Monday, March 23, 2009

Thinking about nationalizing?

Yesterday’s news that Suncor Energy Inc. (TSX:SU) will merge with Petro-Canada (TSX:PCA) to create a $43.3-billion integrated energy giant brings Canada closer to the final chapter of the country’s unseemly dalliance with energy socialism. Petro-Canada’s origin dates back to the oil crisis of the 1970s and Pierre Trudeau’s nationalistic energy policy. The hands of government still remain on the enterprise, as the Petro-Canada Public Participation Act still regulates the control of Petro-Canada.

Given the considerable challenges the energy business must overcome, this merger reflects the expanded need for rationalization and integration to finance and produce energy resources like the oil sands. Suncor has picked an opportune time to buy PCA, and investors can expect more oil patch M&A activity. However, as a reminder of how invasive and controlling the hands of government are on nationalized enterprise free-market participants would do well to view the contents of the act that governs Petro-Canada. This is the language of control, this is the language of socialism. Beware “the Minister”.

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