Oil, Politics, and Other Slick Business
I was asked to discuss and summarize a recent interview with Gil McGowan, the president of Alberta Federation of Labour (AFL), on cbc Radio (link at the end of my ramblings). Here’s the “too long; didn’t read” version of it for those lazy time efficient readers out there;
The NGP will connect Alberta’s oil sands reserves with the rapidly growing Asian market. Supporters claim that the construction of the pipeline will result in 1150 new jobs and $4.3 billion in labor income during the construction phase of the project.
Asian markets have few sources of oil and are essentially limited to trading with members of the OPEC cartel. As such their market price for oil is much higher than in comparable markets with multiple sellers. This “Asian Premium” is expected to shrink somewhat as Canada enters the market (a byproduct of competition). However, the aggregate of foreign and domestic demand should result in an increase in price received for Alberta’s crude oil producers (A big old outward shift in demand), increasing the price paid by domestic refineries. The domestic refineries will need to hire fewer workers and will increase the price of finished products to compete with Asian competitors with lower marginal costs. The AFL estimates a loss of 8000 jobs and a $750 million decrease in domestic GDP due to this potential increase in the cost of oil.
Assuming there is validity to the AFL’s findings, the NGP could cause long term harm to the Canadian economy, and that’s not even discussing the potential for environmental impact. But that topic will need to wait for another blog.
See; http://www.cbc.ca/asithappens/episode/2012/09/04/the‐tuesday‐edition‐45/
September 11th, 2012 at 12:15 am