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Petrol Points
Rescuing oil prices from the bottom of the barrel
If you want to stoke the fire and raise the ire of the consumer, just
let them know that pump prices are jumping by two, three, or any cents a liter overnight. The cat like reflex reactions have a common exple- tive deleted denominator, which will not be defended in this report
– that “the oil companies are all in
it together – and we’re getting the shaft.”Andanother:“Thegovern- ment should do something about it.”
The assumption on the part of some consumers here is that the oil companies meet at Timmy’s to agree on who will sell what at what price – and when and where.
Being, I believe, one of the few,
if not the only media commenta- tor who has actually worked in the downstream side of the oil indus- try, I can tell you that they all adhere tenaciously to the rules of the Competition Act and Restrictive Trade, as issued by the Federal Government.
The Alberta move is
to be applauded, as Premier Notley has no choice because support from Ottawa was and continues to be zilch.
Having said that, some may look at the crude oil curtailment direc- tive, as issued by Alberta premiere Rachel Notley, as a form of price fixing and collusion similar to the anticipated outcome of the current OPEC meeting.
Sure, both producers will lower output, but for different reasons – Alberta for survival of the oil patch, OPEC, or the Saudis, to balance their budgets and maintain their social programs to dampen any potential political uprisings within the Kingdom.
The Alberta move is to be applauded, as Premier Notley has no choice because support from Ottawa was and continues to be zilch. Now, if Alberta had a car assembly plant... but then again, it doesn’t.
The crude oil cutback is the first of three steps recommended in last week’s report, and it’s had an imme- diate effect on the price of Western Canadian Select (WCS), with the West Texas Intermediate (WTI) dif- ferential narrowing literally over- night. The problem is that as the lower supply goes, these low WCS prices will reverse themselves and increase. The faster they increase, the faster U.S. refiners will dust off the old Rolodex and start renew- ing relationships with former sup- pliers. Demand for WCS will then decrease, lowering prices and the spread will return. So, Alberta and
the rest of the country will be right back where it all began.
The next option would be to buy unit trains, which can carry 70,000 bbls of crude. These are not stock items you can pick up at an indus- trial version of Walmart, so delivery time for these units is not immedi- ate and immediate action with asso- ciated results is what is needed.
But adding unit trains to its solu- tion portfolio will only play into Prime Minister Trudeau’s poker hand because it will take the pres- sure off him to come up with the real solution – which is to kick
ass with the Trans Mountain and Keystone XL pipelines, or at the very
least, show that he has his steel toed boots on.
It doesn’t look that way, though.
With the First Minister’s Conference in Montreal to last for all of six hours, the Trudeau govern- ment has succumbed to the criti- cism of Alberta and Saskatchewan, and as a result, there will be a last-minute addition to the agenda that will “include a discussion on the oil and gas industry in Canada and the impact on Canada’s energy sector and workers.”
Forget the steel toed boots. Our federal government is still prac- ticing and perfecting the soft shoe shuffle. TW
Roger McKnight is the chief petroleum analyst with En-Pro International Inc. Roger has more than 25 years of experience in the oil industry. He is a regular guest on radio and television programs, and is quoted regularly in newspapers and magazines across Canada.
January 2019 • Truck News – West 13