While U.S. oil imports have been on a multi-year downward track, suffering from a combination of lessening domestic demand, and accelerating domestic production, the country suffering the most is Canada, and its surging oil sands extraction production.
Although Canada is anticipating future export market development for its 3.2 million barrels per day from China and other Southeast Asian buyers, our northern neighbor is currently overwhelmingly dependent on the steadily reducing orders from the U.S. A good part of this is currently due to the hang-up over the Trans-Canada XL oil pipeline direct to Houston and Gulf Coast refineries. This situation is getting worse as shipment to refiners from inside America’s increased production is being bottlenecked by outdated U.S. pipeline access, and an ambivalent Obama Administration.
This is causing Canada’s tar sands converted oil production to offer heavy discounts to meet competition to U.S. refinery access, which brought the refiners’ purchase price to as low as $80 per barrel last October, before bouncing back.
Currently, Canada is supplying America’s 19 million barrels per day demand with 2.41 million BPD. Saudi Arabia follows with 1.36 million BPD, while Mexico, Venezuela, Iraq and Nigeria are shipping at varying degrees below one million BPD.
While the U.S. pipeline deficiency has prevented domestic refiners from utilizing the amounts available from Canada’s Alberta Province is expanding tar sands fields, the refineries have compensated by extracting sharp discounts from the Canadian producers. This has proved to be a profit bonanza for most of America’s major refiners. However, it has also curbed their ability to convert the combination of domestic shale crude, as well as imports, into gasoline and other derivatives that would prove highly profitable to them. It would also allow them to increase exports, along with a generous supplement in tax revenues to help alleviate America’s debt/deficit problems.
In the meantime, the inability for our main export/import partner, Canada, to utilize America’s massive demand capability effectively is creating gross domestic product growth problems in Ottawa. The Canadians had not projected as much as a quarter percent loss from its 2013 2.5% growth resulting from the sharp cuts in oil sales profitability.
The Obama Administration’s unwillingness to embrace the economic benefits that would accrue to both the U.S. and Canada by approving not only the Trans Canada project, plus expanding internal U.S. structural pipeline diversity, reflects the blind eye that the President is turning to tax revenue generation, additional employment, and bi-national good will. A reversal from this catering to the “climatological purists” would prove a major plus to the U.S., as well as Canadian economies.For future easy access to my blogs, please use the link below, and bookmark it to your desktop. The old link you may be using is still available. However, an alternate link is: