraq war in 1980- 81, the first Gulf War in 1990-91, the invasion of Iraq in 2003 and Hurricane Katrina in 2005 were all major disruptions in global supply, says the report.
As the world gets closer to peak oil - that point where global supply reaches its zenith - tighter supply might trigger periods of scarcity that a strategic reserve could alleviate, said Clarke.
Both think tanks behind the report are critical of the North American Free Trade Agreement. The report said Canada should re-negotiate a part of the NAFTA deal, which currently prevents Canada from favouring domestic needs over exports to the U.S., even in times of crisis.
Both Irving Oil and the New Brunswick department of energy said they could not comment on the report's recommendations without having seen the report.Telegraph-Journal (New Brunswick)
