05 December 2008

Gold is not money; oil is not gold, but it's not money, either...

We don't know who Steven Harper is beholden to, for the money to make his original leadership campaign run, but is there anyone who wants to argue that there's no oil money involved at all? (Didn't think so.)

Alberta's tar sands oil extraction industry is only profitable when oil is expensive; exact figures are hard to get, but it was generally held that the tar sands would be profitable at about 60 USD a barrel. This turned out not to be the case; if the price of energy goes up, the prices of everything else goes up, and the profit horizon retreats.

Oil is at 46 USD a barrel, and dropping, due in large part to collapsing demand. The actual point of profitability for the tar sands may be around 100 USD a barrel. The majority of the money being made from tar sands development is made via a chain of subsidies.

One of the reasons Harper is frantic right now has to be that he's beholden to somebody to keep those subsidies high.

Any sensible economic policy is going to move away from fossil carbon for energy just as fast as it can, and note that the current effect of the subsidies are to get a lot of perfectly good natural gas burned to melt perfectly good road surfacing material in order to spend a lot of money turning it into oil. This kind of good sense contributes heavily to why so many people appear to hate Dion; it's the sort of thing his economic policy pointed out. It makes no sense to spend money to avoid having to admit fundamental change has happened. It makes less sense to spend money to cause environmental harm while trying to avoid admitting that fundamental change has happened.

This is a big part of what all the screaming is about from the CPC camp. It's not in Canada's interest in any way to subsidize tar sand production, with its attendant massive environmental cost, in order to ship oil to the US. But I'll bet you that's what Steven Harper promised someone on his knees he'd do.

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