Editing National Energy Program (section)

==Background==
In his preamble to the announcement of the National Energy Program, introduced as part of the [[1980 Canadian federal budget|October 1980 federal budget]], Finance Minister [[Allan MacEachen]] echoed concerns by leaders of developed countries regarding the recession that followed both [[Energy crisis#Historical crises|oil crises]] of the 1970s and the "deeply troubling air of uncertainty and anxiety" that was shared by Canadians.<ref name="Budget_1980">{{citation |url=http://www.budget.gc.ca/pdfarch/1980-plan-eng.pdf |title=Budget 1980 |date=28 October 1980 |access-date=27 January 2015 |first=Allan J. |last=MacEachen |location=Ottawa, ON}}</ref> The Bank of Canada reported that economic problems had been accelerated and magnified. Inflation was most commonly between 9% and 10% annually,<ref name="Bank_of_Canada">{{citation |url=http://www.bankofcanada.ca/en/rates/inflation_calc.html |work=Bank of Canada |title=Inflation calculation |access-date=2010-11-08 |archive-date=2007-05-10 |archive-url=https://web.archive.org/web/20070510124111/http://www.bankofcanada.ca/en/rates/inflation_calc.html |url-status=dead }}</ref> and prime interest rates were over 10%.<ref name="canada_bubble">{{citation |url=http://canadabubble.com/charts/bank-of-canada-interest-rate-history.html |title=Bank of Canada Interest Rate History |work=Canada Bubble}}</ref><ref>“Uncertain Country.” Canada: A People’s History. CBC Television. Prod & Dir: Susan Dando. Aired: TVO: CICI, Toronto. January 10, 2005.</ref>

{{blockquote|...ever since the oil crisis of 1973 industrial countries have had to struggle with the problems of inflation and stubbornly high rates of unemployment. In 1979 the world was shaken by a second major oil shock. For the industrial world this has meant a sharp renewal of inflationary forces and real income losses. For the developing world this second oil shock has been a major tragedy. Their international deficits are now three to four times the sum they receive in aid from the rest of the world.... They are not just Canadian problems. ...they are world-wide problems. At the Venice Summit and at meetings of Finance Ministers of the IMF and OECD, we have seen these new themes emerge.<ref name="Budget_1980"/>}}

===Global context===
Historically, the United States had been by far the world's largest oil producer, and the world oil market had been dominated by a small number of giant multinational (mostly-American) oil companies (the so-called "[[Seven Sisters (oil companies)|Seven Sisters]] of oil": [[Standard Oil of New Jersey]], [[Pseudonym|alias]] [[Exxon]] (US); [[Standard Oil of New York]], alias [[Mobil]] (US/UK); [[Standard Oil of California]], alias [[Chevron Corporation|Chevron]] (US), [[Gulf Oil]], now part of Chevron (US); [[Texaco]], now part of Chevron (US); [[Anglo-Persian Oil Company]], alias [[BP]] (UK); and [[Royal Dutch Shell]], alias Shell (UK/Netherlands).<ref name="MEI_1979_Amuzegar" />{{rp|9}} During the late 1940s, the 1950s, the 1960s, and the early 1970s, the discovery and development of many [[giant oil and gas fields]] outside the US by those and other companies kept the world flooded with cheap oil. Meanwhile, global demand increased to take advantage of the increased global supply at lower prices. In particular, US oil consumption increased faster than production, and the country, which had been a net oil exporter, became a major oil importer.

