CALGARY – Canada is leaving billions of dollars on the table due to a lack of pipeline capacity, according to the findings of a report from the University of Calgary’s School of Public Policy.
It finds the price differential of Western Canadian Select (WCS) relative to West Texas Intermediate (WTI) reflects the lower quality of WCS and transportation costs, but pipeline capacity constraints have dramatically increased the discount to historical levels.
Research Associate Kent Fellows said prior to 2013, the WCS/WTI discount generally stayed between nine and 13 per cent of the WTI price but as of Feb. 2, 2018, the differential is at 47 per cent.
“The historical differential when we still had some excess capacity was sort of in the range of $10 to $15, maybe a little bit higher than that, but the current one is close to $40, so a pretty big difference,” he said.
Fellows explained the larger discount means Alberta is getting lower revenues for each barrel of heavy crude exported, costing the provincial government $6.60 on every barrel of heavy oil exported to the U.S, which is an annual loss of $7.2 billion.
Private companies are missing out on $5.3 billion and the federal government is leaving $800 million on the table.
Fellows argued this shows why governments need to push for pipelines that are in the public interest.