I know I'm wandering away from food these days but bear with me. I can't stop thinking about how convoluted today's story on Senator Mike Duffy's speculating that Atlantic Canadian refineries could get cheaper oil from Canadian sources, making all of us happier and more secure.
"Refineries in Atlantic Canada should get the opportunity to process cheaper oil from Alberta, says P.E.I. Senator Mike Duffy."
I wish it were true, but it isn't.
The politics of this probably started with a question from Peter Mansbridge to Prime Minister Harper in an interview a couple of months ago. It was just after the Keystone XL pipeline had been turned down by the Obama administration (that's changed again as well and is important to the story), and Harper was concerned that Canada had become too dependent on U.S. buyers. (Hello China) Mansbridge asked why it is that Eastern Canadian refineries are still buying from South American and Middle East producers, when Alberta had increasing amounts of tar sands crude to sell. Harper's response? "That's a good question Peter." That's a pretty thoughtful answer when you think about it. He could have said "Well Peter Alberta went through years of taking an artificially low price after the dastardly Pierre Trudeau brought in the National Energy Program. It took Brian Mulroney to set things right by killing the policy and ensuring that Alberta producers got the world price no matter who they are selling too. That's the market at work and that's how it should be. If private businesses want to bring Alberta crude East, they'll decide to do this by themselves. The Federal Government certainly isn't going to get involved. That happened once and it won't happen again." But he didn't say that, and now here comes Mike Duffy (who's been helping us somewhat lazy/government dependent Maritimers understand the wisdom of Stephen Harper) making the case for Alberta oil coming East. Something is afoot, but I don't think it has anything to do with refineries here getting cheaper oil.
The missing point (and it brings us back to Obama's announcement last week to promote the Southern half of the Keystone XL pipeline from Oklahoma to Gulf refineries) was made on an excellent segment of the CBC program The Current a few weeks ago. Fortunately Jim Brown (who made his start here at CBC Charlottetown) was guest hosting. He normally does the Calgary morning show and has a good handle on the oil and gas industry. Brown had a panel of knowledgeable oil industry types talking about the Obama's original denial of the Keystone XL project. These analysts made an extraordinary point: that Alberta producers were taking a discount on their oil (less than world price) because of a pipeline supply bottleneck in Oklahoma that can't move oil quickly enough to refineries in the Gulf and on the East Coast. That's why they want to see the Keystone project go ahead, and that's what Obama is trying to do by promoting the Southern part of the project.
This brings me back to Senator Duffy's comments reported on CBC today. Alberta oil is cheaper than the world price not because its Canadian (Trudeau's National Energy Program is long gone, unless Tom Mulcair wins the next election) but because of the oldest story in the book: too much supply in that Oklahoma terminal. If this supply bottleneck isn't resolved, or the Keystone XL pipeline doesn't get built, then Alberta producers would look to Eastern Canada precisely because they COULD charge the higher world price.
I'd love to see Alberta oil flow East. It would assure Canadians (as Duffy says) of a supply from a very reliable source. That's becoming even more important as conflicts escalate in the Middle East, and China and India continue to demand more oil. I just don't see any way short of government intervention that would allow Alberta oil to come East at a discount. It won't happen, so let's not pretend that it will.