Long-Run Effects of the Canadian National Energy Agreements

For the last decade Canadian energy policy and oil pricing policy have been subjects of heated debate, dividing the country into several interest groups. The debate began when the federal government shielded the Canadian consumer from rapid world oil price increases by freezing domestic wellhead pri...

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Bibliographic Details
Published in:The Energy journal (Cambridge, Mass.) Mass.), 1985-01, Vol.6 (1), p.63-77
Main Authors: Schwartz, S. L., Fuller, J. D., Ziemba, W. T.
Format: Article
Language:English
Subjects:
Coal
Consumers
Debates
Economic resources
Energy
Energy policy
Energy resources
Federal government
Financial investments
Fossil fuels
Freezing
Imports
Incentives
Income distribution
Interest groups
Oil prices
Oils & fats
Operating costs
Petroleum
Prices
Pricing
Pricing policies
Research Reports
Subsidies
Supply
Tar sands
Tariffs
Transport costs
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Summary:For the last decade Canadian energy policy and oil pricing policy have been subjects of heated debate, dividing the country into several interest groups. The debate began when the federal government shielded the Canadian consumer from rapid world oil price increases by freezing domestic wellhead prices and subsidizing oil imports. This created a single price for oil across the entire country (except for transportation cost differences). The subsidy was to be paid by an export tax equivalent to the difference between domestic price and the world price. This policy was seen as an immediate response to a short-term problem: either world prices would return to lower levels or domestic prices could slowly adjust to the higher level without creating a price shock. Once a subsidy is established, however, it is hard to withdraw. Industries and consumers that rely on low-cost oil can be expected to lobby for continued subsidies. By observing real costs, moreover, the Canadian subsidy destroyed incentives to conserve costly fuels (e.g., imported oil). And there was no incentive to increase domestic production of such valuable commodities. By intervening, the federal government appeared to take on the responsibility of maintaining a status quo with respect to regional income distribution. Thus the scene was set.
ISSN:0195-6574
1944-9089
DOI:10.5547/ISSN0195-6574-EJ-Vol6-No1-7