In 1970, US oil production unexpectedly peaked and started to decline, which caused global oil markets to tighten rapidly as the US started to import more and more Arab oil.<ref name="MEI_1979_Amuzegar">{{citation |chapter-url=http://chenry.webhost.utexas.edu/public_html/elephants/OilShock201979-Final.pdf |chapter=OPEC's Adaptation to Market Changes |last=Amuzegar |first=Jahangir |title=The 1979 "Oil Shock": Legacy, Lessons, and Lasting Reverberations |publisher=The Middle East Institute (MEI) |location=Washington, DC |pages=136 |year=1979 |access-date=26 September 2016|archive-url=https://web.archive.org/web/20150209230659/http://chenry.webhost.utexas.edu/public_html/elephants/OilShock201979-Final.pdf|archive-date=9 February 2015}}</ref>{{rp|10}} As the decade continued, global demand caught up with global supply, and two major oil price shocks occurred: the [[1973 oil crisis]] and the [[1979 oil crisis]].<ref name="Grytten">{{cite encyclopedia |first=Ola Honningdal |last=Grytten |title=The Economic History of Norway |encyclopedia=EH.Net Encyclopedia |editor-first=Robert |editor-last=Whaples |date=16 March 2008 |url=http://eh.net/encyclopedia/the-economic-history-of-norway/}}</ref> The first occurred after the [[Organization of Arab Petroleum Exporting Countries]] (OAPEC), whose membership is the Arab members of the similarly named [[Organization of Petroleum Exporting Countries]] (OPEC), plus Egypt, Syria, and Tunisia, imposed an [[embargo]] on oil exports to the US, the UK, the Netherlands, Japan, and Canada in retaliation for supporting Israel during the [[Yom Kippur War]]. US producers had been able to defeat the [[1967 oil embargo]] by ramping up domestic production and flooding the world market with additional product at cut-rate prices, but declining domestic production and the ongoing rise in global demand prevented a similar response to the 1973 Arab embargo. The result was immediate shortages and lineups for gasoline in importing countries, particularly the US, which signalled the end of decades of cheap oil and a change in the balance of power from consuming countries, which now included the United States, to producing countries.<ref name="IER">{{citation |title=Forty Years After the Oil Embargo |date=16 October 2013 |access-date=27 January 2015 |url=http://instituteforenergyresearch.org/analysis/forty-years-after-the-oil-embargo/ |publisher=Institute for Energy Research (IER) |location=Washington, DC}}</ref> On October 16, 1973, the Ministerial Committee of the Persian Gulf's OPEC membership announced an immediate rise in its posted price from $2.18 to $5.12 per [[barrel of oil]].<ref name="MEI_1979_Amuzegar" />{{rp|10}} "Thus for the first time in oil history, the producing countries assumed power to consider and set the oil price ''unilaterally'', and independently of the" Seven Sisters.<ref name="MEI_1979_Amuzegar" />{{rp|10}}

The Yom Kippur War ended in October, but the price of oil continued to increase, and by January 1974, it had quadrupled to US$12 a barrel. "The more than seven-fold increase in the oil price from $1.80/b in 1970 to $13.54/b in 1978 created profound and far-reaching changes in the world oil balance, as well as the prevailing relationships among major oil producers, principal oil importers, and the major oil companies... [and the] spectacular jump of the crude spot price to more than $US40/b following the 1979 Iranian Revolution, turned the global oil market into total disarray."<ref name="MEI_1979_Amuzegar" />{{rp|10}} The Norwegian economics historian [[Ola Honningdal Grytten]] described that period in the 1970s as one of a prolonged global recession and slow growth that affected most developed economies.<ref name="Grytten" />

The [[1979 oil crisis]], precipitated by the [[Iranian Revolution]] and compounded by the [[Iran–Iraq War]], was the second major market disturbance in the 1970s. "The curtailment of oil supplies and the skyrocketing of oil prices had far-reaching effects on producers, consumers, and the oil industry itself."{{attribution needed|date=February 2015}}<ref name="MEI_1979">{{citation |url=http://chenry.webhost.utexas.edu/public_html/elephants/OilShock201979-Final.pdf |title=The 1979 "Oil Shock": Legacy, Lessons, and Lasting Reverberations |publisher=The Middle East Institute (MEI) |location=Washington, DC |pages=136 |year=1979 |access-date=28 January 2015|archive-url=https://web.archive.org/web/20150209230659/http://chenry.webhost.utexas.edu/public_html/elephants/OilShock201979-Final.pdf|archive-date=9 February 2015}}</ref>

In his [[State of the Union Address]] in January 1980, US President [[Jimmy Carter]] described how his country's "excessive dependence on foreign oil is a clear and present danger,"<ref name="Carter" /> and he called for a "clear, comprehensive energy policy for the United States."<ref name="Carter">{{citation |url=http://www.jimmycarterlibrary.org/documents/speeches/su80jec.phtml |title=State of the Union Address |date=23 January 1980 |access-date=27 January 2015 |first=Jimmy |last=Carter}}</ref>

