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article imageCanada's oil industry declares national emergency as prices drop

By Karen Graham     Nov 16, 2018 in World
Alberta - The Canadian crude oil industry has declared a national emergency after prices plunged to record lows. On Thursday, the price of Western Canadian Select closed at a record low just under $14 a barrel.
Brent and WTI oil futures are trading higher for the third day in a row thanks to Saudi Arabia, the United States and Russia pumping more oil in response to fears of higher prices as a result of renewed U.S. sanctions on Iran.
But meanwhile, in Alberta's oilpatch, producers are losing patience with the lack of support for the industry. The lack of pipeline capacity has sent Canadian oil prices to a near-record discount to the U.S. and energy stocks reeling. To make matters worse, U.S. gas has surged about 19 percent due to an expected cold spell - while in Canada, gas prices have dropped about 14 percent.
Aerial view of the Syncrude oil sands extraction facility with the Suncor extraction facility in the...
Aerial view of the Syncrude oil sands extraction facility with the Suncor extraction facility in the background, in Alberta Province, Canada on October 23, 2009
Mark Ralston, AFP/File
CTV News Canada is reporting that if oil prices remain through 2019, Alberta's government could lose about $5 billion in revenue or about 10 percent of the province's budget.
“Globally, we’ve politicized energy so much," Darren Gee, the chief executive officer of Peyto Exploration & Development Corp., a Calgary-based gas producer, said in an interview at Bloomberg’s Toronto office Wednesday.
Gee added that regulatory and environmental concerns have added an “entire layer of risk that people just don’t know how to assess.” Canadian Finance Minister Bill Morneau also admits there are no easy solutions to the historically low price for Canada’s oil.
Suncor Edmonton refinery
Suncor Edmonton refinery
Suncor / Newsroom
The oil industry is in a crisis
“We are in what we would describe as nothing short of a crisis,” Tim McMillan, a spokesperson for the Canadian Association of Petroleum Producers, told CTV News. The average price of a liter of gas is just above $1.12, the lowest it has been since last December.
The oil industry is plagued with problems that will impact on production and jobs. Cenovus has announced cutbacks in production of 10 percent, and chief executive Alex Pourbaix is urging the Alberta government to order all oil companies to make a similar move.
“This is an extraordinarily serious situation both for the province of Alberta, the people of Alberta and I would say Canada also,” he told CTV. Rival companies, Suncor and Husky have rejected the call to cut production, favoring a free market. But these companies are also under pipeline constraints.
Alberta Premiere Rachel Notley is not ruling out government intervention. “We have a suite of options at our disposal,” she said.
“You'll see something certainly within weeks and perhaps sooner.”
Canadian Prime Minister Justin Trudeau is caught in a political crisis over the expansion of an oil ...
Canadian Prime Minister Justin Trudeau is caught in a political crisis over the expansion of an oil pipeline
Lars Hagberg, AFP/File
Lack of market access
Canada's crude oil problems always come back to the lack of market access. The Keystone XL and Trans Mountain oil pipeline projects are facing fresh environmental scrutiny while gas exports are largely handled by only one pipeline company, TransCanada, said, Gee.
Canada's main energy index is down 11 percent over the past 12 months, while U.S. energy stocks dropped only 3.4 percent for the same period. Gee argues that even with the Trudeau government buying the Trans Mountain pipeline to get oil to the coast, he believes the government has “absolutely no interest in having that pipeline built or expanding this basin."
“I’m quite afraid that we’re going to see a separatist agenda in the west and a lot of separatist movement because of the energy industry. I’m afraid for Canada for that reason," Gee added, according to the Houston Chronicle.
According to Nasdaq, Canadian crude began Friday's session in the red, but has since pared its early losses and is now hovering around the flat line as of mid-morning.
More about Canada, Oil industry, national emergency, $14 a barrel, global glut