Guest Post: Global Market Needs Canada's Crude

Tyler Durden's picture

Submitted by Daniel Graeber of

Global Market Needs Canada's Crude

Canada's natural resources minister told delegates at the International Energy Forum in Kuwait that his country was on the cusp of becoming an "energy superpower." Canada ranks No. 6 in terms of global oil production, but much of its crude exists in the form of oil sands. European leaders are considering a measure that would classify oil sands as an environmental issue, prompting Canada to threaten to take the issue to the World Trade Organization. With the U.S. political system in a deadlock over Canadian crude, the Ottawa government is now working to convince the international community that the global market is in jeopardy if polices "discriminate against oil sands."
Drill-happy critics of the Obama administration are painting the Keystone XL oil pipeline planned from Alberta as a panacea to U.S. economic woes. Because of debates over the planned route through Nebraska, however, the White House has pushed the issue aside for now. The pipeline company behind the project, TransCanada, has opted for a smaller leg in the United States while the Canadian government has thrown its support behind the Northern Gateway pipeline meant for Asian exports.
Canadian Natural Resources Minister Joe Oliver said his presence at the IEF summit in Kuwait proved his country was "an emerging energy superpower." Canada has around 175 billion barrels of proven oil reserves, which means it’s the only non-OPEC member in the global top five, just behind Saudi Arabia and Venezuela.
European leaders in March were unable to reach a decision on whether or not to characterize oil sands as an environmental issue. Critics of oil sands note that its production releases much more CO2 into the atmosphere compared with regular crude oil and its tendency to sink in water makes it a particular concern if spilled. Some critics have dubbed it the dirtiest form of oil on earth and advocate an outright ban. The European government is set to consider the issue by June.
Oliver, however, complained to IEF delegates that any policy that would discriminate against oil sands would be harmful to the global market and overall energy security. Last year, the global economy was threatened by a loss of crude oil from war-torn Libya, OPEC's No. 7, so sidelining oil sands from Canada could be much more severe.
"Our government believes that the free market is the most efficient and cost-effective means to ensure the proper allocation of resources for the development and supply of energy," said Oliver.
Just as Obama said there's no "silver bullet" that can magically push U.S. gasoline prices to something American consumers consider fair, there's nothing in a global market that's easily replaced. Singling out Canadian oil means potentially sidelining an oil supply larger than Iran's, something a depressed European economy could hardly stomach. But as with Iranian crude, if the Europeans don't want it, they don't have to buy it. While that's an oversimplification of the issue, the world still needs as much oil as it can get. Europe is embracing a greener economy. But until global economic engines run on something other than petroleum products, when Canadian crude oil is at stake, it's time to just let it flow.

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macholatte's picture

I don't get it.  Why not build some refineries in Detroit instead of making a pipeline to Louisiana and the South?

CPL's picture

It takes 30 years to build one and the ones we have right now can't process it because it's nearly 100% Bitumen, it's tar.  Hence tar sands.

Eally Ucked's picture

Are you real? Or just shill? Canada pushes sythetic oil thru the lines, transformed to almost comparable to sweet crude. Just think man! how you push tar over few thousand of miles of pipeline?

Fedophile's picture

It's only transported in the extraction process as Dilbit (step 2), but it's sweet synthetic crude when it ships out to the US (step 4)

BobPaulson's picture

It's a mix. Some upgraded, some as diluent and bitumen.

The region is remote and not easy to find skilled workers so infrastructure construction there is significantly more expensive. Meanwhile, the majors have their infrastructure in places like chicago or texas already paid for at costs much higher than new pipeline construction.

So: to the extent they can, as much upgrading is done locally as possible. This still does not absorb the production. Canada has no strategic energy plan. If they had a plan, it would make obvious that the governments are highly affected by oil company donations to entrenched parties and that maximum taxpayer value isn't always aligned with maximum multinational oil company value. In Alberta the same party has won successive majorities for over 40 years. The previous government lasted almost as long and most of its supporters were rolled into the current governing party.

Canada is one of the few countries left in the world where there is excess production and it is not secured by national production monopolies. The lack of export methods basically means all production is exported to the US at less than competitive prices.

Ahmeexnal's picture

Send that tar to Portland. They like their black tar out there.

onthesquare's picture

As the politicians have inferred; the economy comes first, the free market will be fed and the environment does not matter.  Sooner or later they will process the dirty elements out of the tar sands and send a slightly cleaner product to the American refineries.  The environmental impact predictions will be reported as insignificant compared to the jobs created and the system will continue as it always has. 

We are not preparing to get rid of the internal combustion engine; not now not ever.

Ceteris paribus's picture

"Are you real? Or just shill? Canada pushes sythetic oil thru the lines, transformed to almost comparable to sweet crude" One problem with that statement tar sand oil has only about 2.5 million BTU and sweet crude has about 5.5 million BTU per gallon so for fuel it is hard to refine and that is why it is so much cheaper because it makes crap fuel , but as a lubricant it is the best.

CrashisOptimistic's picture

Crude has 5.6 million BTUs PER BARREL, not per gallon.  A barrel is 42 gallons.

