Gateway to domestic price hikes
The Northern Gateway Pipeline from Alberta to Kitimat will send Albertan oil to the Pacific Rim, in which the largest market in the current discussion is China. In a simple exercise in supply and demand, this will raise the price of crude oil for Canadian refineries, and lower the sale price realized in Chinese sale of Canadian crude oil, according to Gil McGowan, President of the Alberta Federation of Labor, in his interview with CBC’s Carol Off (“As It Happens, The Tuesday Edition,” 4 September 2012).
Canadian oil producers are currently attracted to selling crude oil in China because of the “Asia premium,” higher prices on crude oil sold in China in particular, presumably even with transportation costs under consideration. This would reduce supply for Canadian refineries and processors, therefore raising the domestic sale price of domestic crude oil. These higher raw materials costs will mean higher production costs and likely lower employment rates in the Canadian oil processing and refining sectors.
Although it seems counterintuitive that exporting Canadian oil can lower profits in both domestic and international markets, the global market is a fascinating circus, as always. McGowan also explains that the Saudi Arabian oil producers who currently supply most of China’s oil can readily lower their prices to compete with the Canadian oil at “Asia premium” prices, therefore eliminating that Canadian premium and reducing profits.
The proposed route of the Northern Gateway pipeline tears through some of the most beautiful and ecologically unique landscape in the world; here, the Sacred Headwaters in Northern BC, by Paul Colangelo for Patagonia (http://www.thecleanestline.com/2012/08/the-sacred-headwaters.html)
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