Phase out dependence on oil to deal with rising gas price 'crisis': experts

Gas prices soar above $2 a litre Montreal pump prices are at record highs with many thinking they’ll go even higher.

Since Russia's invasion of Ukraine and the resulting spike in oil prices, some politicians are calling for the removal of taxes on gasoline or the revival of fossil fuel projects like LNG Quebec or Keystone XL. However, experts point out that we should rather be free of oil to better deal with this kind of crisis.

On Tuesday morning, Quebec Conservative Party leader Eric Duhaime called on the Legault government to stop charging sales tax on gasoline, following the recent decision by Alberta Premier Jason Kenney.

But according to Pierre-Olivier Pineau, Chair of Energy Sector Management at HEC Montreal, this decision would be against the interests of motorists, since gasoline taxes finance the road network.

"Gasoline taxes have not changed in 20 years because they are not indexed to inflation," said Pineau, explaining that "there is a flat rate excise tax of 10 cents per liter on gasoline at the federal level and in Quebec, there is a fuel tax on gasoline of 19.5 cents."

In an interview with The Canadian Press, he said that "because they have not increased for many years", there has been "a decrease in these taxes," which creates "a shortfall for governments because they are intended to finance the road network," which is already underfunded.

The energy expert believes that "the reason consumers pay so much for gasoline is because the price of crude oil is so high and the profit margins of refiners and retailers are so high.

He said it's time "to ensure that the oil industry no longer benefits from any government subsidies" and to make a real energy transition.

Normand Mousseau, scientific director of the Trottier Energy Institute, points out that the skyrocketing price of gasoline is a "crisis" that affects many people and that in the short term, lowering taxes on gasoline could relieve some people "if done intelligently."

"People do not have all the means to face these blows and there is an issue of equity, of protection of people", indicates the researcher, adding that "the question is to know how we can support people who need it without necessarily giving a reduction to everyone around the table."

Governments could proceed, according to him, "through financial compensation mechanisms, where people are most affected."

NEW PIPELINE PROJECTS?

Mousseau underlines that at the time of the energy transition, it is not the time to bet on the production of new fossil energy projects in order to face the shock caused by the rise in the price of oil, as some politicians propose.

"We must ensure that we do not use the current crisis to reinforce fossil fuel production and distribution infrastructures that will trap us in an energy structure that is incompatible with GHG reduction objectives for a few years or a decade, or 20 years," he said.

On Tuesday, Duhaime also pleaded for the revival of the natural gas export project GNL Québec, in order to supply Europe with natural gas and reduce its dependence on Russian gas It's an idea shared by MP Pierre Poilievre, a candidate for the leadership of the Conservative Party of Canada, and also the Montreal Economic Institute (MEI), an organization financed in part by the oil industry.

"I think Quebec has a role to play right now because we have a little more than $93 billion in natural gas reserves and I think we could exploit that safely and then export it to Europe," said Miguel Ouellette, director of operations and economist at the MEI.

According to him, Quebec natural gas could replace the coal used by countries like Germany and Poland as an energy source, "which would reduce global GHG emissions."

But according to the BAPE report on LNG Quebec, this liquefied natural gas project would not reduce GHGs in Quebec, nor in the countries where the product would be exported.

"The long-term adherence to this supply chain, following the GNLQ business model, would lock in the energy choices of client countries and, consequently, the GHG emissions associated with the combustion of the natural gas that would be delivered to them," reads the BAPE report published last spring.

Despite calls to resurrect the LNG Quebec project, the Legault government has reiterated that it will not reverse its decision to reject the gas project.

"In any case, the time scales don't match, it's a project that would take up to 10 years to be put in place," said Mousseau.

"So we would be in the 2030s, most European countries have announced reductions of 30 to 40 per cent of their greenhouse gas emissions for that time frame. So it's hard to see how this can be compatible with those targets."

For the past week, Alberta Premier Jason Kenney has been posting on social media in favour of building pipelines to allow European countries to reduce their dependence on Russian oil.

"If Canada really wants to help defeat Putin, let's build pipelines," he wrote on Twitter last Sunday.

BAN ON RUSSIAN OIL MORE ABOUT SENDING A MESSAGE: EXPERT

But for Mousseau, the energy transition is precisely a way to achieve energy independence.

"The idea of energy transition in a climate framework, therefore environmental, also has the advantage of strengthening the energy independence of people and countries, because renewable energy is produced much more locally," said the researcher, adding that "we are much less dependent on international markets when it comes to producing electricity with wind, solar or hydroelectricity, for example."

On the other hand, Trottier does not believe that U.S. President Joe Biden's decision on Tuesday to impose a ban on Russian oil and gas imports in order to sanction Russia will have a significant impact.

"It's a principle of communicating vessels," the researcher points out, explaining that if the U.S. no longer buys oil from Russia, this oil will be available for other markets.

"So we must also see that some of these announcements are more about appearances than real effects," he said.

Last year, only about eight per cent of U.S. imports of crude oil and petroleum products came from Russia.

Nevertheless, Biden said that "Americans are going to feel it at the gas station" and that defending freedom "has a cost."

This report by The Canadian Press was first published in French on March 8, 2022.