“The increase in the price of our oil imports raises production costs for Canadian firms and also puts upward pressure on gasoline prices, since about half of the gasoline purchased in Canada is produced using refined petroleum priced off Brent.”
Typically, the higher prices to consumers are offset by greater export earnings for Canadian producers. So while the impacts are unevenly spread between producing and consuming provinces, the net effect on the Canadian economy is positive.
Canadian prices have recovered somewhat from a serious slump in February, when refinery outages in the U.S., plus the glut of crude in the U.S. mid-continent drove prices down sharply.
The Bank of Canada noted that planned pipeline expansions in the U.S. should help lift the price of Canadian crudes. Enbridge Inc. and its partner, Enterprise Products Partners LP, are reversing the Seaway pipeline - which formerly carried crude into Cushing, Oklahoma, - to take oil from that over-supplied market to the massive Gulf Coast refining hub.
However, central bank analysts say the differential between WTI and Brent will persist until more pipeline capacity is built between western Canada and the U.S. Gulf Coast, the route for TransCanada Corp.’s proposed Keystone XL line, and between Oklahoma and Texas, where there are several projects being planned.
Intellpuke: You can read this article by Globe and Mail journalist Shawn McCarthy, reporting from Ottawa, Canada, in context here: www.theglobeandmail.com/report-on-business/economy/canada-sideswiped-by-high-world-oil-prices-bank-of-canada/article2406376/