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The Birth and Death of the NEP

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Those energy policies, however, were not entirely unique to Canada. Other countries with domestic oil production also capped their prices at less than OPEC prices in the 1970s, and applied taxes to capture rising oil revenue for the public sector. In the United States, the controlled prices for "old oil" –- oil produced from U. S. fields discovered prior to 1974 — were at times less than the prices Ottawa set for Canadian oil. Britain applied a schedule of taxes that took as much as 90 percent of the sales revenue from oil fields in its sector of the North Sea.5 The slump in industry expenditures for drilling for exploration was a function of supply and demand. Almost from the inception of the petroleum age, the cycle has swung from oil shortages causing prices too high to sustain economic prosperity to oil gluts with prices too low to sustain the search for and develop­ment of new supplies. The period of supply glut in the 1980s would have reduced industry activity regardless of the NEP; in fact, drilling continued to fall after the NEP was dead.

Regardless, the NEP and its predecessors had adverse economic consequences, and where they were not the cause of tough econom­ic conditions, they made them worse. The consensus of economists is that the NEP was not economic policy, it was a political document. It "did not result in nor was it primarily intended to produce good economics," political analysts Bruce Doern and Glen Toner conclud­ed." The energy policies hit the petroleum industry by the discrimi­natory measures that discouraged the investment of foreign capital; by the federal-provincial squabbles over revenue that squeezed the industry's revenues; and by the "Canadianization" measures which wound up bankrupting the Canadian-owned firms they were intend­ed to help.


  1. Foster, Sorcerer’s Apprentices.
  2. For more on the link between the National Energy Program and the Western Development Fund, see Doern and Toner, Politics of Energy.
  3. Petroleum Economist, Nov. 1981.
  4. Robert Bott, “Ten Years after the NEP,” CPA Review (Calgary: Canadian Petroleum Association, Nov. 1990).
  5. Petroleum Economist, “U.S. Prolongs Price Controls” (Jan. 1975), “PRT Rises to Boost Stake take” (Sept. 1978).

From The Great Canadian Oil Patch, pgs. 449 to 454, reprinted with kind permission of JuneWarren Publishing and Mr. Earle Gray


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