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The government of the western Canada province of Alberta is imposing a 325,000 barrel-a-day cut on oil producers, an extraordinary intervention in one of North America’s biggest energy markets. The measure wasn’t entirely unprecedented: Alberta’s government ordered production cuts in the 1980s to protest federal energy policies. But the production quotas that are a hallmark of the Organization of Petroleum Exporting Countries are a strange fit in a free-market economy. 1. What prompted Alberta’s action? Premier Rachel Notley said the production cuts, which take effect in January and are to be reevaluated monthly, are necessary to address a glut of stored Alberta oil that has sent its price, relative to West Texas Intermediate futures, to its lowest level in at least a decade. She blamed the oversupply on a shortage of pipeline capacity. The province is working to buy rail cars as an alternative transport method; longer term, the Canadian oil industry is counting on a trio of pipeline projects to help get more of its oil to market: Enbridge Inc.’s Line 3 increase, TransCanada Corp.’s Keystone XL and an expansion of the Trans Mountain pipeline from Alberta to the British Columbia Coast. The government of Prime Minister Justin […]
