Why Is Alberta’s Oil Cheaper?

Why Is Alberta’s Oil Cheaper?

By Payman Parseyan

Alberta is the heart of Canada’s oilsands and economic engine. It’s no secret that the oilsands have helped to fund roads, schools, hospitals and other major projects for over half a century. We know that the world will eventually shift to less carbon-based energy sources. This doesn’t mean that we must forget our vibrant and innovative oil & gas sector. 100,000’s of employees feed their families, clothe their children and pave our highways (figuratively and literally) because of this sector. The international energy agency predicts that the earlier the globe will peak its demand for oil is 2045. That means that we can have this vibrant sector to continue providing our means for AT LEAST the next 25+ years. It’s also important to remember that a non-partisan study was done on the top oil producers of the globe and Alberta has, by far, the highest standards when it comes to this industry. Regulatory, consequential, application, worker rights, labour standards, and the HIGHEST environmental regulations are the factors that make our products the most ethical on the planet. In the global fight for climate change, buying Alberta oil means, supporting companies that innovate newer, less environmentally invasive technologies, Albertan/Canadians employees/employers, Alberta/Canadian public projects, accountability and ensuring that one drop less is provided from areas of the globe where basic human rights are disregarded, nevermind the grotesque environmental records.

One major problem is that we are selling our oil at a steep discount. Part of it is because we have heavier oil and cost of transporting it but our largest contributor to this is the LACK OF PIPELINES. Oil is identified by its producer and its API-G, a system of rating the “weight” of the oil. The higher the number, the lighter the oil. WTI (West Texas Intermediate) is about API-G of 40 degrees. Brent Crude is 38 degrees and Dubai oil is 31 degree. Alberta’s oil WCS (Western Canadian Select) is much heavier, sitting at about 20 degrees. This means it costs more money to further upgrade/refine the product to similar levels of WTI/Light crudes. The refinement costs plus the transportation to refineries in the united states sits at roughly $13USD/barrel. That means if global prices for WTI is $67.20 ($87.78 CAD)/Barrel, our prices should be around $54($70.54CAD)/Barrel. Our oil today is selling for $38.14($49.82CAD)/Barrel. That’s a differential of about $38CAD ($29USD)/Barrel. That means we are selling our product for a discount of $21CAD/Barrel. We are exporting 3.3Million Barrels/Day and 2.55Million of that is WCS. That means we are underselling $53,550,000/day or $19,559,137,500/Year.

That is enough to build 16 state-of-the-art hospitals, EVERY YEAR.

Lack of pipelines and a bottleneck of getting resources to the right places is the main driver in this price differential. This was proven in the United States with the 2014 gulf coast pipeline which alleviated the bottle necks and helped to close the gap between Brent crude and WTI prices. It is the duty of our provincial and federal politicians to get pipelines built. Our province and our country have sat back for too long and given our products away for far too long. It’s time we start acting like a major oil producer and get our product to markets, alleviate pipeline/infrastructure bottlenecks and start getting real value for our products. What do we want? PIPELINES! When do we want them? NOW!

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