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Long-Run Effects of the Canadian National Energy Agreements

S. L. Schwartz, J. D. Fuller, and W. T. Ziemba

Year: 1985
Volume: Volume 6
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No1-7
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Abstract:
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.



A Survey of Canadian Energy Policy: 1974-1983

Robert N. McRae

Year: 1985
Volume: Volume 6
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol6-No4-5
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Abstract:
Canadian energy policies have been strongly influenced by external events. Like most other countries of the world, Canada adjusted its energy policies in reaction to the OPEC oil price shocks of 1973-1974 and 1979. Canadian energy policies also have been influenced by U.S. energy policies (through trade links) and by the dominant presence of many foreign-controlled multinational petroleum firms.





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