News reports say Grande Prairie is back on its feet. This, after long years following the oil price collapse. Many businesses across northern Alberta cut jobs. Many closed their doors, including both big and small local employers. Today, Grande Prairie people who track such things say the numbers are up. There are more trucks on roads. More heavy loads. Motel rooms are filling up. Crime is down. It’s not all roses everywhere, but there is good news.
But, there is one big “bad” news item hardly ever mentioned: Alberta oil is sold at a discount, often a very, very steep discount, to the price quoted on the nightly news.
Last week, the discount was huge. The headline news price was $65.56 US. Alberta headline price, known as Western Canadian Select, was a measly $33.50. That’s almost half – yes, that is correct – half, of the American price, known as West Texas Intermediate.
There are hundreds of prices around the world at which oil changes hands. To name only a few, there is Brent Weighted Average and Brent North Sea [either often called “world price”], Middle East Sour Crude, Mexican Basket, and OPEC Basket. Even in Alberta, we have Sweet Crude, Peace Sour, Syncrude Sweet Premium, Central Alberta and more. Some, like Premium Sythentic fetch WTI prices. But mostly, being well paid is rare.
All prices relate to distance from market, ease of shipping, supply and demand, and ease of refining into higher price products.
And there are the rubs. Heavy crude that comes out of Alberta oilsands is diluted, or it is upgraded. Of course, it has to be refined. There is not enough refinery capacity in Canada. It will likely be a long time, if ever, new refineries are built. It’s just too cheap to operate Gulf Coast refineries compared to building new. In fact, it’s cheaper to send oil to Asia for refining.
However, Alberta can’t get it there. No pipeline capacity. Rail companies say they won’t take more oil by rail unless they have long term contracts.
All in all, it’s critical new pipelines are built. Otherwise, this huge discount for most Alberta oil will continue. Which means lost jobs and lost opportunity for Albertans. Canadians as a whole, rely on transfer payments and taxes from business and taxpayers in Alberta to run Canada.
There was a time when some Albertans famously shouted “Let those eastern b******s freeze in the dark.” The idea being, if Alberta couldn’t get world price for its energy resources, it would just be left in the ground.
As seen today, leaving resources in the ground helps nobody. Even the most diehard environmentalist has to admit, our oil and natural gas is better for the environment than existing coal plants in China or India.
And what of the human rights records of many foreign producers?
Alberta Premier Rachel Notley was headlined last week as “taking the gloves off” in her fight for new pipeline capacity through British Columbia.
This is all Albertans’, and Canadians’, fight.
Damn right the gloves should be off.