===Canadian context===
{{Main|History of the petroleum industry in Canada|Energy policy of Canada}}
The Canadian petroleum industry arose in parallel with that of the US. The first oil well in North America was dug in Ontario in 1848 by using picks and shovels, one year before the first oil well in the United States had been drilled in Pennsylvania.<ref>{{cite book |last=May |first=Gary |title=Hard Oiler!: The Story of Canadians' Quest for Oil at Home and Abroad |url=https://books.google.com/books?id=NdYFO2GGkooC&pg=PA33 |year=1998 |page=33 |publisher=Dundurn |isbn=978-1-55488-184-0}}</ref> By 1870, Canada had 100 oil refineries in operation and was exporting oil to Europe.<ref>[http://www.petroleumhistory.ca/history/cdnbeginnings.html] Petroleum History Society - Canadian Beginnings</ref> However, the oil fields of Ontario were shallow and small, and oil production started to decline around 1900 while the automobile started to become popular. In contrast, US oil production grew rapidly after huge discoveries had been made in Texas, Oklahoma, California, and elsewhere. By the end of World War II, Canada imported 90% of its oil, mostly from the US.

The situation changed dramatically in 1947, when [[Imperial Oil]] drilled a well near [[Leduc, Alberta]], to see what was causing peculiar anomalies on its newly introduced [[reflection seismology]] surveys. The peculiar anomalies turned out to be oil fields, and [[Leduc No. 1]] was the discovery well for the first of many [[history of the petroleum industry in Canada, part one#Leduc|large oil fields]]. As a consequence of the large finds, cheap and plentiful Alberta oil produced a huge surplus of oil on the Canadian Prairies, which had no immediate market since the major oil markets were in Ontario and Quebec. In 1949, Imperial Oil applied to the federal government to build the [[Enbridge|Interprovincial Pipeline]] (IPL) to [[Lake Superior]], which allowed it to supply the [[Midwestern United States]]. By 1956, the pipeline had been extended via [[Sarnia]], Ontario, to [[Toronto]]; at {{convert|3100|km}}, it became the longest oil pipeline in the world. The federal government gave approval to build a pipeline in Western Canada, and in 1953, the {{convert|1200|km}} [[History of the petroleum industry in Canada#Crude oil arteries|Transmountain Pipeline]] was built from Edmonton to [[Vancouver]], British Columbia, with an extension to northwest [[Washington (state)|Washington]]. The pipelines did more to improve the energy security of the United States than that of Canada since the Canadian government was more interested in Canada's [[trade balance]] than in military or energy security. The Canadian government assumed that Eastern Canada could always import enough oil to meet its needs and that imported oil would always be cheaper than domestic oil.

====National Energy Board====
{{main|National Energy Board}}
The National Energy Board (NEB) was created in 1959 "to monitor and report on all federal matters of energy as well as regulate pipelines, energy imports and exports and utility rates and tariffs."<ref name="OAG_2007" /> The NEB regulated mostly the construction and the operation of oil and [[natural gas pipeline]]s crossing [[provinces and territories of Canada|provincial]] or international borders. The Board approved pipeline traffic, tolls, and tariffs under the authority of the National Energy Board Act.<ref>{{citation |author=Government of Canada |author-link=Government of Canada |title=National Energy Board Act (R.S.C., 1985, c. N-7) |publisher=Department of Justice |url=http://laws-lois.justice.gc.ca/eng/acts/N-7/index.html |date=2014-04-01 |orig-year=Enacted 1985 |access-date=2014-11-03}}</ref>

From its introduction in 1961 to its end in September 1973, the National Oil Policy (NOP) was the cornerstone of Canadian energy policy. It "established a protected market for domestic oil west of the Ottawa Valley, which freed the industry from foreign competition,"{{attribution needed|date=October 2016}} and the five eastern provinces, which included major refineries in Ontario and Quebec, continued to rely on foreign imports of crude oil, such as from Venezuela.<ref name="OAG_2007">{{citation |url=http://www.oag-bvg.gc.ca/internet/English/att_c003aa_e_11101.html |title=2000 May Report of the Commissioner of the Environment and Sustainable Development |date=15 November 2007 |work=Auditor General |access-date=27 January 2015}}</ref> In 1973, "the federal government announced the extension of the inter-provincial oil pipeline to Montreal (completed in 1976), froze prices of domestic crude and certain oil products, and sought to control export prices. The federal government announced this change in policy so that supply problems in the United States would not automatically raise prices for Canadian consumers."{{attribution needed|date=October 2016}}<ref name="OAG_2007" />

