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Boycott Canadian Oil Sands? I Think Not.

|Includes: The Gap, Inc. (GPS), PTR, TBL, WBA
It seems there is a movement afoot to pressure Fortune 500 American businesses to stop using petroleum from Canadian oil sands production. Since Feb of this year, the American activist environmental group Forest Ethics, and its sister organization Rethink Alberta, have been attempting to line up support for programs designed to eliminate mainly diesel fuel to power fleets of corporate delivery trucks that is refined from synch fuels using the oil sands.

Last week, Forest Ethics announced it had signed up four additional American companies for this effort. They are: The Gap (NYSE:GPS) including Old Navy and Banana Republic; Timberland (NYSE:TBL); Levi Strauss; Walgreen’s (WAG).

In Feb, Forest Ethics announced they had signed on Whole Foods (WMFI) and Bed Bath and Beyond (NASDAQ:BBBY). BBBY later clarified their position saying it requested its logistics suppliers to “give preference to fuels with lower greenhouse gas footprints where feasible.”

There has been a call from some Canadians to reciprocate by refusing to do business with these firms. Mr. Ed Stelmach, Premier of Alberta, is writing the companies involved to voice his objections.

Since the announcement by Forest Ethics, three of the four US firms have also clarified their positions. According to the CBC News organization:

The Gap:
“A spokesman for The Gap said the company is not boycotting the oil sands. ‘It's absolutely untrue and inaccurate to portray it that way,’ Bill Chandler, the clothing retailer's vice-president of corporate communications, said Monday from San Francisco. In Canada, The Gap has asked potential transportation contractors for more information about the fuel they use, but it has not said how this will factor into company decisions — if at all, Chandler said.”

Levis Straus:
" ‘Levi Strauss & Co. supports the development and use of clean and renewable fuel sources, but we do not take a position opposing or supporting any fuel or energy source from any country or geography,’ Levi Strauss spokeswoman Genevieve Sexton said in an emailed statement. ‘We expect our transportation service providers to demonstrate a similar commitment to environmental sustainability and emissions reduction, and have made these expectations part of our contracts with transportation providers. We have not stated any requirements for how our transportation contractors will achieve emissions reductions or put stipulations on where they source their fuel.’ ”

“A spokeswoman for Timberland, Robin Giampa, told CBC News in an email that the company has asked its transportation contractors to show how they have increased their use of ‘low carbon fuels and avoiding carbon-intensive sources’ but that does not mean the company is boycotting a ‘type or source of fuel.’ "

Canada has become an important source for US imported oil with Canadian imports increasing by 61% over the past decade. Sixty-five percent of current oil sands production goes to refineries in the Midwest. However, in addition to Forest Ethics wanting to eliminate oil sands imports, there are Congressional leaders who are actively attempting to block a proposed pipeline from Alberta to New Orleans.

Waiting stage right are oil-thirsty consumers in China, India, South Korea and Japan. 

The Chinese are current developing several properties in the oil sands, and probably won’t be sending any of their production to US consumers.  PetroChina (NYSE:PTR) has taken a 60% stake in two new tar sands projects due to start production next year. These projects combined anticipate producing 35,000 barrels a day within 3 years, and eventually producing up to 500,000 a day.

It would be just as feasible to build a pipeline from Alberta to waiting Chinese oil tankers off British Columbia as it would be to build one to New Orleans. 

It seems obvious that there exist multiple long-term competitive buyers of current and future oil sands production. If it won’t be the US and our consumers, it will be our Asian partners. 
Is boycotting Canadian oil sands production in our country’s best interest?   I think not.

Disclosure: No Positions in the listed companies, but long SU since 2009