Back to Analyst

America’s oil ally takes a hit


Hard to imagine that with the U.S. producing the most oil in over 48 years and heading towards a once thought to be lost goal of energy independence, that oil from Canada provides the majority of an ever-dwindling oil import picture.

But at 3.2 million barrels of crude per day, Canadian oil, especially heavier Western Canadian Select, is favored not only for its deep discounted price of $29.39 a barrel but in quality by US refiners from the Midwest to the Gulf Coast. And therein lies a growing problem and dilemma for the future of Canadian oil.

For decades, virtually all Canadian oil has been exported to willing US refiners, who could then turn the cheap priced oil into fuel for American drivers, while making a killing in the spread between the low-cost Canadian oil feedstock and the going spot price for gasoline, diesel, jet fuel and other petroleum products. Bargain basement prices allowed more refiners TO invest in and pivot away from more expensive lighter slates of crude, creating a win-win-win for refiners, drivers and Canadian producers who sit on the world’s second largest provable oil reserves.

But limitations in infrastructure at Canadian mined or extraction sites, as well as pipelines delivering crude to the U.S. have reached capacity. The alternatives of crude by rail too, are exhausted and with no likelihood of new pipelines permitted, Canadian oil is throttled in supply and price. At less than $30 a barrel, less than half the value of WTI (West Texas Intermediate) oil, investments and prospects in Canada’s petroleum upstream are facing hard times in the land of plenty.

So dire is the outlook for the future of Canadian oil, that even approved pipelines, such as Kinder Morgan’s twinning of the Trans Mountain Pipeline is facing stiff opposition from environmentalists, the Green Party-led coalition of the minority NDP, BC government, and well-funded groups opposed to Canada selling oil from Alberta to Asian markets, via the Port of Vancouver. Ironically, the existing and aging multi-purpose TransMountain pipeline also furnishes Vancouver with the lion share of its fuel needs and devoting it to fuel while the new approved line earmarked exclusively for oil, could alleviate the $1.50 a litre ($5.70 a gallon) drivers there are forced to shell out due to a chronic shortage.

Without the means to ship oil effectively via pipeline, Canada’s oil industry is at risk and the losses could be felt on the nation’s finances as well as American motorists.

Those opposed to fossil fuels and the benefits their use has played in advancing our standard of living and improvement in the quality of life for society as a whole, couldn’t be happier.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.