What’s a “Fair Price” for Canada’s Oil? And What Happens if We Get it?

It’s a phrase that has wafted up from the oil sands to the airwaves. It pops up in speeches by politicians and editorials by journalists: A “fair price” for Canadian oil. The key to this, we are told, is pipeline access to “tidewater” (another marketing term adopted by media and government).

The basic argument goes like this: A barrel of oil sands crude currently trades at a lower price than other global oil benchmarks. That price gap means Canadians are losing money on every barrel sold. Access to world markets will fetch higher prices, elevating our collective prosperity.

It’s a persuasive story, tickling the part of the brain associated with loss aversion. No one wants to bleed money day after day. At the same time it paints a picture of one nation, our fortunes rising and falling in unity. It’s good politics. But the reality is more complex. As individuals and businesses calculate whether the risks of these pipelines outweigh the rewards, three broad trends should be kept in mind.

First, what kinds of energy do those global markets want? Second, who can get it there at the lowest price? And most importantly, who wins and who loses if the price of Canadian oil climbs? The answers point to 2014 as a crucial year in the pipeline battle. That’s because the window in which these projects are viable may be closing faster than we think.

(CLICK HERE to continue reading at DeSmog.ca)

oil price differentialsImage courtesy of Kirsten Smith, University of Alberta



Leave a Reply to kainagata Cancel reply