Sean Pledger

Enbridge’s proposed Northern Gateway Pipeline, if built will transport Alberta crude bitumen to Kitamat, BC where it will be shipped to Asian markets. The project has experienced an onslaught of public opposition yet many supporters can still be found, particularly in government and those involved in the oil industry. Recently however, it has come to light that at least some of the stated benefits to Canadians may be smoke and mirrors (http://www.cbc.ca/asithappens/episode/2012/09/04/the-tuesday-edition-45/). The problems lie with the so called “Asian premium.” This is the current phenomenon where Asian markets are paying a higher price for crude than the same product will fetch in North America. This arbitrage opportunity is exactly what Enbridge and some ministers are looking to exploit. Unfortunately there are a couple complexities which may negate the benefits to Canada. Currently much of Asia’s bitumen is supplied by Saudi Arabia which charges more to Asian customers due to their greater market power. If the Saudi’s are pressed with increased competition in Asia they will be forced to reduce their price (possibly eliminating the “Asian premium”) to maintain market share. The second major issue involves the domestic consequences to Canada. Although roughly 1100 permanent jobs will be created in Canada, it has been estimated that 8000 existing jobs will be eliminated from the oil industry in refining, construction and maintenance. This coupled with increasing oil prices in North America could result in a $750 million hit to Canada’s GDP.