OREANDA-NEWS. August 07, 2012. The media are having a great time portraying the showdown over the Northern Gateway Project as a cat fight between the premiers of Alberta and B.C.

But this battle isn't just a bunch of soundbites from two tinpot politicians—including one who may be out of a job within a year.

In geopolitical terms, this is really a race between the United States and China for Canadian energy, with B.C. and Alberta serving as the playing field.

There can be little doubt that the United States has serious concerns about Enbridge's proposed pipeline linking the Alberta and Kitimat. That's because it would clear the way for China to get its mitts on Canadian oil, reducing supplies and raising prices for U.S. refiners.

The Obama administration deftly undermined the Enbridge proposal with a July 10 news release. In it, the chair of the National Transportation Safety Board, Deborah A. P. Harsman, pointed to "a complete breakdown of safety at Enbridge" in connection with an oil spill in Michigan.

She even claimed that Enbridge's "employees performed like Keystone Kops and failed to recognize their pipeline had ruptured and continued to pump crude into the environment." It was an ironic choice of words, given that one of the rivals to Enbridge's Canadian proposal is called "Keystone XL".

To really rub it in, Hersman added: "Despite multiple alarms and a loss of pressure in the pipeline, for more than 17 hours and through three shifts they failed to follow their own shutdown procedures."

Canadian opponents of the Enbridge pipeline seized on this statement to advance their claim that the company can't be trusted to protect B.C.'s environment.

Meanwhile, China doesn't want too much Canadian oil flowing to the United States through the proposed Keystone XL pipeline. This project is back in play, according to a recent email sent out by the environmental group 350.org.

Former president Bill Clinton has expressed his support for the project, even though his wife Hillary oversees the approval process.

Focus on the math

The Keystone XL pipeline would ship 800,000 barrels of oil per day to the United States.

The Enbridge pipeline would transport 525,000 barrels per day to Kitimat for export, likely to Asia. And Kinder Morgan Canada's proposed twinning of its pipeline from the tar sands to the Lower Mainland would move another 550,000 barrels per day, enabling the export of more oil to Asia.

Add those numbers up, and you get nearly 1.9 million barrels of additional oil moving through Canadian pipelines for export.

According to the Alberta government's energy ministry website, 1.31 million barrels per day came from the tar sands in 2008. The government expects this to rise to three million barrels per day by 2018.

If the economy slows in either China or the United States, demand for oil will go down in those countries.

Then, there wouldn't be enough production in Alberta to keep sufficient amounts of oil flowing through all three pipelines to justify the huge capital expenditures.

Kinder Morgan's parent is a U.S. company, unlike Enbridge. If only one pipeline project to the coast is approved, the U.S. government would prefer that it be Kinder Morgan's.

Meanwhile, oil production rose by 1.4 million barrels per day in the United States between 2008 and 2011, thanks to horizontal drilling techniques and the controversial practice known as "fracking". This is also undermining U.S. demand for oil imports.

The Canadian Association of Petroleum Producers recently produced an exceptionally rosy forecast of 6.1 million barrels per day from all Canadian sources by 2030. Of that, five million barrels would come from the tar sands. Prime Minister Stephen Harper has started quoting that production figure as if it's a fact, rather than a very optimistic forecast.

However, former CIBC economist Jeff Rubin's recent book, The End of Growth, questions whether there will be sufficient demand in the economy for all this oil production.

He has a chapter called "The Keystone Condundrum", which spells out some of the details. He notes here that Canadian oil producers are selling at about USD20 per barrel below the world price into the U.S. market because of the surplus of oil in Cushing, Oklahoma.

This enables U.S. refiners to buy this oil at a bargain price, then reap windfall profits selling it to motorists.

The Alberta government is eager to get the Northern Gateway Project approved because Canadian oil producers could sell their commodity at world prices to China, which would bring in more royalties to the provincial treasury.

In addition, having customers in Asia could also reduce the bottleneck at Cushing, driving up the price of oil sold into the U.S. market, too. That adds up to more money in the pockets of oil companies and the Alberta government.

B.C. government officials know this, which is why Premier Christy Clark and Finance Minister Kevin Falcon are talking about some sort of revenue-sharing in return for supporting the Enbridge application.

Rubin points out that if the Enbridge pipeline is approved, the "big loser" will be the U.S. economy. He paints it as a zero-sum game, in that if one pipeline project is approved, the other one is doomed.

That has to be of concern to the staff working in the U.S. embassy in Ottawa and the U.S. consulate in Vancouver.

I wonder to what extent they might have pushed the B.C. government to rethink its position on the Enbridge pipeline.

By finally playing a little hardball, the B.C. Liberal government has begun acting, in a geopolitical sense, in the interests of the United States.

The B.C. NDP is also advancing the interests of the U.S. economy with its effort to rally citizens to be more concerned about the Enbridge project.

That's apart from the very real issues related to the marine coastal environment.

Prime Minister Stephen Harper, on the other hand, is advancing the interests of China by streamlining the regulatory process and trying to cut off funding for environmental groups that oppose the Enbridge project.

It's noteworthy that a rabid free enterpriser like Harper promotes policies to help a supposedly Communist government in Asia. Meanwhile, the B.C. NDP is being far more friendly to our neighbours to the south.

It's looking like Premier Clark is moving in that direction, too, though it took her a long time to figure out which way the winds are blowing.

Perhaps this position will one day result in preferential treatment for B.C. in the export of lumber and other products to the U.S. market.

The environmentalists, on the other hand, appear to want to stop all the pipelines from being built. They're not playing favourites.