The "Ethical Oil" Argument is Bogus

Ted Hsu
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At least three times during question period yesterday I heard Conservative ministers or parliamentary secretaries refer to oil sands as “ethical oil”, the implication being that it is preferable to buy oil from the oil sands because Canada is the land of the good guys and places like Nigeria or Saudi Arabia are not, or that increasing production of Canadian oil will displace “bad oil”.

But this is a bogus argument. The market for oil is global. If you buy oil, you drive up the global price of oil, you increase the profits of everybody who sells oil, from my friends in Alberta, to the Saddam Husseins and Colonel Ghaddafis of the world.

Some markets are not global. If you buy gravel, you will push up only the local price of gravel because it is so expensive to transport gravel long distances. The oil market is global. Supertankers ply the oceans with their cargoes of oil searching for the most lucrative place to transport their oil, able to change their destination in mid-voyage in response to price fluctuations.

Producing more oil sands oil will not displace oil produced in places like Saudi Arabia. The cost of production is much higher for the oil sands.

To a good approximation, all the oil that is produced goes into a global pool. You can’t pick out the “ethical” parts.