All oil prices are not created equal

Alberta's Business

January 3, 2013

CALGARY, AB, Jan. 3, 2013/ Troy Media/ – Anyone who is in Alberta for more than 15 minutes learns the provincial economy rises and falls with energy prices – and these days that means oil.

The West Texas Intermediate (WTI) benchmark price sets the trend for other varieties of oil, but it certainly isn’t the only price. A price quoted closer to home reveals why some oil companies – and the provincial government – long for better days ahead. The most commonly quoted price for oil coming out of this province is the Western Canadian Select (WCS) blend from the storage hub at Hardisty.

Prices are quoted in dollars per cubic metre, but a dollars-per-barrel conversion gives a more comparable price to West Texas Intermediate. In December, the trading price for WCS was around $C43 per barrel – a far cry from the US$85 to 90 prices in the U.S., and even farther from the global Brent price of more than US$100.

Western Canadian oil is priced so low because of the glut of oil in the U.S. refinery system, the backlog caused by some pipeline constraints, and the additional supply of shale oil from North Dakota. This combination has weakened demand for Canadian oil in the all-important U.S. market.

The lower prices have caused a problem for the Alberta government, which depends on oil and gas royalties to finance much of its program and capital spending. But it has brought at least one distinct benefit: lower gasoline prices at the pump.

| ATB Financial

Read Alberta’s Business

This snapshot is FREE to use on your websites or in your publications. However, Troy Media – Alberta Edition, with a link to its web site, MUST be credited.

You must be logged in to post a comment Login