Tag Archive for canada

Bloomberg: Canadian Crude Strengthens as Enbridge Fills Pipeline

"Industrial" by woodleywonderworks from Flickr.com via Creative Commons License

Heavy Western Canadian Select crude’s discount to West Texas Intermediate shrank to the least since 2012 as a new pipeline started and production sites were shut for maintenance. To read the entire article, go to http://bloom.bg/1FLETYu

Key observations

Heavy Western Canadian Select discount to the U.S. benchmark narrowed to $8.50 a barrel Monday, the smallest margin since September 2012, according to data from Bloomberg.

The grade’s absolute price rose 3 cents to $50.43, the highest since Dec. 4. WTI futures were $58.93 in New York.

The Enbridge Company reported that it filled a new 570,000-barrel-a-day pipeline last month. In part the pipeline adds to the inventory (in motion) storage. The Enbridge line will raise the amount of crude that can be shipped from Edmonton, in northern Alberta, south to the storage terminals located at Hardisty, Alberta. From Hardisty, crude can move by unit crude oil trains either south to the upper Midwest or to the southern US state refineries. Or west towards markets along the Pacific Ocean coast or for export to Asia.

 

Behind the story: Short line rail economics in Western Canada

Progressive Railroading ran a story in March on the conversion of a Canadian National branch line to an independent short line operation. The CN found the branch line uneconomic to keep or to invest in. A short line group reached the opposite conclusion.

What is behind the difference?

ALBERTA hit hard by dependency on oil…who’s next?

Oil price crash hits Provence budget hard. Forced to jack up other taxes

Bloomberg report: Alberta Budget Deficit Soars to Record on Oil Collapse

HOW BIG? The hit from plunging oil prices is estimated at a whopping C$7 BILLION Revenue will fall 11 percent to C$43.4 billion this fiscal year while spending is forecast to be little changed at C$48.4 billion.

WITH OIL… “We had the best tax structure in North America,” said Scott Hennig, a spokesman for the Canadian Taxpayers Federation, in an interview in Edmonton. “The government didn’t want to make the tough decisions. Are they spending too much? Absolutely.”

ARE MONGOLIA and South Africa listening?

Government greed and poor due diligence based on state resource windfalls set up a lot of great government plans for failure. They never evaluate for down cycles.

Alberta’s dependence on petroleum revenue had fed an expectant population of 4.2 million people with visions of prosperity. Alberta, with the lowest taxes in the country, now instead faces more job cuts as corporate profits for its leading industry sink 50 percent this year and energy investment falls 30 percent.

That is from a Bloomberg evaluation of Alberta’s budget documents.

To wean itself off the oil habit, Alberta will now have to devote only 50 percent of its energy revenue to finance its budget by 2019-20. That is down from 100 percent curently. The recent oil collapse forced the government to draw down C$4 billion from its contingency fund for fiscal year 2015-16, reducing the balance to C$2.5 billion. “We need to get off the roller coaster of oil,” Campbell said.

Alberta relied on royalties from oil and gas for almost a fifth of its revenue this current fiscal year. In the next fiscal year it will account for less than 7 percent, “It MIGHT rebound to 17 percent in a decade.” Maybe. Higher Fees Higher local taxes and fees will help fill the budget gap, bringing in a combined C$11.4 billion over the next five years. The province’s income tax rate of 10 percent will increase to 10.5 percent for those earning more than C$100,000 starting in January That will rise to 11.5 percent by 2018. Albertans earning more than C$250,000 will see their tax rates rise to 12 percent over three years. Gasoline taxes will increase by 44 percent to 13 cents a liter, effective tonight. Buyers of wine and cigarettes will pay more, while traffic fines and motor vehicle fees will also increase.