Article content continued

Even our existing refineries aren’t running at full capacity

Nobody has ever accused an oil company of not knowing how to make money. So it is generally safe to assume that if Canada could make more money by refining more of its own oil, someone would have thought to do that by now. Case in point: Even the refineries we already have aren’t running full tilt. In 2017 Canada’s refineries only ran at 84 per cent capacity, according to the National Energy Board. The story is a bit different in Alberta, where refinery utilization impressively topped 101.5 per cent in 2017 — but that still means eastern refineries are sitting on their hands up to one fifth of the time. There’s even some wiggle room in U.S. refineries, who worked at only 91 per cent capacity in 2017. It’s for this reason that Husky Energy CEO Rob Peabody said last month that North America is effectively maxed out on refineries. What’s more needed, he said, are new pipelines to connect Alberta’s oil with some of the continent’s more underused refineries. “If you can pipeline connect Alberta to North America, you don’t need a lot of new upgrading capacity built in North America – there is actually enough,” he added.

Photo by Tom Stromme/The Bismarck Tribune via AP

The people buying our oil generally aren’t interested in our gas and diesel

Last year, Canada exported $67 billion in oil. As with prior years, most of that exported oil ended up in the United States. Pretend that, tomorrow, Canada shut off all its oil exports and informed the Americans that if they wanted our petroleum, they’d have to start ponying up for some made-in-Canada gas, diesel and kerosene. The likely result is that U.S. oil importers would give us a blank look before immediately calling one of the hundreds of other places that could sell them crude oil instead. “They’re not going to idle all of their refining capacity to suit Canada’s needs, they’re going to do what’s best for them, which is to continue to run their refineries,” said Jason Parent with Kent Group, a leading Canadian oil industry analyst. One major problem is that Canada has a pretty hard time making gasoline cheaper than anyone else. The United States is the world’s most prolific refiner of oil — and most of its refineries are already paid off. China benefits from a one-two punch of lower labour costs and lax environmental standards. Against those odds, there are only so many ways in which a brand-new Canadian refinery could expect to make competitively priced diesel and gas. “Although the return is still below that of Asia, a new refinery could work in Alberta or British Columbia given the right circumstances, but not without some risk,” was the most optimistic forecast that a recent report by IHS Markit could muster.