Reality check—Canada’s need for new pipelines is critical
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.