Why the creation of the Gateway pipeline from Alberta to Kitimat will raise the price of crude oil for Canadian refineries?
The Alberta Labor Union has been one of the most vocal opponents of the construction of the Northern Gateway pipeline in the last few months (“As it happens” –CBC news edition 45). Their main contention is that the export of raw bitumen will increase the crude oil prices for Canadian consumers and refineries; as well, it may end up costing the Canadian economy valuable long-term jobs.
The creation of the proposed pipeline will indeed increase the crude oil prices in Canada (“Update of Market Prospects and Benefits Analysis for the Northern Gateway Project”)1 because exporting raw bitumen means that the Canadian producers of crude oil will have to increase the home price to the world market price. Furthermore, as the bitumen is exported to the Asian market, it would significantly decrease the quantity of raw bitumen available for the Canadian refineries. This diminishing supply will further raise the prices of crude oil and may lead to future reliance on other (foreign) bitumen. Such circumstances will make it difficult for the Canadian refineries to stay competitive in the home market; thus, one may expect to see more refinery closures in Canada, as predicted by CBC news2.
References:
1(http://www.ceaa.gc.ca/050/documents_staticpost/cearref_21799/4234/Attachment_01.pdf)
2http://www.cbc.ca/m/touch/news/politics/story/2012/08/27/pol-cp-oilsands-refinery.html)
