Why do we need pipelines? It’s a question we hear often, and the answer lies in the fact that pipelines deliver the products that fuel our lives. The crude oil and natural gas transported in Canada’s transmission pipelines keep our vehicles running, heat and cool our homes, fuel our hospitals and schools, and provide the raw materials for medical supplies, electronics, rubber, plastics and much more.
In other words, there are many everyday reasons for our reliance on fossil fuels.
Those who oppose pipelines feel that creating barriers to fossil fuel availability will force people to become less dependent on them. Is this true?
To find out whether this argument makes sense, we spoke with Pierre-Olivier Pineau. Pierre-Olivier is a professor of energy policy at HEC Montréal, and the chair in energy sector management, focusing on energy sector research.
Pierre-Olivier explained that global consumption of petroleum products is expected to increase for the foreseeable future.
“As the world is developing, many societies get richer and have the means to consume more,” he said. “This translates into more production for the transportation of goods and people. As our transportation systems are still largely fueled by oil products, and as people still feel that a good way to spend their increasing wealth is to buy a personal vehicle, more oil is expected to be consumed in the future.”
Pierre-Olivier: There has been a historical lack of success in curbing oil consumption, and companies are proposing pipeline infrastructure projects in anticipation that consumption will continue to rise.
Pipelines, in this context, are not the cause of the increasing consumption of oil, nor are they the reasons why climate policies have failed so far. They are just a symptom of society’s interest in oil products. Without pipelines, oil and oil products would just flow through other, marginally more expensive, means – tankers, rail or trucks.
Pierre-Olivier: Limiting pipelines has never been an effective way of reducing oil consumption. The cost of transportation by tankers, rail or truck is not high enough to discourage consumers from buying oil products. For instance, the largest refinery in Canada (owned by Irving Oil, in Saint John, New Brunswick), isn’t connected to a pipeline and has operated without major problems for years. It gets oil from tankers and distributes its refined petroleum products through a combination of tankers, rail and trucks. Oil consumption in the Atlantic Provinces isn’t different from the rest of Canada because of the absence of pipelines.
Pierre-Olivier: By not approving pipelines, Canada’s oil industry will be disadvantaged compared to oil producers closer to oceans or with adequate access to pipelines. This will most likely mean that less investment will take place in Canada, and more will materialize in other countries.
Many countries such as Venezuela, Brazil or different African countries could indeed increase their oil production if enough investment was made. In most cases, the oil fields that would be developed in these countries are unconventional and by no means easier to produce than Canadian oil.
Furthermore, these countries are very unlikely to have stronger environmental regulations, and have weaker institutional capacities to enforce their own regulations.
Consequently, limiting pipelines in Canada helps investment in these countries, at the expense of Canada and the environment. It may raise the price of oil by some marginal amounts, as such projects would be second best for investors. However, given the inelasticity of oil consumption with respect to price, these marginally higher prices would not have a significant impact on oil consumption.
Pierre-Olivier: Limiting pipelines limits the risk of exposure to oil spills for communities that would be adjacent to pipelines. However, this benefit can be destroyed by more risks from increased marine, rail, or road transportation of oil. In any case, the risk is simply transferred to other communities that will see the oil coming from other places.
Pierre-Oliver expands on these arguments in ‘Three Reasons Not To Stop Pipelines’, published, in French, in La Presse on January 30, 2017. We hope you’ll find the article interesting and informative.
To add to the conversation, we believe it’s worth noting the following:
You can read more about the implications of stifling market access for Canadian oil and gas products in ‘Market access Q&A with Dr. Robert Mansell.’
And check out these seven reasons why Canada needs new pipelines.