Should Ottawa help Fund West-to-East Oil Pipeline?
Bank of Nova Scotia’s Derek Holt thinks the former Bank of Canada governor makes a lot of sense in calling for the government to help spur a west-to-east oil pipeline.
David Dodge said late yesterday that the federal government should wade in with incentives like loan guarantees, tax breaks or public-private partnerships.
That would help the economies of the eastern provinces, said Mr. Dodge, now an adviser to Bennett Jones LLP.
Mr. Holt agrees that the government should back off its “hands-off approach to fragmented domestic energy markets.”
The Scotiabank economist noted the “large gap” in prices of oil projects across Canada, citing east coast exporters getting Brent prices at about $115 (U.S.) a barrel, while others bring in the West Texas Intermediate price of $92.
Western Canadian production, he noted, was fetching its benchmark of $77 this morning.
“This massive $38-a-barrel gap between the selling prices of eastern versus western Canadian projects is a foregone opportunity to regional producers that are left to sell their product at a discount, and also penalizes some regions of the country by way of reduced government royalties in the west and higher energy prices elsewhere than may otherwise be the case, although this also speaks to refinery shortfalls,” Mr. Holt said.
“There are many bottlenecks in all directions, but the east-west infrastructure deficiency is a contributing factor and I’m not sure that a small wave toward rail car shipments is an ideal long-term solution notwithstanding some of its potential to alleviate some of the near-term price discrepancies.”
Citing the controversy over the Keystone and Northern Gateway projects, he argued that “public leadership” is needed.
“Speak of Canada’s commodity riches all you want, but the inability to get product to market for the best price handicaps the country’s ability to cash in on what I also believe to be the still early stages of a long-run commodity super-cycle as consumers across developing regions of the world economy become ‘westernized’ for better or for worse on net,” Mr. Holt said.
David Dodge said late yesterday that the federal government should wade in with incentives like loan guarantees, tax breaks or public-private partnerships.
That would help the economies of the eastern provinces, said Mr. Dodge, now an adviser to Bennett Jones LLP.
Mr. Holt agrees that the government should back off its “hands-off approach to fragmented domestic energy markets.”
The Scotiabank economist noted the “large gap” in prices of oil projects across Canada, citing east coast exporters getting Brent prices at about $115 (U.S.) a barrel, while others bring in the West Texas Intermediate price of $92.
Western Canadian production, he noted, was fetching its benchmark of $77 this morning.
“This massive $38-a-barrel gap between the selling prices of eastern versus western Canadian projects is a foregone opportunity to regional producers that are left to sell their product at a discount, and also penalizes some regions of the country by way of reduced government royalties in the west and higher energy prices elsewhere than may otherwise be the case, although this also speaks to refinery shortfalls,” Mr. Holt said.
“There are many bottlenecks in all directions, but the east-west infrastructure deficiency is a contributing factor and I’m not sure that a small wave toward rail car shipments is an ideal long-term solution notwithstanding some of its potential to alleviate some of the near-term price discrepancies.”
Citing the controversy over the Keystone and Northern Gateway projects, he argued that “public leadership” is needed.
“Speak of Canada’s commodity riches all you want, but the inability to get product to market for the best price handicaps the country’s ability to cash in on what I also believe to be the still early stages of a long-run commodity super-cycle as consumers across developing regions of the world economy become ‘westernized’ for better or for worse on net,” Mr. Holt said.
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