Trump could strike back at Alberta oil cuts, says former provincial trade envoy

A former Alberta trade envoy to Washington, D.C.,believes U.S. President Donald Trump could slap the province with countermeasures for its decision toimpose mandatoryoil production cuts.

Gary Mar, Alberta's representative in the U.S. capital for four years from 2007, said it's uncertain how Trump will feel about the province's decision to wadeinto the free market in a bid to raise Canadian crude prices.

But the president could take action if he becomes concerned with climbing prices, Mar said.

• Why producing less oil is likely to help Alberta and Canada earn more

Trump has been a vocal advocate for lower oil prices, frequently calling on OPEC members to boost production in recent months. The vast majority of Alberta crude is sold inthe U.S.

"The president of the United States obviously is very keen on his America First policy," Mar told CBCCalgary's News at Sixin an interview this week.

"And if he sees that there is a change in the price because of a curtailment of production, he might not treat that very favourably. We don't know what he's going to do.

"But you can imagine that in an America First policy, as presented by the president of the United States, we could be in for some type of countermeasure against our increased price."

Watch Gary Mar explain how Trump could react to Alberta oil cuts:

Gary Mar on how Donald Trump could react to the mandatory oil production cuts in Alberta

5 years ago

Duration 2:06

Alberta's representative in the U.S. capital for four years from 2007, said it's uncertain how Trump will feel about the province's decision to wade into the free market in a bid to raise crude prices.

Mar, now president of the Petroleum Services Association of Canada (PSAC), made the comments in Ottawa, where he is meeting this week with federal officials to stress the importance of the domestic energy sector.

His remarks follow Premier RachelNotley'sannouncement Sunday of a temporary 8.7 per cent oil cut, or a decrease of 325,000 barrels a day, in the production of raw crude oil and bitumen starting Jan. 1.

The action is aimed at liftingAlberta crude prices, which plummeted earlier this fall afterproduction growth and pipeline bottlenecks contributed to a costly oil glut.

The day afterNotley'sannouncement, the price of Western Canadian Select heavy oil jumped$8.02 US to$29.95 a barrel.

Oil companies that had called for production cuts praised the premier for her decision. The move also found support among her political rivals.

However, Husky Energy and Imperial Oil which both opposed mandatory cuts have warned that government-ordered curtailment could have implications for trade and investment.

"We believe the market is working and view government-ordered curtailment or other interventions as possibly having serious negative investment, economic and trade consequences," Husky spokespersonMel Duvall said Sunday.

Provincial officials have downplayed such fears, saying they don't believe curtailment will spark trade trouble.

Christopher Sands, director of the Johns Hopkins University Center for Canadian Studies in Washington,also does not believe Alberta has opened itself up to either trade or diplomatic problems.

"The real trade vulnerability would be if curtailment led to lower shipments to the U.S. because then that would be actionable" under current trade terms, Sands said in an interview.

"By saying they will maintain all of their commitments to the U.S. ...they have, Ithink, covered their exposure."

Alberta's plan appears to be carefully devised, he said, andeven if rising prices causeAmerican refiners to grumble,they'll continue to take Alberta oil because their facilities are set up for it.

"The folks who are tuned to refine Canadian oil are going to absorb that price and, given the state of prices globally, it will still be profitable for everybodyI would think," Sands said.

Carlo Dade, an expert on Canada-U.S. trade who's with the Canada West Foundation,doesn't think Alberta's curtailment violates the North American Free Trade Agreement (NAFTA), which is stillin effect.

Also, with America awash with oil and the president preoccupied with other issues, Dadedoesn't believe the cuts would be on his radar. Still, with Trump in charge, you can never be entirely sure, he said.

"What would have been a no-brainer not to worry about under Obama or any of the Bushes is something that we do have to keep in the back of our minds," Dade said.