Question 1
Since the crude oil resources in Canada heavily relies on the US refineries and the US economy is still in a downturn, Alberta and federal government have strong willingness to export crude oil to Asian market through the creation of the Gateway pipeline. Thus, the demand of the crude oil would be increased, since the Asia refineries would be able to import crude oil with a relative low transportation cost from Canada. The total oversea demand of crude oil increased, however, on the other hand Canadian firms will not increase their capacities in the foreseeable future. Therefore, the crude oil price will be raised up to a higher level for the creation of the Gateway pipeline. Secondly, to build a pipeline between provinces, a large fixed cost must be required. In order to recover the fixed cost, Canadian firms need more market power and charge a higher price.