Posted: Apr 30, 2019 (written by John Paul Tasker)
Link: https://www.cbc.ca/news/politics/pipeline-constraints-cost-20-billion-canadian-oil-report-1.5116790
Summary: Canadian oil producers could have collected $20 billion more in revenue last year if they’d been able to sell their product at prices closer to the going world rate, according to a new study from the Fraser Institute. The conservative-leaning think tank said that, Canadian heavy crude oil traded at an average discount of $26.50 U.S. That price discount is far larger than it was in the preceding five years, when producers were seeing a gap of just $11.90 U.S. a barrel. Because oil is one of the country’s most valuable exports, the estimated revenue loss works out to approximately one per cent of Canada’s national gross domestic product (GDP), the institute said. With 99 per cent of Canadian crude exports destined for refineries in the U.S., producers are forced to either store product and wait out price dips or offload product at discounted rates. Other companies have turned to crude-by-rail transport — a far more costly and potentially more dangerous option — to send product to the Gulf Coast, where prices are higher for Canadian heavy crude than they are at Midwest U.S. refineries. A mandatory production cut instituted by then-Alberta Premier Rachel Notley, and a promise to buy more rail cars to move product, helped stabilize the Canada-U.S. price gap last year, but the institute said building more pipelines is the most practical long-term solution for Alberta’s oil patch.
Stakeholders and how different organizations can be affected:
Canadian oil producers: They lost a revenue of $20 billion because they traded at an average discount of $26.50 to U.S.A.
Canada’s economic growth: It will affect Canada’s economic growth because it is one of the country’s most valuable exports.
GDP growth rate: The estimated revenue loss impacted GDP by one percent.
Other countries: They will be effected neutrally because neither they will make money nor they will loss it.
Environment: It will be effected because of the building of more pipelines. As a result, people’s health will be affected too.
Personal Opinion: I think this will not affect me as a customer because the prices of crude oil in country will remain same. And this may affect employment rates because they are building more pipelines which may add on a little bit to country’s economic growth.
Question: Do you think this will effect you in any way? Why or why not?
Economics 12 