Trudeau and Alberta lock horns over oil price hikes

Prime Minister Pierre Trudeau's showdown with the western Canadian province of Alberta on the issue of domestic oil-price hikes is causing more political and financial trouble for his Liberal government.

The year-old impasse has strained Trudeau's energy policy to the breaking point, forcing the Liberal government to resort to highly unpopular tax increases.

As a result, Mr. Trudeau, who won reelection in 1980 mainly on a pledge to keep energy costs from rising steeply, recently has had to weather furious criticism over the sharply higher gasoline prices imposed by the Liberals.

The main players in the drama are Mr. Trudeau and Alberta Premier Peter Lougheed, whose province supplies 90 percent of Canada's domestically produced crude.

Last October, after Ottawa decreed new oil-pricing and revenue-sharing rules not to Alberta's liking, Mr. Lougheed announced he would begin slowly turning down the oil tap.

By this month the province had cut its shipments of crude by 120,000 barrels a day, and was planning further 60,000-barrel-a-day cuts later in the year.

This move is playing havoc with the budget of the federal government.

Canada imports about 400,000 barrels a day of crude, and under a complicated system of subsidies brought in by the Liberals, Ottawa pays billions of dollars a year to keep the domestic oil price low. Currenly it is $14.56 a barrel, less than half the world price.

So, each time Alberta has cut back oil shipments, the Trudeau government has been forced to slap another tax on gasoline to ease the burden on the federal treasury.

Ottawa, in an obvious attempt to shift public resentment against Mr. Lougheed , depicts the tax hikes as "the type of punishment that is being imposed by the government of Alberta," as one Liberal minister put it.

But the most recent Ottawa-imposed tax increase -- 7 cents a gallon on gasoline -- was much larger than anyone expected and drew thunderous protest when it was revealed earlier this month.

Announcement of the tax increase set off one of the loudest uproars in the House of Commons in many months. Progressive Conservative Party leader Joe Clark, referring to the Liberals' 1980 pledge to hold down gasoline prices, said Mr. Trudeau's regime was "an arrogant and callous government which once again breaks its promise to the Canadian people."

Mr. Trudeau was loudly rebuked by many Canadians for the abrupt tax hike. This wave of criticism came at a time when the Liberal government was already under fire from opponents of its plan to write a new Canadian constitution.

Mr. Trudeau, whose party is trying to rebuild its weak position in western Canada, said recently that he would very much like to solve the energy dispute with Alberta.

But, despite continuing negotiations, no progress is in sight. Alberta refuses to take the blame for the higher gasoline taxes Ottawa has brought in.

"The federal government made the choice by unilaterally imposing a price for oil last October which they knew we would regard as totally unacceptable," Alberta Energy Minister Merv Leitch said recently. "They knew we would reduce productions."

It is not yet clear who is winning this propaganda battle. Trudeau has lost points recently, but there is deep anger among Canadians, particularly in the eastern region, about the Alberta Supply cutbacks.

"I think it's unfortunate that one province can tell us what we have to pay for oil," a Toronto man said. "I don't think it would happen in any other country. For instance, I couldn't see Texas doing it in the US."