CALGARY—Lack of pipeline capacity is driving down the price of Canadian oil, costing the country’s energy sector C$20.6 billion in lost revenues last year, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“Without sufficient pipelines to coastal ports, Canadian oil producers must sell their product to the United States at dramatically discounted prices, which leads to large losses for the energy sector and more broadly Canada’s economy,” said Elmira Aliakbari, associate director of natural resource studies at the Fraser Institute and co-author of The Cost of Pipeline Constraints in Canada, 2019.
The study finds that Canada’s overdependence on the U.S. market (again, due to Canada’s lack of pipeline capacity to tidewater) has led to a greater reliance on oil-by-rail—a more costly (and less safe) mode of transport.
The result?
Even after adjusting for quality differences and transportation costs, Western Canada Select (WCS)—the heavy oil extracted from Canada’s oilsands—sells for much less than comparable West Texas Intermediate (WTI) oil.
In fact, last year the price difference between Canadian and U.S. oil was US$26.50 per barrel. Put differently, in November 2018, WCS traded at roughly 30 per cent of WTI, representing a 70 per cent price discount.
And crucially, last year’s lost revenue ($20.6 billion) nearly eclipsed the revenue loss for the previous five years combined (2013 to 2017) when Canada’s pipeline shortage cost our energy sector $20.7 billion.
“Clearly, the federal and provincial governments must better cooperate to get pipelines built so Canada’s oil producers can connect with markets overseas,” said Ashley Stedman, study co-author and senior policy analyst at the Fraser Institute.
The Cost of Pipeline Constraints in Canada
Media Contact:
Elmira Aliakbari, Associate Director, Natural Resource Studies, Fraser Institute
Ashley Stedman, Senior Policy Analyst, Fraser Institute
To arrange media interviews or for more information, please contact:
Mark Hasiuk, Fraser Institute
mark.hasiuk@fraserinstitute.org
The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit fraserinstitute.org.
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CALGARY—Lack of pipeline capacity is driving down the price of Canadian oil, costing the country’s energy sector C$20.6 billion in lost revenues last year, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“Without sufficient pipelines to coastal ports, Canadian oil producers must sell their product to the United States at dramatically discounted prices, which leads to large losses for the energy sector and more broadly Canada’s economy,” said Elmira Aliakbari, associate director of natural resource studies at the Fraser Institute and co-author of The Cost of Pipeline Constraints in Canada, 2019.