Oil from oil sands has the same.

CPL's picture

I correct myself...these guys have the refineries pre built and drop them in a year.  Impressive.

onthesquare's picture

American and international interest want the nasty stuff left in Canada and want to pull the maximum benefits out of the material to their highest benefit.  Full refineries can be built virtually overnight.  Ask  China to build them.

oddjob's picture

Ever heard of an upgrader?

Carl Spackler's picture

Clearly CPL, you are not in the commodities industries, nor are you a geologist.

What form of petroleum is in Alberta is what is coming out of Orinoco...yeah, the place where Hugo Chavez has made his money.

While it doesn't take that long to build a refinery up (logistically speaking). See "Minnesota, Duluth," and "tar sands."

It does take time to get an EPA approval because liberal Democrats don't want middle-class Americans to get beyond their historical political control by having an opportunity for high-paying jobs and upward mobility or, stated otherwise, the pursuit of happiness.


palmereldritch's picture

The only politics there is the corrupt mercantilism supporting a choke point cartel on downstream products.

Democrat, Republican...they're all in the same crony pipeline.  My favorite excuse 'the government' uses for not building more refineries is the environmental pollution argument....that is the tell that Big Oil regularly uses eco-Fascism to maintain artificial scarcity and support high prices (and petro dollar inflation/currency consumption). 

Carvasarus's picture

Transcanda wants to ship refined product from Louisiana overseas to china.


Herkimer Jerkimer's picture

There's a lot of people asking that question in Southern Ontario right now, considering they get their oil from the mid-east. You could ship it right down the St. Lawrence or pipe it south.

Energy self-sufficiency. What a concept, eh?


Can you say, "I'm sorry, what are you calling us for, mid-east quasi-dictatorship?"


30 years to put up a refinery? 5-7 more like it. They don't want to build one because it would increase supply, and higher prices.


Simple math.



CPL's picture

It's not just American and Canadian refineries, it's around 70% of them across the world in the last six months.  


So is that a condition of price controls in effect in somewhere like South Africa?  


Or is it really a symptom of the underlying supply issue that was expected?

memyselfiu's picture

As long as NAFTA exists, Canada is locked in to selling a fixed percentage of all its production, this Keystone stuff is all noise and it's just a matter of time before we're merrily shipping oil to be refined in the US for Asian markets. And guess what else, 30 bucks a barrel more once keystone starts shipping- so much for $2.50 a gallon LOL!

BobPaulson's picture

I think it has more to who already has built refineries and that for such large facilities you don't really have a free market. This is the kind of thing Adam Smith warned of. The free market is a neat idea when there are limitless supplies and alternatives. Once logistic issues affect the delivery of a product to market, you see politics and influence peddling controlling things.

There is a big push to get the Gateway Pipeline to Prince Rupert to give free access to competing markets in Asia. It is at least 5 years away IMHO.

The reason we don't sell it to Ontario is because Gulf crude is cheaper for you folks and as I commented above, anything that looks like planning or securing strategic national interests is always panned as communist, and against NAFTA. Locals here in Alberta are easily sold the fear that people from Ottawa are coming to steal our oil. They'd rather willingly give it to Houston. It's an amazing feat of propaganda actually.

Savvy's picture

Or a refinery in Alberta and we process our own raw resources.


Time to liberate the Canucks......

jonjon831983's picture

Failed blueprint:


Canadian Bacon


"The U.S. President, low in the opinion polls, gets talked into raising his popularity by trying to start a cold war against Canada."

tickhound's picture

"Land war would be over in days... claims Salvation Army could kick Canada's ass."

prains's picture

Time to liberate the Canucks......


please just take Luongo and Kessler

Manthong's picture

I want to emancipate the Montreal strippers.

WhackoWarner's picture

I assume you hail from the lower 50. How about your clean your own house before you

 come in to give me advice about mine. Liberate yourself. IDIOT

GoinFawr's picture

Hahaha! What a posturing joke. Robert Paulson has you Canuckistanians NAILED!

Enjoy your Police State with some of the lowest royalty rates in the world (~23c CAD/barrel if memory serves) suckers. You kept asking for it, you finally got it, yay! And don't forget to clean up afterwards either. No, no, stop thanking me already, I assure you that I had nothing to do with it, but you're welcome anyway.

PS If you think you've lost all the sovereignty you can with NAFTA, return your seats to the full upright and locked positions: CETA's gonna mop up whatever is left. You getting thirsty yet?

You know, I give USeans who deserve it a rough ride here on ZH, but I'd wager even the most deluded, stupidest of them would never vote for a party with a leader who spews crap like,

"And we cannot be effective at major economic matters any longer unless we work with our economic partners around the world and work with them closely and intimately. That is essential. I know some people don't like it. It is a loss of National Sovereignty but it is a simple reality. It is a simple reality."
- Canuckian PM Stephen Harper

Bonne Chance!

LawsofPhysics's picture

"Our government believes that the free market is the most efficient and cost-effective means to ensure the proper allocation of resources for the development and supply of energy," 

He is correct.  The problem is that there hasn't been a free market in over a hundred years.

