Canada’s lack of the pipeline capacity to transport crude oil to markets has cost producers over $20 billion in 2018 alone, a new report charges.
The new report from the Fraser Institute highlighted the shocking price differential between Canadian crude and the global average.
“In October 2018, Canadian heavy crude (WCS) traded at only about 40 percent of the US crude (WTI) price, which represented a discount of 60 per cent. In November, the price differential widened even further and reached almost 70 per cent, meaning that WCS was sold at only 30 percent of WTI,” it reads.
This means that for most of 2018 Canadian crude was selling at less than half that of American crude, amounting to a loss of $20.6 billion — equivalent to about 1% of Canada’s entire GDP last year.
Last fall, Canada produced 400,000 barrels more than pipelines had the capacity for, meaning increased storage costs and lost potential revenue.
Producers have been forced to transport crude by rail in order to get it to markets which are both more expensive and less safe.
Canada has seen multiple pipeline projects, which would have addressed the shortage, get cancelled or postponed — with no end in sight, the energy sector is no haemorrhaging money and losing thousands of jobs.
Rather than fix the situation, the Trudeau government has created laws like Bill C-69 which only deepened the competitiveness crisis with the United States.
The report also recognizes the necessity to new markets for Canadian crude given demand changes in the United States.
“Currently nearly 99 per cent of Canadian heavy crude gets exported to the United States, meaning that the US is essentially still Canada’s only export market for crude oil.
“Given soaring US oil production in recent years and competition from American producers, finding new customers for Canadian heavy crude is critical.”
Seeing that many pipelines to both the United States or the Pacific have been cancelled or left unapproved indefinitely, it appears that low pipeline capacity will continue to be a drag on the Canadian economy.