Reality Check: “New Markets” for our Oil

“Canada needs new markets in Asia!”

The Enbridge case for the Northern Gateway pipeline rests on fetching a higher price for bitumen from Asian customers. The argument from Enbridge and their friends in the Harper and Redford governments is that Alberta’s oil is “trapped” in North America, and we can get a higher price from customers in Asia.

Indeed, without the increase in the price of oil, Enbridge’s economic case for the Northern Gateway pipeline evaporates.

Four reasons why the “New Markets” argument from Enbridge and the governments who support them are questionable at best

But will the Northern Gateway pipeline actually deliver what they say?

1. The oil is going to China. Enbridge’s own filings of evidence show the only refineries capable of refining the products Enbridge expects to ship on the Northern Gateway Pipeline are in China. Eventually, Enbridge says some products will go to Taiwan and Korea, but those exports are further into the theoretical future.

2. Bitumen needs to be diluted with something in order to ship it. Bitumen a thick, sticky, tar-like substance that needs lighter fluids added to it in order to make it flow down a pipeline. Enbridge has only today disclosed their forecasts for the cost of condensate and/or diluent – on the first day of the hearing and with little time for the public to examine it. The cost of diluent has a massive effect on the price of oil in North America. Because we don’t know the future market, supply, and cost of condensate and/or diluent, we can’t know whether Enbridge’s claims of a “price uplift” for bitumen are grounded in reality or not.

3. Will the government of China and their state-owned oil companies pay market prices for bitumen? Northern Gateway doesn’t opens up Canadian oil to a “free market” in Asia – it’s a market dominated by China, Russia, and Saudi Arabia – none of whom are free market, open economies like Canada. Making predictions – as Enbridge has done – about what kinds of prices our oil will fetch, and assuming normal “free market” principles, is questionable at best.

4. The question before us is not whether Canada sells petroleum products on the world market. We already do this. The question is what we are selling. Are we selling the product that fetches the lowest price and creates the fewest, most temporary jobs? Or are we refining our oil sands wealth in Canada, and using the resource to build a more sustainable economy?

About the AFL Northern Gateway Reality Check Series

The Alberta Federation of Labour is a full intervener in the Northern Gateway pipeline.

The debate around the Northern Gateway pipeline is heated, and we hear governments and industry saying all kinds of things to justify locking Canada in to being a raw resource producer, but never move up the value chain with our natural resource wealth.

“The Northern Gateway pipeline hollows out our value-added industries, imposes higher oil prices on consumers, and rewrites the rules of Canada’s oil industry by reducing the amount of oil refined in Canada and shipping those jobs to China.”

-          Gil McGowan, President, Alberta Federation of Labour.

Be the first to comment

Please check your e-mail for a link to activate your account.