Hold on to your hats folks. Mr. Harper’s chickens have come home to roost. We let Stephen Harper blow off our manufacturing in Ontario and Quebec. We let the Conservatives spend millions on fictional economic action plans that neither made sense nor worked. And they built this Canadian oil economy that cannot compete.
The mathematics are at a grade school level. It costs more than $20 to get a barrel of Canadian bitumen ready for a refinery. It costs as little as a couple dollars for Saudi Arabia to pump up a barrel of refinery-ready crude. Does it take a genius to understand what happens if there is an oil glut and Saudi Arabia and the other OPEC members keep pumping their inexpensive crude? The price goes down. And OPEC squeezes the profits of marginal producers.
If you want to add to the headaches for Canada’s tar sands exploiters, you might mention they are also landlocked. Alberta and Saskatchewan do not have convenient harbours where they can fill up ocean going tankers to carry off their wares. Imagine the nerve of that B.C. premier who wanted to extract a toll for pipelines over the Rockies?
And American President Obama is in no rush to approve the Keystone XL pipeline to the Texas Gulf shipping points.
Since Hudson Bay is still frozen much of the year, it is not considered a good place to bring oil tankers. That leaves the Eastern route. There was a somewhat more complex playbook on this route. It started with moving the National Energy Board to Calgary and getting rid of a lot of government of Canada scientists. Getting rid of the scientists might not have been related but it certainly helped.
Enbridge Pipelines had a pipe that went from Alberta to Montreal that had been used at different times to send imported crude oil west and Canadian crude oil east. Through Ontario it is called Line 9. Through Kalamazoo, Michigan, there are other names for it because they are still working on cleaning up the June 2010 diluted bitumen spill in the Kalamazoo River. Taking an old pipeline and increasing the pressure to force heated bitumen through it does have its risks.
But not to be outdone, TransCanada Pipelines has an old gas line across Northern Ontario that it wants to convert over to high pressure hot bitumen. The company might not have a better solution but it certainly spends more on its public relations.
But neither pipeline will be completed if the price of crude oil does not improve soon. And their friend Stephen Harper might not be around long to grease their approvals.
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Copyright 2014 © Peter Lowry
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