Russia bullies its European energy customers; Saudi Arabia, Iran and others export terrorism; Nigeria is unstable and Venezuela's Hugo Chavez spews hate. This means there is little choice for the U.S. and the world, but to embrace, and possibly finance, Alberta's gigantic oil sands.
True the Canadian oil made from these sands is dirtier than Saudi crude, but the choice is dirty oil from a clean regime (Canada) or cleaner oil from dirty regimes.
Besides, the oil sands production process can be cleaned up with investments in carbon recapture and research into more efficient refinery methods that use less natural gas and water.
Vast treasure trove
The Alberta oil sands are bigger in potential than Saudi Arabia's. Right now, mining operations the size of Rhode Island are taking place north of remote Edmonton Alberta. The potential is so vast that an investment of roughly US$50 billion could add one million barrels per day to production. Eight million barrels would cost US$400 billion, or roughly two years' warfare in Iraq.
It's cheaper than the price paid as a result of the economic hostage-taking that the Saudis, Ruskies, Iranians and others will indulge in once economic activity returns and oil prices can go through the roof.
The oil sands is America's, and Canada's, economic insurance policy. And Washington's financial support, or Ottawa's, represent investments, not bailouts or rescues.
In fact, it is just as important to invest in new energy sources as it is to make sure the banking system doesn't go bust. Both sectors represent the underpinning for all economic activity and government intervention is needed because markets have fumbled the ball. There is no long-term banking credit around, or shareholder support, for oil sands plants which cost billions and need 25 years to pay off.
An indigenous oil industry in North America would not only be a huge competitive advantage compared with the world's other regions, but would represent a security of supply in an increasingly dangerous world of ruthless oil dictatorships. And they will have a stranglehold on the world economy again because the pricing collapse and credit meltdown have caused oil exploration and new developments to be shut down, thus sowing a supply-demand mismatch that will result in soaring prices again.
Forget traditional oil business models
Canada's oil sands industry must recalibrate. The old paradigm does not work which was that energy needs were best met by private-sector companies and their bankers/shareholders willing to take the risk in order to finance long-term energy projects.
Instead the new paradigm should be: Energy needs will only be met by government-backstopped private-sector companies because banks and shareholders won't take the risk on a long term basis.
And if the Americans aren't going to help then the Asians will be happy to do so.
The Age of Oil will last another four decades or more and today's slumping prices simply sow the seeds for huge price hikes down the road and inordinate wealth to despotic oil nations.
Diane Francis blogs for the Financial Post daily