A bit of crude talk

There’s a movement afoot that wants Canadians to believe we are not to blame for losing billions in tax revenue and tens of thousands of jobs.

There’s some needed clarity on the issue of the oil price collapse of 2014 and the overabundance of U.S. light crude being the driver of Alberta and Saskatchewan’s woes, and the lack of new pipelines. 

Here’s what’s going on.

Canadian companies export crude for U.S. dollars, which are converted to Canadian dollars. What this means is that at $US80/barrel and a Canadian dollar at $0.92, as in 2014, Canadian companies got around $C87 per barrel of oil with no differential. Similarily, when the West Texas price is $US56 and the Canadian dollar $0.75, Canadian companies receive C$75 per barrel. 

U.S. refineries are tooled for heavier crudes like Canada’s dilbit, rather than light crudes. In fact, rather than an expensive retool of refineries, the U.S. ban on exporting their crude oil was lifted to allow these low profit margin, light shale oils to leave the country unrefined.

We saved U.S. refiners hundreds of millions in retooling costs.

Here’s the rub ... Our Canadian oilsands operators were under the belief Canada would allow them to get their product to world markets, just like grain farmers, GM, lumber mills, etc. These companies invested tens of billions in the Canadian economy to get oilsands production to a profitable level. They created thousands of jobs, obeyed environmental restrictions, and reduced their carbon footprint. Canadian companies increased production to target world markets.

But pipelines to the Canadian coasts were and have not been built. That increased product we produce can not leave North America ... except via where? The United States. The U.S. refiners in Texas have us over a barrel. The U.S. now essentially controls price. 

There are simple economics of supply and only one customer in play here. The U.S. has been dictating our product price. Now imagine you are a Texas refiner getting cut rate Canadian crude, maybe $20-$30 per barrel cheaper than world price. He buys the cheap stuff, refines it, and sells at huge profits to his market. What a deal.

Knowing you could get close to world pricing, and increase your country’s standard of living, keep your jobs, and add huge tax revenues to pay for things like maybe universal drug plans, and free post secondary tuition — maybe that’s why Alberta and Saskatchewan aren’t happy. Maybe Canada deserves alternatives.

There’s a movement afoot that wants Canadians to believe it’s not our fault we’ve lost out on a better standard of living, have to borrow for universal Pharmacare, wait for free post secondary tuition for all, and leave our seniors and vets disadvantaged by low pensions. This movement says we are sinners for wanting an east to west pipeline and a better life.

Give your head a shake. We Canadians have been martyred at the alter of climate change for the sake of U.S. profits.

Neil Stephenson, Kelowna