It's nice to be testifying with André and Stewart.
In my remarks today, I'd like to reiterate some of the key forces we face in the oil and gas markets. I'd like to start by eliminating a source of confusion, at least one for me, about when people talk about oil and gas markets and then fail to distinguish that these are fundamentally different from electricity markets, the area I work the most in. When we hear commentary on news media, or often in policy debates, we hear discussion of the energy market. The energy market, small “e”, is one that encompasses a lot of different fuels, but it's not necessarily the oil market, and it's only partially the gas market when we talk about generation.
Per your instructions for my appearance today, I'm confining my remarks to oil and some gas markets, a couple of remarks on coal, but none on electricity. In that, I'm going to concede that I'm making a mistake, because all of these markets depend on electricity for pumps and control systems and, as a consequence, the issue of electricity does belong in the background of your deliberations.
The four key forces—which, I would point out, bring us to a discussion of whether we can become more competitive in oil and gas—in many ways have to do with the outside world. We have lots of world competition. Oil is abundant and is relatively easy to get at. It doesn't matter whether you're talking about Africa, South America, Mexico, or the Asia-Pacific markets, we have a lot of competition in that wide world. We have a lot of increased supplies coming from elsewhere in the world, Saudi Arabia being a principle case. When you're dealing with someone whose marginal costs of production, from fields they developed back in the mid-1950s, could be as low as $6 a barrel, you have someone who doesn't need to hesitate to lower prices or force capitulation in world markets. This affects us, of course, fairly dramatically.
There's a decrease in the demand from our principle client, the U.S. There are a lot of reasons for that, but in part they're developing their own supplies, and they're certainly fostering some innovation of their own on the demand side of the market.
As Professor Elgie pointed to in his remarks, we have new environmental standards that are imposing restrictions on us and on the way we acquire and process oil and other hydrocarbon products. Those standards are beginning to bite and constrain our ability to not only create new facilities in Canada but also to be able to sell to the U.S. and points beyond.
My recommendations and my sense of where we have to go are contained in how we are going to change our own responsiveness and our own structure for governance and incentives in the broader policy arena in Canada.
I'm going to suggest that we have to sponsor a couple of changes that will be fundamental to providing incentives for new innovation and new inventions, or new ways of doing business.
First, we need a better information system. We need something like the U.S. EIA in terms of our sources of information—and that's for all of our players, including the provinces or future investors. We need a way to get dispassionate, accurate, and dependable energy information out into the marketplace. We don't do that now. We have limited and, at least from the market's standpoint, biased information sources that don't always benefit every province or every area in an egalitarian way.
Second, I believe that we need an energy strategy, a real energy strategy, not just platitudes and policy prescriptions that are a reflection of current political conditions, but a strategy that says where we want to go as a nation in terms of our investments and in terms of our long-term policies, a strategy that brings the provinces together rather than continues to support 10 separate energy policies, 10 separate structures dealing with the outside world. If we're going to be able to sponsor that kind of energy strategy, we will find a better view of the future and a better view of how markets operate.
In that sense, I would like to suggest that we have a habit of chasing markets rather than planning for them. The energy markets that we face, we could address with hydrocarbon products, not necessarily just raw oil products, or natural gas, or natural gas liquids. In fact, markets will demand different products from us, and we're going to have to anticipate them and get out ahead of that.
I think that leads us, inevitably, to a world of greater investment. I'm going to touch on what Stewart Elgie just said, we need greater investment in trying to understand where technology is going and trying to understand how to produce better products that use energy in all its forms more efficiently over time.
Innovation, I believe, will be based on a fuller understanding of the basics of the technologies that we use and on finding out what to incent. The reference to developing new technologies, which I'm very, very familiar with from working at the U.S. national energy labs, is to know when to quit. You can chase a lot of technologies that have promise but won't make it through what's known as that S-curve, the valley of death that doesn't let them get commercialized over time.
I think we can focus our innovation most profitably on learning what the choices are of technology, how to use that most effectively, and how to focus on behavioural choices, which is the component that literacy is built on. We've done some work with Carleton University and discovered that there are great strides we can make in terms of bringing the public on to support technological change and embrace new solutions. Finally, make investment uncertainty decrease by having more consistent policy goals and more consistent opportunity, consistency between provinces and between investment opportunities.
Let me just list a couple of areas where I believe that innovation and technological change can benefit us in terms of using our oil and gas or hydrocarbon resources when they are finally no longer useful or attractive to the marketplace. By the way, I believe that the 2040 date that Professor Elgie suggested is probably very close to reality. The likelihood that there will be a transportation market beyond 2050 is pretty low. It will likely be replaced by electric demand more than combustible fuel demand.
We can use some of our hydrocarbon products, including natural gas, to bring onshore fertilizer businesses back to Canada. It's likely to be useful as we begin to get longer rotation times for agriculture and more penetration of agricultural development farther north. There are new chemical products that are an attractive industry that can use the residual from oil and use it very, very productively. There's an attractive export market for us. We can begin to think more seriously about exporting electricity that we don't have to move around in bulk. In other words, if you generate electricity in many forms, we can begin to export that instead of the fuel itself.
We've got new opportunities for plastics and synthetics—and frankly, long term, one of the most attractive uses for some of our pipeline system may be for moving water around and making use of that in new water markets.
At the core of of my arguments here today lies the idea of getting our policy arena more consistent, more coherent, and adopting strategies that bring the provinces together with a goal of trying to understand where the future energy markets in the wide world are going, as opposed to where they've been. I think when that is put out in front of the investment community more clearly, we're likely to be more attractive for capital investment here and, frankly, for a transition that's more attractive to outside investors.
My final point is that we are living adjacent to a country that has invested a tremendous amount of money in developing the 11 national energy labs just south of us. Right now every one of those labs is looking for research opportunities and collaboration for developing new technologies, and one of those is right in front of us today, a $240 million investment in revamping the transmission grid to make it more resilient and to bring it into the 21st century. These all represent opportunities for collaboration with people who do this for a living all the time. One of the most efficient uses of some of our own research talent will be collaborating with our colleagues in the U.S. and speeding up that S-curve that Professor Elgie just spoke of.
Thank you.