After the first OPEC price shock in 1973, the federal government "formally broke the link between domestic prices and international prices. The objective of 'made-in-Canada' prices for crude oil was to protect Canadians across the country from the whims of the world oil market and to provide producers with enough incentives to develop new energy resources."{{attribution needed|date=October 2016}}<ref name="OAG_2007" />

In 1981, the [[Edmonton]] economist Brian Scarfe claimed that the NEB's setting of the price of oil and natural gas in Canada meant that producers did not receive full world prices for the resource and that consumers were not charged world prices.<ref name="Scarfe_1981" />{{rp|2–5}} He claimed that the subsidies had a number of side effects, including larger trade deficits, larger federal budget deficits, higher real interest rates, and higher inflation.<ref name="Scarfe_1981" />{{rp|2–5}}<ref name="Doern_1984">{{citation |first1=B. |last1=Doern |first2=G. |last2=Toner |title=The NEP and the Politics of Energy |year=1984}}</ref><ref>{{citation |first=J. |last=McDougall |title=Fuels and the National Policy |year=1982}}</ref>

====Petro-Canada====
{{main|Petro-Canada}}
[[File:Petro-Canada logo.svg|thumb|150px|upright=1.3|Petro-Canada logo]]
In 1975, in response to the world energy crisis, the federal government created Petro-Canada, a Canadian [[crown corporation]] that was national oil company. Petro-Canada was involved in the massive [[Hibernia oil field|Hibernia]] oil find off Newfoundland and was a partner in the Syncrude [[oil sands]] venture in Fort McMurray, Alberta. The Alberta oil industry was then overwhelmingly owned by Americans, who were also the major importer of Albertan oil. The [[Petro-Canada Centre]] (1975–2009) was known in the oil patch as "Red Square" until its purchase by [[Suncor]].<ref name="Red Square">{{citation |url=http://www.cbc.ca/news/canada/suncor-rebrands-red-square-1.810901 |title=Suncor rebrands 'Red Square' |date=4 August 2009 |access-date=27 January 2015}}</ref> The NEP included plans for a "greatly-expanded Petro-Canada."{{attribution needed|date=October 2016}}<ref>{{citation |url=http://www.thecanadianencyclopedia.ca/en/article/petro-canada/ |title=Petro-Canada |first1=Larry R. |last1=Pratt |first2=Sasha |last2=Yusufali |date=16 September 2011 |access-date=27 January 2015}}</ref>

====Price controls====
In 1974, Canada inaugurated its first system for pricing oil with three objectives: to regulate prices of domestic crude oil by federal-provincial agreements, to subsidize imported oil so that consumers in Eastern Canada would enjoy lower prices, and to control prices and quantities of crude oil and products in the exporting market. [[Synthetic crude]] oil (upgraded petroleum from oil sands) was exempted from the policy and was sold at the world price. The federal government levied a tax on all oil refined in Canada to pay for the difference between the price of synthetic and that of conventional crude oil.<ref name="OAG_2007" />

The federal budget in October 1980 reflected the concern that Canada could "become increasingly dependent on insecure foreign supplies and, therefore, unnecessarily subject to the vagaries of the world oil market."<ref name="Budget_1980" />

On 28 October 1980, Finance Minister [[Allan MacEachen]] introduced the National Energy Program but cautioned that things could get worse if there were "new shocks coming from the price of oil or food or if the upward momentum of costs and prices proves impervious to the economic climate I am seeking to create."<ref name="Budget_1980" />  
{{blockquote|"The new energy policy limits the rise in prices of oil and gas to domestic consumers and thus continues to protect us from the violent shocks of OPEC price increases. It strengthens our specific measures to promote the most economical use of energy and in particular the displacement of oil by other fuels. It provides new impetus to the development of new sources of supply, through direct government programs and through new incentives of particular value to Canadian-owned producers. Energy policy is only the most urgent element of our new strategy. Renewed growth in productivity and lower costs are needed throughout the economy. Within the overall expenditure plan which I will lay before the House, we have assigned clear priority to economic development."|MacEachen October 1980}}