Citizen Action Monitor

Sinking oil prices and pipeline bottleneck cutting into Alberta’s bottom line

Bad news for the Alberta oil industry is good news for environmentalists and activists opposed to the tar sands and pipelines

No 664 Posted by fw, January 25, 2013

Absent a turnaround in Alberta’s fortunes, expect a ripple effect throughout Canada’s resource-dependent economy. The following selected passages are excerpted from the hyperlinked article below. Curiously, the original piece makes no mention of the growing protests to stop proposed tar sands pipelines to continental coastal ports to the West, East and South, which are obviously contributing to the pipeline bottleneck.

Subheadings have been added to the abbreviated post below. Click on the linked title to read the full story.

Bitumen bubble means a hard reckoning for Alberta, Redford warns by Josh Wingrove, The Globe and Mail (Edmonton), January 25, 2013

Sinking oil prices and pipeline bottleneck in North America hurting bottom line

Canada’s economic engine is sputtering, with sinking oil prices and a pipeline bottleneck …that’s cutting deeply into Alberta’s bottom line, Premier Alison Redford says.

The province’s oil and gas royalties are now expected to fall $6-billion short of projections in the coming year, Ms. Redford said Thursday evening. That would amount to a 45-per-cent drop at a time when economies across Canada continue to sag and the federal government dials back revenue projections – underscoring how closely national fortunes are tied to the energy sector.

Alberta’s discounted oil has fallen $18 a barrel below the $83 forecast price as sole customer, US, faces oil glut

It’s a complicated series of issues hurting the province’s bottom line. Essentially, Alberta is getting less and less for its oil, even though the North American benchmark price remains relatively strong. That’s because Alberta’s oil has always sold at a discount, one that’s quickly growing as Alberta’s sole primary customer, the United States, faces an oil glut.

That gap has hovered between $30 and $40 in recent weeks, meaning Alberta is getting about $50 to $60 a barrel for its oil on a given day. It had forecast $83 per barrel, and a gap of $16. And “the trend is getting worse,” Ms. Redford said.

To get a competitive price, Alberta must  find new markets outside North America

Alberta has little leverage to demand the full North American benchmark price, West Texas Intermediate (WTI), without an ability to sell elsewhere, such as Asia, Ms. Redford said.

“We have a duty to ensure that our resources, especially Alberta oil and gas, get to new markets at a much fairer price … We absolutely must find ways to get Alberta oil to multiple customers around the world and get a competitive price.”

Video: Redford: Provinces need to collaborate towards energy strategy

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This entry was posted on January 25, 2013 by in economic counterpower, information counterpower and tagged , .
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