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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Canada Lacks A Successful Energy Strategy

“Canada has no energy plan beyond pedal-to-the-metal export of its non-renewable energy assets.”

That’s the bottom line of a recent opinion piece in Calgary Herald by David Hughes, an earth scientist and research associate with the Canadian Centre for Policy Alternatives.

Canada needs a long-term energy plan to wean itself from fossil fuels and move to renewable energy, Hughes writes.

While Canada will continue to rely on oil and gas in the foreseeable future, the country is currently exporting its oil at rock bottom prices, and continues to push for a pipeline—the Trans Mountain Pipeline Expansion—to export it to Asian markets. However, Canadian oil won’t fetch much higher prices in the world’s fastest-growing oil market Asia, as the federal government and Alberta province hope, Hughes argues.

The costs for sending Alberta’s heavy oil to the U.S. Gulf Coast are lower than the transportation costs to sell said oil to Asia via an expanded Trans Mountain pipeline and then oil tankers. Alberta’s oil can sell in the United States for $2-$5 per barrel more than it would sell in Asia, according to Hughes.

Two pipelines to the United States with double the capacity of Trans Mountain are currently under development. These two new pipelines would ease pipeline takeaway constraints before 2022, the earliest possible completion date for the Trans Mountain expansion, if it goes ahead, Hughes says.

Therefore, the current push to save the Trans Mountain Expansion Project and sell off the Alberta oil as fast as possible “makes little sense,” he wrote. Related: World’s Cheapest Natural Gas Market Could Be Facing A Shortage

It’s the capacity constraints that have been severely depressing the price of Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—which has been selling for as low as $20 a barrel in recent weeks.

Trans Mountain has faced numerous hurdles for years, including staunch opposition in British Columbia, but the biggest blow to the project came two months ago.

In August, a Federal Court of Appeal quashed the federal government’s approval of the expansion project, saying that the NEB’s review of the project was fraught with flaws that made it unsuitable as a basis for the government’s approval. The court ruled that the NEB failed to adequately consider how increased tanker traffic off British Columbia’s coasts would affect the environment and First Nations people in the region.

Canada’s federal government instructed in September the National Energy Board (NEB) to review the project again, this time also taking into account the impact of the expected higher oil tanker traffic off the British Columbia coast.   

The short-term plan to sell off Canada’s heavy oil to Asia is one of the reasons why the country needs a long-term strategy to rely more on renewable energy to curb emissions and to meet Paris climate goals, Hughes argues. Another reason is the fact that conventional oil and gas production in Canada peaked years ago—oil in 1973 and gas in 2001—so significant production growth now comes only from emission-heavy oil sands and fracking, he said.

In addition, royalties from oil and gas production have slumped by 44 percent in the past decade and a half, despite the fact that liquids production jumped by 77 percent between 2000 and 2017, Hughes writes, citing data from the Canadian Association of Petroleum Producers (CAPP). Related: Cold Snap Could Send Natural Gas To $5

“It’s time to look at the big picture and develop a viable energy plan that will meet Canada’s long-term energy needs and emissions reduction targets,” Hughes said.

According to Natural Resources Canada, renewable energy sources currently provide around 17 percent of Canada’s total primary energy supply, with wind and solar energy the fastest growing sources of electricity in Canada. Of the total renewable energy—including energy consumed for electricity and heat production and biofuels in the transportation sector—hydropower accounts for 67.5 percent, followed by solid biomass with 22.6 percent, and wind power with 5.4 percent.

Planning for the energy transition and global peak oil demand—whenever this comes—is a commendable effort and many countries have such plans with targets in place. In a decade or two, it could make sense for Canada, too. But currently, the oil and natural gas industry is a key part of the Canadian economy. The industry contributed US$83.1 billion (C$109 billion) in direct real gross domestic product last year, or 6.25 percent of Canada’s GDP, according to CAPP.

By Tsvetana Paraskova for Oilprice.com

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  • Ronald C Wagner on October 31 2018 said:
    Very bad advice IMHO. Canada needs to go full bore with pipelines across the country from sea to shining sea. Any other course will be disastrous but it is to be expected given most of the leaders in charge.
  • Jeff on October 31 2018 said:
    Our Prime Minister and his idealist sidekick Gerald Butts have an agenda, they are passively letting Canada's oil industry die. Their limp wristed Liberal agenda, weed legalization and carbon taxes included, is inflicting serious harm on our once great nation and jeapordizing our youth....our present..our future. Treason .
  • Justin on November 01 2018 said:
    Canada is the only major country on the Pacific Rim that isn’t using its underground thermal resources to produce energy, and it isn’t due to the lack of potential it's a tireless relentless need to sell oil. Our energy sectors should learn to diversify.
  • Chris on November 01 2018 said:
    I disagree. Canada lacks LEADERSHIP, and everything else is secondary. I hate to bring Mr. Putin to this equation, but this is the type of a leader we need (does not need to make people disappear), but I mean, he must be strong, and rise above the noise, and BS coming from LEFT, the GREEN influence peddlers, the natives, the LGBT and on, and on , and on....... He's got to govern in the NATION's interests. The OIL INDUSTRY is the most important industry in this country, and provides the LIFT to all else across the land from EAST to the WEST, from NORTH to SOUTH. Unfortunately the writer must be the follower of PM Trudeau, and wants to kill the GOLDEN GOOSE, instead of providing the REAL SOLUTION. And I mean REAL. The solution that is good for all Canada, not just Ontario and Quebec, the GREEN American lobby, and so on.......

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