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Pipelines are back in the news on a daily basis, and once again misinformation is the order of the day.
The biggest fraud being perpetrated is to so called “differential” between Canadian oil and the world price for crude oil.
We are told that the main export product of the Canadian oil
sands, Western Canada select (WCS) sells at a deep discount (the differential) to West Texas Intermediate (WTI).
As I write this WTI is selling for $53.12/barrel in Oklahoma and WCS is selling for $41.41/barrel in Alberta. Oil producers and their political coat holders would have us believe that if only we had more pipelines, we could sell our bitumen in more markets and get a better price.
The implication is that there would be no differential and we could sell bitumen for the world oil price. Nothing could be further from the truth, because WCS and WTI are not the same thing. WTI is a light sweet crude, which commands a high price on the world market because it requires less refining to produce the products that we desire, gasoline and diesel.
WCS is diluted bitumen, which is not oil at all, it is closer to tar. The definition of tar is a hydrocarbon that will not flow without help. The “help” that makes it flow is usually heat or dilution with lighter oils. In any case, energy has to be spent to move bitumen.
If bitumen is fully upgraded in Alberta, it becomes Synthetic Crude Oil (SCO) which at the time of writing is selling for $51.91/barrel, pretty much the same price as WTI. So it is not a lack of pipelines that affect the price of Canadian oil, it is the quality of the oil.
The key factor in the tarsands business is upgrading. Upgrading is a refining process that converts tar or heavy oils into a synthetic crude oil that can be further refined in conventional refineries into commercial products.
Synthetic crude is a high value product because it canmatch the quality of WTI and Brent crudes that are the global standards and command the highest price.
As a bonus upgrading strips out any sulphur present, making the oil less toxic and corrosive. Unlike pipelines, upgraders really do take a product worth $40/barrel and turn it into oil worth $52/barrel.
Since synthetic crude doesn’t need to be diluted, pipeline capacity can be freed up by a factor of about 30 per cent, removing the need for costly and dangerous rail transport or new pipelines. Any pipelines built now will be for FUTURE tar sands expansion.
So why don’t we upgrade our bitumen in Canada rather than exporting it as a raw material? It’s mainly because most oil resources are controlled by vertically integrated oil companies who arrange affairs to suit themselves, not a particular province or country.
Oil companies don’t care about the price differential. If they “lose” money at the mining end of the chain, they can make it up at the refining end.
Since they control everything from mine to pump the price differential doesn’t affect them. The major oil companies own upgraders on the U.S. gulf coast and southern California.
They would rather take our cheap bitumen and upgrade it there. It is easy to see why oil companies want direct lines from the oil sands to their upgraders and refineries in the United States.
What is hard to understand is why the provincial and federal governments support the oil company agenda, shilling for pipelines rather than upgraders, putting forward oil policies that benefit multinational oil companies rather than Canadians.
We have been lied to by the oil companies and their many and varied propaganda outlets, including our own governments.
They have misrepresented the nature of energy markets and lied to us about our options as a nation. The news media have failed to understand, or understand and fail to report, the true nature of oil markets.
They have failed inform Canadians about the nature of options available to them and basically peddled the lie that only more pipelines can save us. As a nation we would benefit from a secure domestic supply of synthetic crude to our eastern refineries and not have to rely on oil imported from corrupt regimes overseas.
By exporting a low grade raw material from the west we are passing up good jobs and potential added market value. Low grade crude is always low grade crude until you add value by upgrading and refining it.
What we need is a national energy policy that puts the energy security of Canadians first, ensuring that jobs and value added are retained here and that we get a fair return for our non-renewable resources.
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