Business

Early winter squeeze

David Thomas December 17 1979
Business

Early winter squeeze

David Thomas December 17 1979

Early winter squeeze

Business

David Thomas

The Liberian tanker Arctic Star set off this week from Vancouver on a pressing relief mission. Riding low in the Pacific waters under the weight of 350,000 barrels of western crude oil scrounged from three different Canadian producers, the Arctic Star is heading south to the Panama Canal and then up the eastern seaboard to Canada. Early next month, while coast guard icebreakers battle winter’s resolve to solidify the surface of the St. Lawrence River, the Arctic Star will slide between the cliffs of Quebec City and Lévis and surrender her load to the ringing empty drums at the Golden Eagle refinery. Not since the apogee of the 1973 oil crisis has Golden Eagle—the small oil refining and retailing company owned by Ultramar Canada Ltd. of the U.K., and operating solely in Eastern Canadahad to resort to such an incredible journey to ensure that thousands of Eastern Canadians are not frozen out of their homes in midwinter.

The Arctic Star’s costly cruise is just part of the sudden scramble to spare Eastern Canada a fuel shortage which could send Joe Clark’s Conservative government back into the cold. The immediate culprit may be Ayatollah Khomeini, whose crossing of scimitars with the United States has constricted the flow of Iranian oil to North America. But the Clark government’s inexplicable delay in heeding the warnings of oil companies and its obstinate refusal to reverse an unpopular electoral promise to dismember Petro-Canada have caught the country with its woollies down.

Last Friday, a “very tight situation for heating oil” was reported by the National Energy Board, which also warned western drivers they may run short of gasoline. With Alberta refusing to increase supplies there seems no hope that domestic sources can supplant foreign crude. The report came just days after Gulf Canada confirmed that the next tanker of Iranian crude bound for its Point Tupper, Nova Scotia, refinery would be the last. It was a convincing

illustration, many now believe, of the need for Petro-Canada or some other federal agency which could purchase crude oil directly from producing states. Gulf Canada was cut off because it depends on its Pittsburgh-based parent for finding and delivering crude. And Gulf Canada would have little success in attempting to buy directly. Says company spokesman Robert Vallance: “The Iranians would not be able to distinguish between the Canadian and the American company, especially since we have the same name.” It is a distinction many Canadians are finding difficult as they discover that supplies to Canadian subsidiaries are at the mercy of their multinational parents. But even the multinationals want to see Petro-Can-

ada active in buying for refineries located in this country: if the Canadian government can supply refineries here, the multinationals can concentrate on finding crude for operations in the U.S. Gulf last week urged Ottawa to take a more active role in negotiating direct oil purchases from foreign sources, perhaps with Iran itself.

The most vulnerable—and frustrated—company remains Ultramar, whose two Golden Eagle refineries, one at Quebec City and another in Holyrood, Newfoundland, were the only Canadian refineries mostly reliant on foreign supply from sources in the Middle East. Irving Oil Ltd. of Saint John, New Brunswick, also imports its oil, but from Venezuela, where it is believed to have a favorable contract guaranteeing both supply and price. Because of its more vulnerable position, Ultramar desperately wants a share of Canadian crude, and for the past five months has assigned 15 executives to lobby, plead and now beg the Clark government for enough domestic oil to dilute its dependence on foreign crude, whose price is as uncertain as its supply.

The Quebec refinery has already run dry once: Iran’s cancellation of a supply contract a year ago forced the refinery to shut down for four weeks. And the way things are looking at the moment, this year it could get a lot worse. Complains Ultramar’s vice-president, Jean Gaulin: “There is crude available but Canada is doing nothing to get it. PetroCanada was engaged in this but now they don’t have a mandate to continue. We’re losing time.” The Clark government, concludes Gaulin, “doesn’t understand the situation.”