NAFTA’s TRUMP CARd
Posted by mhudema on June 16, 2008
The global economy is now tripolar and growth is driven by three roughly equal major economic engines: North America, Europe and Asia. However, high commodity prices threaten to slow Asia and Europe’s economies.
North America is a different matter and a NAFTA energy policy could benefit all.
The biggest challenges are America’s wasteful consumption and Mexico’s inefficient national oil company Pemex.
By 2020, Canada’s gigantic oil sands mining operations – spread across an area in Alberta the size of the state of Rhode Island – will increase oil production from 1.2 million barrels a day for export to four million barrels a day, equivalent to Iran’s production.
This Canadian resource largesse, plus off Newfoundland’s coast, parts of the U.S. and Mexico, could provide NAFTA with a huge competitive advantage over Europe or Asia, in the form of oil and energy self sufficiency. But this strategy must also include dramatic conservation measures in all three countries.
The status quo
Mexico produces 3.71 million barrels a day and Canada 3.23 million. the two use two million daily each. Mexico’s production is declining but by 2020 Canada’s oil sands will produce four million for export.
The U.S. produces 8.37 million barrels per day (third largest in the world) but uses 20.59 million, about 25% of the world total. Production is declining, as Alaska runs out, and consumption is dangerously high.
So here is the NAFTA energy policy:
Mandating hybrid cars and fuel efficiency criteria of 10 miles per gallon would reduce consumption rates. This must be done immediately by the U.S. and the two others would follow the lead because their auto manufacturing is destined for the U.S. market. This would, if in place now, reduce North American consumption of 25 million barrels a day by 15% or nearly four million barrels.
Mexico must welcome foreign investors or partners into its oil sector or face an economic catastrophe that will result in more illegal immigration to the U.S.
Americans should fast-track pipeline and regulatory approvals for Canada and Mexico.
The U.S. must build, and finance, the Alaska natural gas pipeline and also projects to tap Canada’s huge natural gas Arctic reserves.
Americans must reverse their ban on drilling offshore or on federal lands. (New polls show 57% of Americans agree with this.) Drilling in these areas won’t yield huge deposits but will help.
Labor mobility. Oil workers must be able to work anywhere.
The three countries should finance a Manhattan Project to come up with environmentally benign alternatives, conservation methods and technologies to better utilize oil and gas.
Fast tracking and rationalizing power generation facilities is also long overdue, as are government mandates requiring clean coal technologies and the use of more nuclear energy.
By contrast, Europe is hostage to Russia and the Middle East for oil and natural gas and Asians scramble for supplies.
Energy of all kinds could be the ultimate NAFTA trump card but only if leaders from all three countries get it and enact it.