WhackoWarner's picture

Another problem with this remark is that it ignores the will of the people

fonzannoon's picture

Someone help me out here. This one seems to easy. Why have the Canadian energy income and oil sands plays not risen a lot here?

CPL's picture

Because as long as it takes 9 barrels of real energy to process 10 barrels of dirty crude, it'll stay exactly where it is right now.  Until that process is made significantly better all current resources will be used against a very difficult to process and make useful raw material.


I'm afraid most of what was sold about the TAR sands, not Oil, is very simple.  You got BreX'ed.

LawsofPhysics's picture

There you go.  At least with the deep-well OIL we can still invest a barrel of energy and get almost three back.  Thermodynamics is a bitch like that.  When i try to explain to people why TAR sands will only be aggresively pursued after oil is $200 per barrel, they try to remember every political talking point the MSM has ever stated.  Facts, no so much.

GoldmanSux's picture

Are you kidding? Not agressively pursued? It's been the biggest capital expenditure project on the continent for over a decade and the production increase reflects that. Production will further double by 2020.

LawsofPhysics's picture

 Remind us, for all that "biggest capital expenditure" how much of the oil on the world market comes from tar sands again?  Is it even more than 3% yet?  Production is fucking irrelevant to the corporate world, profit is what matters.  My point is simply that expensive oil makes tar sands, profitable, but then the whole diminishing returns thing becomes a problem with fiats dying around the world.  I'd bet on fusion reactors before oil from tar sands makes up even 20% of the international market. 

GoldmanSux's picture

Yes, it's getting close to 3%, and 25% of US imports, going to 50%. Good luck with your fusion investment.

LawsofPhysics's picture

LOL!  Ignoring the water issue, the dollar and the American "market" is becoming less relevant every day.  Good luck with the tars sands.  If you are saying the world will use tar sands, then I am glad I bet on the energy companies I did, but they are investing in a lot more than tar sands. 

GoldmanSux's picture

I can't follow what you're trying to express frankly. You said it would never become a big production zone. It's been one for 10 years. It's made Canada the number 1 U.S. supplier of imported oil and the spread with number 2 is widening by the day, never to reverse.

GoinFawr's picture

Yeah, I'm not sure what he's on about either. Last I heard the tarsands were profitable at ~40CAD/bbl, and that's including the price of the joke of the Oil producing nations royalty rates and the joke of the dirt munchers 'reclamation' costs.

Toxicosis's picture

Sorry, that is just not going to happen.  To even maintain production over the next few years will become even more difficult due to the lack of freshwater availability.

Study shows fresh-water levels in rapid decline with implications for Alberta oil-sands industry


Obviously water for this mining process is a rate limiting step, and perhaps Albertans might just want some water for themselves.

Oil sands mining is licensed to use twice the amount of fresh water that the entire city of Calgary uses in a year. The water requirements for oil sands projects range from 2.5 to 4.0 barrels of water for each barrel of oil produced.



LawsofPhysics's picture

And then there that, but hey, maybe we can burn some oil to generate some power to desalinize some ocean water - FAIL.  Diminishing returns and the failure of humankind to accept knowledge and truth or understand what exponential equations really mean for growth relative to resources. 

The fucking noise from bullshit make-believe propaganda machines is starting to make the real signal difficult to see. 

Toxicosis's picture

It's virtually only when people have to eat their neighbours dog and maybe even their neighbour out of desperation that they'll wake up.  For now it's back to dancing with the stars, until hyperinflation makes it impossible for me to even pay my cable bill.  Sons of bitches!

AnAnonymous's picture

Diminishing returns and the failure of humankind to accept knowledge


Ah, humanity. US citizen hijacking human beings.

No, the denial comes from US citizens, not humanity.

Even if, admittedly, for US citizens, most of those who did not comply are subhumans or non humans.

Resources when handled by US citizens, is handled the US citizenism way. Because US citizen nature is eternal.

GoldmanSux's picture

It most certainly will. I'm sorry, but is not a source of facts, but of propoganda. Most of future production growth comes from the SAGD process, not mining.

Toxicosis's picture

SAGD typically uses water from deep reservoirs.  Taken right from their website.  Oh but Calgarians wouldn't want to drink freshwater from reservoirs would they?

The quantity and use of water in Alberta has become a high-profile issue due to many factors. The consecutive years of drought, dwindling water supplies and the rapid growth and expansion of industries and population in Alberta have all played a role in increasing the demand on Alberta's water supply, thereby raising stakeholder concern about the supply of water for the future.[25] As part of its Water for Life – Alberta's Strategy for Sustainability, the Alberta government is currently assessing water demands and at the watershed level.[26] The Senate Committee on Environment and Natural Resources expressed particular interested in these issues during a recent hearing with the Honourable John Efford, Minister of Natural Resources Canada.


In mining projects, water is used create a slurry of the oil sand ore that is then transported by pipeline to the extraction plant where more water is added and the bitumen is separated the from the sand. Water is also used in integrated operations to upgrade the bitumen to synthetic crude oil. About 70 percent of water is recycled, leaving a balance of two to three barrels of water being used to produce one barrel of synthetic crude oil.[28]