A oil tanker is guided by tug boats as it goes under the Lions Gate Bridge at the mouth of Vancouver Harbour on May 5, 2012. THE CANADIAN PRESS/Jonathan Hayward

"It was truly disgusting in this emergency debate that the Conservatives continue to push the party line that the pipeline is necessary and that good times are coming back to Alberta if it is built." ---

In Parliament’s emergency debate on Trans Mountain Expansion the first speaker, Conservative MP Shannon Stubbs, talked a lot about economics but forgot to mention world price of crude, the most fundamental element of the story. She talked about energy investment falling off under Justin Trudeau at a record rate and blamed the prime minister for that. The price of crude and LNG fell dramatically as Trudeau came into office, it was that not Trudeau that caused this change in Alberta.

The stories told by Conservative members of Parliament that Trans Mountain is needed to maintain jobs and create new jobs in Alberta is false. The crisis in Alberta, that investment has turned down, is because Alberta makes a high carbon, high cost, capital intensive, heavy barrel of crude in a world where low cost, quick payback, higher quality crude is growing almost exponentially. A new pipeline is not going to change that.

The Conservatives used the fact that the U.S. is exporting crude to say the U.S. is our competition. Let’s examine that idea: A pipeline doesn’t solve the fundamental competitive base problem of cost, quality and high capital requirements, those problems are inherent in the nature of the oil sands. We aren’t competitive in the hunt for capital, pipeline or no pipeline.

It was truly disgusting in this emergency debate that the Conservatives continue to push the party line that the pipeline is necessary and that good times are coming back to Alberta if it is built. Of course it isn’t much different than the Liberal line on the pipeline. We have the two major parties in the House basically saying the same thing — build the line because its in the national interest and good for Alberta.

If only that was true.

“There is a race to get commodities to market” was said during that debate. This totally misses the reality that the oil trade is a liquid transparent market where price and value dictates what crude is bought by a refiner. China today gets oil from all over the planet including from the Gulf Coast. Building a pipeline to the west coast does not create some kind of magic spell making Canadian diluted bitumen more valuable in the eyes of the crude market, the oil molecules don’t change if they move from Vancouver or Houston.

But there is something on the horizon that could truly hammer the heavy oil market and have deep repercussions in Alberta. It isn’t pipelines or the idea that American light crude barrels are beating our barrels to market but does have something to do with oil molecules.

In 2016 the International Marine Organization (IMO) decided by 2020 to drop the global sulphur specification on the residual fuel oil (RFO) that ocean going ships burn from 35,000 ppm to 5,000 ppm. I know your eyes just glazed over.

But this is really important. This could force the global marine fuel market to shift by as much as three to four million barrels a day of material that contains the hardest to refine material into stuff that looks more like diesel. In other words up to four million barrels per day of nasty stuff that can’t be burned any more could be competing to get into high conversion refineries where currently our bitumen is headed or wants to head.

Now MP Stubbs, that is competition.

Few global refiners are putting investment in because of the uncertainty of the long-term solutions to this change. And at this point those types of investments take a long time to put together so that isn’t even practical. The market will be sorting it out with price. I have heard this referred to as a potential apocalypse for the Canadian oil sands as it is possible for a period pricing on heavy crude could drop to shut-in economics as it tries to elbow the RFO out of cokers. No one knows how this is going to play out or how long it will take.

So continue yapping about pipelines, making up stories about national interest and competitiveness. The real problem of producing crude that is high in carbon with high sulphur is about to hit home and there is nothing we can do about it at this point.

And our own refining industry is also at risk. There is only one coker east of Saskatchewan, so that means those refineries are dependent on selling into the RFO market even when they are running lighter crude. Since our industry hasn’t invested our refineries aren’t competitive relative to the U.S. Midwest or the Gulf Coast.

Again that competitiveness thing.

Alberta heavy crude industry is not bouncing back. All indications are it is about to get worse in fairly short order due to this really earth-shaking shift in global marine fuel.

If the politicians really cared about Alberta workers, they’d be discussing what we are going to do as an energy producer in the new world of U.S. fracked crude and the IMO marine fuel change. Instead political points are trying to be scored based on a world of growing oil sands that existed last decade instead of this one where oil sands investment is ending. Does that remind you of a certain U.S. president talking about reviving his coal industry? You can’t push against market fundamentals.

Even better we should be thinking about the decade coming up since this one is almost over. Our leadership in both the Trudeau government and Her Majesty’s Loyal Opposition are failing Alberta and the rest of us.

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