Canadian News

Tying the Petrocan to Exxon

Ian Urquhart March 26 1979
Canadian News

Tying the Petrocan to Exxon

Ian Urquhart March 26 1979

Tying the Petrocan to Exxon

The Nation

Memories of the 1974 election cam paign dancing in their heads, the federal Liberals would welcome-

indeed, they are courting—a confrontation with Alberta’s ayatollah, Peter Lougheed, over resources. In 1974, the Liberals recall, Lougheed was openly in conflict with Ottawa for holding down oil prices to protect consumers and the federal Conservatives, with 19 MPs from Alberta, were forced to stand silent on the sidelines. The election result—a Liberal majority—has been traced in large part to the conflict and the Conservative cop-out. The Liberals are salivating over thoughts of a replay with Lougheed once again cast in the role of the heavy and the Conservatives as wallflowers. But the Conservatives are betting it won’t happen. Says Calgary MP Harvie Andre, a key Tory strategist: “I think Lougheed is going to be very quiet during this election.”

Andre reasons that Lougheed, having won his election, can afford to sit out the federal campaign and wait until after the vote to press his claims. Furthermore, says Andre, the issues in dispute today—the precise wording of clauses in the constitution concerning resources and policies relating to tarsands development—are not as sexy as in 1974. Nonetheless, the Liberals can be expected to try to heat up the energy issue during the campaign and to smoke out Lougheed. They will also try to link Lougheed to federal Conservative leader Joe Clark, his former campaign worker. “If I were Clark,” says one MP, “I’d be on the phone telling Lougheed to keep his head in the sand.” Whether Clark has that sort of influence over his former boss is doubtful: their relationship is much cooler than is commonly believed. But Lougheed can probably figure out for himself the advisability of keeping his head down over the next few months.

The Liberals, however, may have found another target for their re-election campaign in Imperial Oil Ltd., the country’s biggest petroleum company and subsidiary of Exxon Corp., the world’s biggest. Last week, Imperial issued a final and firm rejection of a fiveweek-old government request that it start buying oil directly from Venezuela instead of using Exxon as a middleman. In spite of cutbacks in its Venezuelan supplies imposed by Exxon earlier this year, Imperial judged it “prudent” to continue its arrangement with its parent company. Imperial Chairman Jack Armstrong argued that Exxon, with its vast array of oil contracts, provides a more secure source of supply than would a single contract with Venezuela. Unanswered was the question whether Imperial really had any choice.

After receiving Imperial’s rejection in person from Armstrong in his Parliament Hill office last week, Energy Minister Alastair Gillespie issued a curt press release saying he was “very disappointed.” Gillespie also announced that Petro-Canada, the government-owned oil company, has been instructed to purchase oil from Venezuela when Exxon’s contract expires this year. Venezuela is apparently willing to make the switch to Petrocan. “We are trying to increase the number of customers we deal with, to diversify our clientele,” explained Jesus Garcia, counsellor for petroleum affairs at Venezuela’s Ottawa embassy. “We don’t want to depend on just one or two big customers.”

Gillespie’s end-run around Exxon to Venezuela provided a graphic illustration of the usefulness of Petrocan, which the Conservatives have vowed to dismantle. That pledge was made at a time when the growth of government, not energy, was a feature issue. Now it may be coming back to haunt the Conservatives.

Attempting to make a virtue out of necessity, the Conservatives attacked Gillespie for his move. They suggested that Petrocan will end up paying higher prices for Venezuelan oil than does Exxon and Canadian consumers will be the big losers in the switch. But even Imperial cast doubt on that suggestion. Said

Imperial Executive Vice-President J. G. Livingstone: “Everybody pays the same price for the same crude oil.” Gillespie turned the Tory attack on its head with a suggestion that Petrocan’s involvement will bring lower prices for oil because there will be no middleman to skim off profits.

The whole affair provided Gillespie and the Liberals with invaluable publicity with an election upcoming. Mused Imperial’s Livingstone: “We have certainly fitted in well with the political environment.” But Imperial also played into the government’s hands by refusing its request to deal directly with Venezuela, something rivals Texaco and Gulf have agreed to do. It remains to be seen if Lougheed will be as accommodating to the Liberals as Imperial.

Ian Urquhart