Jack Mintz: Energy security will top many nations' future political agendas |
Share this Story : Financial Post Copy Link Email X Reddit Pinterest LinkedIn Tumblr
Jack Mintz: Energy security will top many nations' future political agendas
If the Strait of Hormuz is no longer safe, Saudi Arabia and other Gulf States will need other ways to deliver oil to the global market
You can save this article by registering for free here. Or sign-in if you have an account.
With the closing of the Strait of Hormuz to non-Iranian shipments of oil, the world is keeping close watch on oil prices. Energy security is now paramount, not ESG or climate change. Higher gas and diesel prices will crimp many household budgets already shrunken by price hikes since the pandemic year. Farmers, truckers, foresters and other energy-intensive businesses will be hurt by the sudden surge in oil prices.
Subscribe now to read the latest news in your city and across Canada.
Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.
Daily content from Financial Times, the world's leading global business publication.
Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
Daily puzzles, including the New York Times Crossword.
Subscribe now to read the latest news in your city and across Canada.
Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.
Daily content from Financial Times, the world's leading global business publication.
Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.
National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.
Daily puzzles, including the New York Times Crossword.
Create an account or sign in to continue with your reading experience.
Access articles from across Canada with one account.
Share your thoughts and join the conversation in the comments.
Enjoy additional articles per month.
Get email updates from your favourite authors.
Create an account or sign in to continue with your reading experience.
Access articles from across Canada with one account
Share your thoughts and join the conversation in the comments
Enjoy additional articles per month
Get email updates from your favourite authors
Sign In or Create an Account
But let’s not forget in the current fog of war that the run-up in prices is not nearly as bad as in some earlier episodes. Here in North America, the highest West Texas Intermediate has been in the past half century was US$140 in May 2008 (equivalent to US$208 in 2026 dollars). There was no geopolitical crisis that year but speculation about supply shortages in the face of rising Asian demand pushed prices up 38 per cent in four months.
Get the latest headlines, breaking news and columns.
There was an error, please provide a valid email address.
By signing up you consent to receive the above newsletter from Postmedia Network Inc.
A welcome email is on its way. If you don't see it, please check your junk folder.
The next issue of Top Stories will soon be in your inbox.
We encountered an issue signing you up. Please try again
Interested in more newsletters? Browse here.
The 1974 OPEC production cuts, the 1979 Iranian Revolution and the 2022 Russian invasion of Ukraine were no picnics, either. As shown in the accompanying graph, inflation-adjusted WTI oil prices hit levels even higher than today’s in September 1980 and May 2022. Shocks also go the other way, with deep price cuts in 1986, 1998, 2015 and the pandemic year.
The American-Israeli war with Iran is not over so we may yet see higher prices in coming months. The good news, if there is any, is that we are less reliant on oil than we were in earlier decades. Since 1980, oil consumption as a share of GDP has fallen by half. The world has become more energy-efficient, needing less energy to run its machines. Oil was 38 per cent of the world’s energy mix in 1980. Today it’s 30 per cent. Though shipping through the Strait of Hormuz is responsible for a fifth of world supply, today’s disruption is half as important as it would have been 50 years ago.
That said, we shouldn’t underestimate the potential losses from Iranian attacks on neighbouring Gulf-state energy infrastructure. Qatar lost 17 per cent of its natural gas exports in Iranian missile and drone strikes on one of its gas facilities and two of its 14 LNG trains. Repairs will take months. Almost 30 per cent of fertilizer exports have been affected and that will eventually hit food prices. If the Strait is closed for long, shortages will grow and many countries will begin rationing oil.
Jack Mintz: Will tax hikes undo the affordability agenda?
Jack Mintz: Shorting Israel has not been a good market bet
Advertisement 1Story continues belowThis advertisement has not loaded yet, but your article continues below.document.addEventListener(`DOMContentLoaded`,function(){let template=document.getElementById(`oop-ad-template`);if(template&&!template.dataset.adInjected){let clone=template.content.cloneNode(!0);template.replaceWith(clone),template.parentElement&&(template.parentElement.dataset.adInjected=`true`)}});
Once the war is over — and it will be at some point — energy security will top many countries’ political agendas. With ever-growing demand for petrochemicals, industrial production and electrification, the overall demand for energy itself will not cease and oil and natural gas will be a big part of the mix for many years to come.
Given oil’s importance to national security, stability in the Gulf region has long been a major concern to the West. Just before the First World War, Winston Churchill understood that switching the Royal Navy from home-produced coal to Persian-produced oil would be risky: “To commit the Navy irrevocably to oil was indeed to take arms against a sea of troubles.”
Iran oil revenue soars as it's the only exporter out of Hormuz Oil & Gas
Iran oil revenue soars as it's the only exporter out of Hormuz
Meet the Canadian e-bike maker who is redefining the factory floor Electric Vehicles
Meet the Canadian e-bike maker who is redefining the factory floor
Advertisement 2Story continues belowThis advertisement has not loaded yet, but your article continues below.document.addEventListener(`DOMContentLoaded`,function(){let template=document.getElementById(`oop-ad-template`);if(template&&!template.dataset.adInjected){let clone=template.content.cloneNode(!0);template.replaceWith(clone),template.parentElement&&(template.parentElement.dataset.adInjected=`true`)}});
Markets could be making the wrong call on interest rates Investor
Markets could be making the wrong call on interest rates
LNG Canada signs key pipeline agreement required for phase two expansion Energy
LNG Canada signs key pipeline agreement required for phase two expansion
Quebec demands Air Canada’s CEO resignation in 92 to 0 vote Airlines
Quebec demands Air Canada’s CEO resignation in 92 to 0 vote
If the Strait of Hormuz is no longer safe, Saudi Arabia and other Gulf States will need other ways to deliver oil to the global market. Already, Saudi Arabia has increased pipeline flows to get oil through the Red Sea — although the Iranian proxy Houthis threaten tankers passing by Yemen. Oil could also be routed north through the Suez Canal, though only with smaller tankers. Or Gulf states might look to build new pipelines through friendly countries to the Mediterranean.
Consuming countries, including Europe, will seek alternative energy sources from reliable allies, whether it be natural gas, renewable or nuclear. China will deepen its commitment to replacing oil with coal, renewables, nuclear and transport electrification. Consuming countries may also build up storage capacity to help withstand future temporary shocks.
Oil-rich countries like Canada, the U.S., Australia and Norway will want to help address their allies’ national security concerns. That means building more LNG plants, oil pipelines to tidewater, mines and nuclear plants. Whatever the “business case” for these things may have been when Justin Trudeau was doing the math, it is now much stronger.
A major challenge for NATO countries will be their adversarial relationship to China. It has a stranglehold on solar panels and cheap EVs that can only be broken by western countries finding alternatives. The U.S. has already made quite clear to Venezuela its oil should not be shipped to China.
The Mark Carney government has made the right noises about Canada becoming an energy superpower, but so far has accomplished little. And Carney has neither made clear why exporting decarbonized oil should be a priority nor justified his claim that other countries will happily pay a premium for it. After all, cost-competitiveness matters everywhere.
With Canada about to enter CUSMA renegotiation with the United States, energy security will be top of Americans’ minds. The U.S. won’t like our selling oil and natural gas to China rather than to NATO allies. That will make it hard to carry through on our agreement to become a “strategic partner” of China.
The world has taken a dramatic turn this past month, generating many new unknowns. What is very clear is that energy security will be a priority for years to come.
Share this Story : Financial Post Copy Link Email X Reddit Pinterest LinkedIn Tumblr
Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.