The province of Alberta, opening a political struggle that could eventually force Canada into a constitutional crisis, announced today that for the first time it was setting domestic petroleum prices without the formal agreement of federal authorities.
The announcement comes less than a week after Prime Minister Pierre Trudeau and Alberta Premier Peter Lougheed broke off negotiations on oil issues. This heightened tensions between the Liberal government and Alberta, which produces most of Canada's crude oil.
But a major clash between the national and provincial governments was averted. Alberta raised the wellhead price of oil -- previously about $12.80 a barrel -- by only $1.70. Federal officials previously had said they would not object to a unilateral move by Alberta if the increase were $1.70 or less.
By avoiding provocative action, the Alberta government has left open the possibility that Trudeau and Lougheed might renew their talks before the issue becomes a national crisis.
Alberta says it has the right to set oil prices because under Canada's constitution, the provinces own their resources.
Ottawa says the national government has the right to set prices because under the constitution, the federal government can set the price of goods once they have left a province.
In the past, the two governments have set prices jointly, and Canada has been spared the divisive effects of a showdown.
The two sides remain far apart on how fast domestic oil prices should rise after today and how billions of dollars of new revenues should be divided.
In addition, the Trudeau administration is proposing an export tax on natural gas sold to the United States, an idea adamantly opposed by Alberta and the other western Canadian petroleum-producing provinces -- British Columbia and Saskatchewan.
The Alberta government hinted it may raise the oil price again by another 85 cents as early as October. This would probably prompt a strong response from Ottawa.
The next move will probably come in the federal government's budgetary message, to be presented when Parliament reconvenes in October. At that time, if the Trudeau administration and oil-producing provinces are still unable to strike a deal, Ottawa would probably impose a petroleum pricing schedule and other related revenue-generating measures in the budget.