Reality check—Canada’s need for new pipelines is critical
Source: The Fraser Institute
Author: Kenneth P. Green, Elmira Aliakbari, Ashley Stedman
In recent months, Canadian crude oil prices have dropped relative to other international benchmark prices, costing the economy billions in foregone revenues. The recent surge in the Western Canada Select (WCS) price discount compared to West Texas Intermediate (WTI) is largely due to Canada’s insufficient pipeline capacity. The result? Increased crude-by-rail and higher transportation costs.
Between 2009 and 2012, the average price differential was 13 dollars per barrel. However, in February 2018, the differential reached 34 dollars per barrel, which is a striking increase of two-and-a-half times. This significant increase in the price differential reflects Canada’s lack of transport capacity and restricted market access.
Consider this. Despite growing oil production in recent years, Canada has not built any major pipelines, resulting in excess oil production and lack of transport capacity. Simply put, there are not enough pipes to move western Canada’s crude oil.
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1 Comment
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This comment is in line with our previous comments.
The reality of our present situation is primarily determined by our neighbors to the south who have had control over our industry with respect to:
control of the investment in the industry;
control of the purchase of our unrefined production—they are the only other major purchaser-eastern Canada buys very significant amounts of its crude from sources other than western Canada;
control of the finished goods-gasoline for eastern Canada and some for western Canada;
control of the public relations—mostly negative because the resistance to the oil and gas industry is controlled by a couple of United States Non Profit Organizations who through funding of Canadian entities, pay individuals to disrupt and provide mis-information to the public, so that our production output is ultimately not sent outside of the Americas.If we want to have some control over our oil and gas industry we will have to ensure we deal with a number of issues which are:
Have Informed and active leadership of our country;
Establishing a true national energy program;
Build pipelines to the north , east and west;
Expand the capacity of our existing refineries in Canada;
Move towards public-private financing of the pipelines and refineries so that we are not as dependent on foreign investments-the more sources of investment. The more likely that it will happen;
Continue to reward efficient and ecologically safe methods of production and transportation of our production, we are world leaders in this areaListening to the press, one would never know this.