Canada is the "world's biggest oil loser," buying its crude oil high and selling it low, costing...

Canada is the "world's biggest oil loser," buying its crude oil high and selling it low, costing its economy ~$19B annually in lost revenue. The spread between Alberta’s exported Western Canada Select and Brent oil imported into Ontario and Quebec has reached ~$30.50/bbl, a difference BofC Governor Mark Carney says is creating a drag on growth.

Comments (2)
  • phxcrane
    , contributor
    Comments (705) | Send Message
    Why the difference?
    8 May 2012, 05:33 PM Reply Like
  • bob adamson
    , contributor
    Comments (4560) | Send Message
    Why the difference? Largely because Canada is a very large country (about 4, 000 km from east to west coasts), the price of delivery to market and refining imported offshore oil has historically often been lower than for western domestic oil, the requirements to refine oil from various domestic and offshore sources differ significantly and it is both costly and politically contentious to retool Eastern Canadian refineries to process Alberta rather than offshore oil.


    During much of the 1970s the policy of the Canadian Federal Government was to encourage transportation by pipeline of oil from Alberta to Sarnia in Ontario for refining and distribution in Eastern Canada but this required that such Alberta oil be sold at below world prices and that Ontario and other Eastern Canadian markets forgo importation of offshore oil should it become cheaper than oil from Alberta in the future. For a complex mixture of political and economic reasons the Federal policy was met with fierce opposition in several powerful quarters across Canada despite the fact that it would have fostered stable domestic oil prices and energy independence for Canada.


    The upshot is that currently the refineries in Sarnia and elsewhere in Eastern Canada are geared to refine lighter and sweeter offshore crude (albeit that such crude costs about $110 a barrel to import while synthetic and heavy oil, much of which has a high sulfur content and (because of transportation bottlenecks) sells at about $80 a barrel lacks an adequate outlet to market. Compounding this complexity is the fact that the low price of both conventional and synthetic oil in Western Canada does create a benefit to refiners, distributes and retailers of petroleum products located there.


    In short, there are political and economic pressures which serve to preserve the current transportation pattern of oil within Canada despite changes from time to time in the relative price of oil from domestic and offshore sources.
    10 Aug 2012, 04:09 PM Reply Like
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