Economist Calls Gateway Pipeline an Inflationary 'Threat'
A highly respected Canadian economist says the controversial Northern Gateway Project "poses a serious threat" to Canada's "economic growth and long term development."
In a detailed analysis submitted to the National Energy Board, Robyn Allan, the former president and CEO of the Insurance Corporation of British Columbia, concludes that "Northern Gateway is neither needed nor is in the public interest."
Moreover the project, if built, would raise the price of every oil barrel by $2 to $3 dollars in Canada over the next 30 years, and thereby create an inflationary price shock that would have "a negative and prolonged impact... by reducing output, employment, labour income and government revenues."
Allan's 74-page detailed and highly critical report not only challenges the credibility of Enbridge's controversial proposal but also questions the very rationale for a public hearing
"I assumed that it would be a wealth generating project," the 56-year-old retired investment and financial affairs economist told the Tyee. "But when I started digging none of those assumptions held. The project is an inflationary price shock to the economy."
Allan's blunt conclusions indirectly question the financial competence of both Prime Minister Stephen Harper and Natural Resource Minister Joe Oliver, who have described the Chinese funded $5-billion project as a form of "nation building." They have also dismissed its critics as "foreign radicals."
Allan, once rated by the National Post as one of Canada's top 200 CEOs, says she started to study the economic case for the project after a query by her son. That was when she discovered that Enbridge's economic benefit models were based on "misleading information, faulty methodology, numerous errors and presentation bias."
Moreover, 90 per cent of the project's benefits all come from substantial increases in oil prices. Because the price of oil rises to the top global market, the pipeline would not only raise gasoline prices throughout Western Canada but inflate the price of imported oil for Eastern Canada too.
The input-output models used by Enbridge don't account for economic feedback "or how consumers adjust to rising oil prices."
Becoming 'importers of inflation'
Enbridge, Harper and the Alberta government have long argued the project is needed to secure a higher price for bitumen due to overproduction and a supply glut in U.S. markets.
In fact, even Enbridge's analysis admits that there will be no net benefit to Canada if the project does not secure the so-called "Asian Premium" or a higher crude oil price. But by capturing that premium for crude oil, the project will effectively raise Canadian oil prices for the next 30 years.
"The upshot is that Canadian refinery demand... will have its market price determined as if the transactions for Canadian crude oil supply and demand take in place in the Asian market." (The Chinese government heavily subsidizes the price of oil in its economy.)
As a consequence, the project will raise the price of oil with no commensurate change in production or efficiency; it will enrich a few global oil companies such as Sinopec and it will increase inflationary pressures in Canada for decades.
"Northern Gateway is about a redistribution of income from consumers and business that use oil and oil-based products as inputs, to oil producers... Canadians certainly do not want to irrevocably adopt a crude oil energy strategy whereby, as exporters of oil we become importers of inflation," wrote Allan.
As a result, the project will not build the nation's economy but actually shrink it.
"Higher oil prices mean a decrease in family purchasing power, higher prices for industries who use oil as an input into their production process, high rates of unemployment in non-oil industry related sectors, a decline in real GDP, decline in government revenues, increase in inflation and an increase in interest rates and further appreciation of the Canadian dollar."
1. In a detailed analysis submitted to the National Energy Board, Robyn Allan, the former president and CEO of the Insurance Corporation of British Columbia, concludes that "Northern Gateway is neither needed nor is in the public interest."
Dalam analisis rinci disampaikan kepada Dewan Energi Nasional, Robyn Allan, mantan presiden dan CEO Lembaga Penjamin British Columbia, menyimpulkan bahwa "Gateway Utara yang tidak diperlukan dan tidak pula untuk kepentingan umum."
2. Allan's 74-page detailed and highly critical report not only challenges the credibility of Enbridge's controversial proposal but also questions the very rationale for a public hearing
74-halaman rinci dan sangat kritis Allan laporan tidak hanya menantang kredibilitas usulan kontroversial Enbridge, tetapi juga mempertanyakan alasan sangat untuk audiensi publik.
3. Allan's blunt conclusions indirectly question the financial competence of both Prime Minister Stephen Harper and Natural Resource Minister Joe Oliver, who have described the Chinese funded $5-billion project as a form of "nation building."
Kesimpulan tumpul Allan tidak langsung mempertanyakan kompetensi keuangan kedua Perdana Menteri Stephen Harper dan Menteri Sumberdaya Alam Joe Oliver, yang telah menggambarkan proyek $ 5-miliar Cina didanai sebagai suatu bentuk "pembangunan bangsa." They have also dismissed its critics as "foreign radicals." Mereka juga menolak kritik sebagai "radikal asing."
