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Lately, CBC News has been spending a lot of effort on the price differential between Canadian oil and the stated oil price in the world marketplace. Currently there is about a $30 barrel difference, and CBC is spinning this angle as something sinister.
The article does seem to acknowledge that oil is not a commodity of consistent quality. However, the article makes light of this reason for this difference, going back to pipeline capacity.
Western Texas Intermediate (WTI) oil has great qualities for refining. All other oils in North America are compared to WTI, and price discounts are applied based on that quality. Oil companies (sellers) and refineries (buyers) have employees in place to ensure both sides are getting a fair deal on the exchange. Many American oil companies do not get WTI price for their oil because it is not as good of quality as WTI.
The oil coming from the Canadian Tar Sands is no where near the quality of WTI. It should not be getting a high price because it is harder to refine.
Twenty years ago, the Alberta government set up a wild west scenario in that any oil company with a tar sand lease and lots of cash could set up a tar sand operation. At least 10 mega-projects were being constructed at the same time, which created a great labor shortage of skilled tradespeople. When all these projects were completed, there was an oversupply of tar sand plants. The government hastily improved a rail link from Fort McMurray to Edmonton to help move oil to the mainstream market.
So will more Canadian pipelines help reduce the differential? I doubt it.
With a significant proportion of the oil already being moved by rail, this oil can easier find more eager buyers if there are any.
With the pipeline system in place, oil from Alberta (and the tar sands) has four directions it can travel:
1) Stay near Edmonton where it can be refined for local markets.
2) Move to Vancouver where it can be refined for local markets.
3) Move to Central Canada where it can be refined for local markets.
4) Move to Manitoba where it can be exported to the American market. When it leaves Manitoba, the oil can be delivered to many different refineries in the USA.
Canadian oil sellers already have a sufficient number of oil buyers to barter their oil for the best possible price. Adding a new pipeline or two will allow more oil to be sold--or at least travel by the safer pipeline than by rail. But the fact still remains that most Canadian oil is still not the quality of West Texas Intermediate: it will continue to be deeply discounted.
CBC is getting this story all wrong.