5 Factors Threatening the Canadian Economy: Oil Prices
Yesterday we kicked off our mini-series on the 5 biggest threats to the Canadian economy with the housing market. Today, we look at what may be an even bigger threat, and something that’s also a very hot topic today – oil prices.
The current price for Western Canadian oil is about 30 per cent below regular market rates. Being one of our main exports, especially in the Western provinces such as Alberta and Saskatchewan, oil is one – if not the – biggest economic driver, so with commodity prices down, it spells big trouble.
But why are oil prices so low right now?
One reason is because the U.S., the country that we send the most oil to, is currently experiencing a shale oil boom, causing them to have a much lower demand for Canadian oil.
Another reason is because it’s so hard to get our oil to the United States. The pipelines currently in place are bottle-necking, causing Canadian oil to sit, and get less crude oil to market. That’s something the Harper government is currently working on.
Harper is focusing in on the Keystone XL pipeline, the oil pipeline that would run from Alberta to the U.S. Gulf Coast. If plans for the pipeline were to go through, it would allow Canada to send 830,000 barrels of oil a day, mostly from Alberta’s oilsands, to refineries located on the Texas Gulf Coast.
Prime Minister Stephen Harper used the most recent G8 Summit in Ireland to speak to President Obama about the possible pipeline. What was said during that meeting is unknown, although it is known that Harper addressed a number of other issues as well. It’s also known that Obama has recently stated that plans for the pipeline are not included in his latest plan for climate change.
The biggest critics of the pipeline plans say that they’re unsure of the environmental impacts that the pipeline would have, and environmental groups are opposed to the greenhouse gas emissions that would be present with the pipeline. Concerns of a spill are also always present, and always significant.
The G8 wasn’t the first time Harper has appealed to the American people to get them to consider the pipeline construction. He’s also been hitting Washington with a slew of television advertising promoting the pipeline, and the benefit it will bring to both Canadians and Americans.