Northern Gateway Pipelilne

http://www.cbc.ca/asithappens/episode/2012/09/04/the-tuesday-edition-45/

Why the creation of the Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries.

Northern gateway pipeline is proposed by the Canadian oil and gas company, Enbridge, to transport bitumen from Alberta to Kitimat, BC then shipping the oil to Asia.  http://www.cbc.ca/news/canada/story/2012/01/10/f-northern-gateway-pipeline.html

Gil McGowan, the president of the Alberta Federation of Labour, concerns that the pipeline would result in a higher loss of current Canadian jobs than new ones created due to an increase in the cost of production. According to McGowan, Canadian oil producers will have access to Asian Premium if the Northern gateway pipeline is built. It means that Asian countries, China specially pays more for crude oil than Canadians paying for it in North America.  If Canadian oil producers receive a higher price from China for the oil, domestic consumers buying from Alberta will need to pay more than ever before including individuals, business owners and refineries. http://www.cbc.ca/asithappens/episode/2012/09/04/the-tuesday-edition-45/

This situation can be explained by the general economic notion that domestic price would increase by a decrease in domestic oil supply. By Asian Premium, Canadian oil producers prefer selling more amount of oil to Asia for a higher price rather than to Canadians at a cheaper price. This way the producers make a greater profit.  Because of this, Canadian refineries make an effort to higher their price in order to consume the amount they need. The bigger the amount of oil exported from Alberta to the market in Asia, the less available for domestic demand including Canadian refineries. That is why the Northern Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries.

 

2 thoughts on “Northern Gateway Pipelilne

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