MNI INTERVIEW: Energy Strikes Risk Long Rebuild- Canada FinMin
Attacks on Middle East energy production facilities run the risk of a years-long rebuilding process, adding to the burden of recent global shocks that threaten long-term damage to supply chains and boosting Canada's role as a reliable energy supplier, Canada's finance minister told MNI Thursday during IMF meetings in Washington.
"We’ve been focusing a lot on the duration, but one of the points I made with my colleagues is to take every possible step to protect the producing assets, because for me the long tail we can have is if we have destruction in oil and gas facilities in the Middle East," Francois-Philippe Champagne said in an interview. “That would have a very long tail, because we all know that when you bring these plants back into service it would take years, if not longer.”
U.S. officials including National Economic Council director Kevin Hassett have said this week they expect a short phase of high energy prices and supply restrictions linked to the Iran conflict. Other experts say the amount of oil taken offline is bigger than in the 1970s and note several production sites have already been damaged.
"Talking to colleagues in the Middle East, different people are playing with different scenarios when it comes to duration," Champagne said.
SECONDARY IMPACT
"Geography and people don’t tend to change," he said. "The Strait of Hormuz will remain even after freedom of navigation (returns) -- a strategic point in terms of the energy security of the world."
There are signs that the oil shock is leading to more discussion of boosting renewable energy supplies, and about boosting fossil fuel output in more stable countries like Canada, he said. (See: MNI: Canada Needs Bigger Push Than Commodity Boom-Ex-Ministers)
"Colleagues in Asia, colleagues in Europe, are looking for countries like Canada to step up and we’re quite happy to do our part," Champagne said. "To bring some of these assets online, you require a bit more time. We’ve done our part in terms of the strategic release and production."
The "secondary impact" of energy disruptions is also something Champagne is watching. “I’ve seen more than ever I think with this crisis, the nexus between food security, energy security, economic security and national security.” He cited disruptions including helium, semiconductors and fertilizers. (See: MNI INTERVIEW:Canada Exports Resilient Amid US-Iran Strife:EDC)
POWELL, TRUMP AND TARIFFS
Another potential knock for the global economy is Donald Trump's renewed threats of firing Federal Reserve Chair Jerome Powell and desire for much lower interest rates. Canada faces continued tariff threats and trade negotiations this year, and Champagne's Liberals just won a stronger mandate with special elections giving Prime Minister Mark Carney a House of Commons majority.
Champagne avoided directly commenting on dealing with U.S. demands, but defended Powell's record and said Canadians are responding to Carney's message of moving fast to build a stronger domestic economy.
“It’s not for me to comment with respect to U.S. politics, but I would say as an individual having had the opportunity to interact with him (Powell), he’s been a great voice around the table to help all of us navigate the very uncertain world over the last few years,” Champagne said.
“When the prime minister was elected he said we need to do things at speed and scale we haven’t seen in generations. And I think what you see in the polls is a reflection that the vision we’ve put forward is in tune with the Canadian public,” he said. “They want to see a strong Canada at home, and a strategic Canada abroad.”
