Alberta Premier Rachel Notley is aggressively advancing a false narrative about heavy oil’s deep discount. She presents the problem in two parts, neither of which stand up to scrutiny. First, Notley purports that the abnormally wide price spread affects every barrel of heavy oil leading to millions of dollars a day in losses to the Canadian economy. And second, that the Trans Mountain pipeline expansion is crucial. Neither of these claims are supported by the facts. Most Alberta oil is sheltered from the price discount When you crunch the numbers, and include the variety of methods even the smaller players rely on to protect their exposure including long-term supply arrangements, hedging and access to rail, it turns out that only about 20 per cent of oilsands supply is actually affected by the light-heavy differential. WTI is West Texas Intermediate light oil priced in Cushing, Oklahoma and WCS is Western Canadian Select heavy oil priced in Hardisty, Alberta. The WTI-WCS spread is referred to as the light-heavy differential. Alberta’s heavy oil is a low-quality crude that always sells at a discount to lighter, higher quality oil. It costs money to deliver it to Cushing which further reduces its price. The […]
