New research argues a lack of pipeline capacity in Canada will cost Canadian energy firms roughly $15.8 billion in lost revenue this year.
According to a research bulletin from the Fraser Institute – a right-leaning think tank – pipeline bottlenecks and insufficient transportation infrastructure have dramatically lowered the market price of Canadian crude oil.
A number of factors place Western Canada Select (WCS) at a discount below West Texas Intermediate (WCS), including the fact that the Canadian product is heavier than its American counterpart, and thus more costly to transport and more complex to refine.
Beyond that, the institute's research points the finger at constrained capacity for what it calls a dramatic increase in price discount, and argues the price difference is beyond its natural level.
According to the research, WCS cost US$5.27 less per barrel than WTI did in February 2009. Three months ago, the difference was US$28.29 per barrel.
After accounting for differences in quality and transportation costs, the Fraser Institute estimates the lower price of Canadian heavy crude has cost the country’s energy industry $20.7 billion in lost revenue between 2013 and 2017.
The report suggests more pipelines will help capture that revenue.
Data used in the report precedes a recent rise in U.S. oil prices, which on Monday hit their highest level since November 2014.
