Good news for Canada. The media baron hoping to build a refinery on Canada’s west coast is David Black, not Conrad Black as I initially thought (they’re not related).
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This is the chart that should keep Canadian politicians and CAD traders up at night.
It’s the discount on Western Canada Select compared to WTI crude oil. It shows that today, Canada is selling it’s oil (which is a favorite of refiners) to US refineries at a $19.50/barrel discount after hitting a record $42 earlier this year.
At today’s prices, that spread takes away about $52 million per day, or roughly $1.6 billion per month. To put that into perspective, Canada’s monthly trade deficit averaged about $1 billion/month in 2012 — so it’s the difference between a surplus and a deficit. Total exports are about $40 billion so closing that gap would add roughly 4% to all trade.
The solution is to build a refinery in Canada, rather than shipping it to the Midwest, which will be further stretched by extraction from shale in the coming years.
Finally, it appears that someone has stepped up to the plate and is gathering financing to build a refinery on Canada’s west coast — a perfect place to export to Asia. It’s a mystery why this wasn’t done years ago but with US refineries making such a tidy profit on the spread, I’m sure they will be happy to fund any environmental groups who hope to block construction.
