Canada is losing out on $16 billion in potential revenue because of a shortage of oil pipelines, according to the latest study by the Fraser Institute think tank.
The study, released Tuesday, highlights how much money the country is losing through several “costly constraints” that have led to overdependence on the U.S., as well as reliance on more costly modes of energy transportation, such as rail.
“Insufficient transportation infrastructure and pipeline bottlenecks” have led to a dramatic drop in the market price of Canadian crude oil compared to other oil prices, the report said.
The difference in price between Western Canada Select and West Texas Intermediate averaged US$26.30 per barrel in 2018.
New report by #FraserInstitute says a shortage of pipelines in country means Canada's national energy sector is on pace to losing $15.8B in revenue this year. here is year overview of WCS to WTI: pic.twitter.com/uhUtw5HAu3— Ashley Wadhwani (@ashwadhwani) May 8, 2018
If this continues beyond the year’s first quarter, the report said, national energy firms could miss out on $15.8 billion in revenue, or about 0.7 per cent of Canada’s national GDP. That’s compared to a loss of $20.7 billion in foregone revenue between 2013 and 2017.
“Canada’s steep oil price discount is a result of insufficient pipeline capacity, which has dramatically lowered the market price for Canadian crude oil and resulted in lost revenue for oil producers as well as the economy,” the report says.
Trans Mountain key to Asian markets: study
Nearly 99 per cent of Canadian heavy crude oil is currently exported to the U.S., the study said, so expanding the B.C.-to-Alberta Trans Mountain pipeline would help gain access to Asian markets.
Building the Keystone XL and the Line 3 Replacement pipelines, it added, would expand capacity to the U.S. to combat a growing energy sector south of the border.
Canada doesn’t have the inventory to sell oil overseas because of delays and political opposition to several pipelines, the report said, and energy companies are forced to sell barrels to the U.S. at lower prices.
“Canada requires new pipeline infrastructure to transport heavy crude production from Western Canada to Gulf Coast refining hubs and overseas markets,” the report says.
B.C., feds continue court battle
Exactly which level of government has jurisdiction over the trans-provincial pipeline is currently before the courts.
The B.C. government has applied to court to see if it can impose new environmental permits on the pipeline project.
Prime Minister Justin Trudeau has vowed the pipeline will be built, and federal Finance Minister Bill Morneau is working on a plan with Kinder Morgan to ease investors’ worries.
B.C. Premier John Horgan, meanwhile, has said he will use every tool available to stop the pipeline, which he says could have environmental and economic repercussions in the case of the spill.