Canada and its partners in the G7 are calling on OPEC for solutions to the growing energy security crisis they say is a “grave concern” for households – particularly low-income households – around the world.
The G7 is made up of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States. It is asking OPEC countries like Saudi Arabia and Iraq to increase oil and gas supply, instead of looking to Canada to accelerate development and export of its own massive resources.
This will only increase reliance on unstable energy suppliers and deprive Canadians of the long-term opportunity to benefit from expanding sales of the world’s most responsibly produced oil and gas. Sales that can help reduce global emissions and meet climate targets.
Here are the facts.
Fact: Everyday costs are rising because of energy supply issues
Russia’s invasion of Ukraine has led to significant price increases on day-to-day essentials like oil and gas, electricity, goods and services and food across the G7 and beyond, according to a joint communiqué issued by climate, energy and environment ministers on May 27.
The same day, Bank of America warned that a further decline in Russian oil production is likely to spark a global recession.
Russia is the world’s third-largest oil producer and second-largest producer of natural gas. The supply disruption caused by its attack on Ukraine has a ripple effect around the globe.
Canadian gasoline prices averaged a record $1.75 per litre this March and remained above $1.73 in April, according to Statistics Canada. In the U.S., consumers on average are paying US$4.59 per gallon, about US$1.57 more than a year ago, according to the U.S. Energy Information Administration (EIA).
The price for natural gas – used for functions including home heating – is also surging. EIA data shows that U.S. benchmark Henry Hub natural gas reached US$6.6 per million btu in April, its highest price in 14 years.
EU government modelling estimates that six million homes could face blackouts this winter should the Russia-Ukraine war continue to escalate, according to The Times.
Fact: This is a long-term problem
Europe was already facing an energy crisis prior to the invasion, in part due to overreliance on wind power when the wind simply wasn’t blowing.
Alternative and renewable energy is playing a growing role in global energy markets, but the reality is these technologies are not yet capable of providing the scale of energy the world needs.
On the world’s current trajectory, 103 million barrels of oil per day will be consumed in 2030 and demand will stay at that level through 2050, according to the International Energy Agency (IEA). Meanwhile, global natural gas consumption will continue increasing over the coming decades, reaching 5.1 billion cubic meters in 2050 compared to 4 million cubic meters in 2020.
The IEA projects that renewable energy will grow to take over more share from higher emitting sources like coal, rising to 26 per cent of world energy supply in 2050 compared to 12 per cent in 2020. But at the same time the share of oil and natural gas is expected to remain about the same, at 50 per cent in 2050 compared to 53 per cent in 2020.
Fact: Canada is the long-term solution
Canada should be the solution as the world looks for reliable energy suppliers while maintaining targets to reduce greenhouse gas emissions..
Oil and gas will still be required for a long time, according to IEA executive director Fatih Birol. He would prefer the supply comes from “good partners” like Canada.
“Canada has been a cornerstone of global energy markets, a reliable partner, for years,” Birol said in January. “We will still need oil and gas for years to come… I prefer that oil is produced by countries… like Canada who want to reduce the emissions of oil and gas.”
Canada ranks number one among the world’s top oil reserve holders for environmental, social and governance (ESG) performance, according to analysis by BMO Capital Markets of independent ratings by the Yale Environmental Performance Index, Social Progress Imperative Index, and World Bank Worldwide Governance Indicators.
ESG measures a variety of metrics including greenhouse gas emissions, water use, Indigenous engagement, worker safety, diversity and inclusion, absence of violence/terrorism, and regulatory processes.
The IEA says that Canadian oil and gas producers are “leveraging their improving environmental, social and governance performance and Canada’s stringent environmental regulations to build a global competitive advantage.”
Fact: Canadian oil and gas can help reduce world emissions
In the oil sands, where most of Canada’s oil comes from, producers are “doing more” to reduce emissions than in other jurisdictions, according to BMO Capital Markets.
Oil sands producers have already achieved success reducing emissions per barrel, or emissions intensity, by 20 per cent since 2009, according to IHS Markit. The consultancy expects total oil sands emissions – not just emissions per barrel – to start going down within the next five years.
And Canadian natural gas will be important to reducing emissions around the world.
Using natural gas instead of coal to fuel power plants reduces emissions by about 50 per cent on average, the IEA says.
Liquefied natural gas (LNG) carried by tanker from Canada can deliver an even bigger decrease, reducing emissions by up to 62 per cent, according to a 2020 study published in the Journal for Cleaner Production.
That’s in part because Canada’s LNG projects are expected to have the lowest emissions intensity – or emissions per unit of LNG – in the world.
The LNG Canada project now under construction, for example, is expected to have emissions of 0.15 per cent CO2 per tonne of LNG, less than half the global average of 0.35 per cent, according to Oxford Energy Institute.
Driven by emerging economies working to get off coal power, global LNG demand is expected to nearly double to cross 700 million tonnes in 2040 compared to 360 million tonnes in 2020, according to Shell’s latest report.
Policy makers in the G7 and around the world should look to Canada to increase oil and gas exports to help meet growing energy demand reliably, safely and responsibly, avoiding situations where energy can be used as a political weapon.
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