Imagine producing a bumper crop of a product in high demand around the globe, only to learn you must settle for a discounted price because there’s no easy way to get your product to market. Canadian grain farmers experienced that situation in 2013 and again last winter when their harvest outstripped the transport capacity of Canada’s rail companies. Western Canada’s oil companies are now in the same boat thanks to production gains that have not been matched by export pipeline capacity gains. Like those farmers, oil producers have filled storage to bursting while they wait for a solution to appear. The price discounts or "differentials" that had mainly affected heavy oil have spread to light oil and upgraded synthetic oilsands crude as pipeline space tightens. Estimates on the cost to the economy vary wildly, but the Canadian Association of Petroleum Producers officially estimates the impact as at least C$13 billion in the first 10 months of 2018. It estimates the cost at about C$50 million per day in October as discounts for Western Canadian Select bitumen-blend crude oil versus New York-traded West Texas Intermediate peaked at more than US$52 per barrel. "The differential has blown out to such an […]
