Gluts, price differential: 6 things to know about Canada’s oil-price gap

Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can’t be shipped out

The Alberta government has ordered a mandatory cut to crude oil production next year to deal with historically low prices being paid for Canadian oil. Here are six things to know about Canada’s resource:

Light or heavy: Each type of oil around the world has its own price. New-York-traded West Texas Intermediate (WTI), delivered at Cushing, Okla., is the benchmark price for light crude oil in North America. Western Canadian Select (WCS) is the reference price for heavy crude oil from the oilsands delivered at Hardisty, Alta.

Price differential: Canada’s heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.

Record gap: The differential is usually between US$10 to US$15 per barrel. The biggest gap — US$52 per barrel — was recorded in October. Experts say the extreme discount happened due to a reliance on high-cost transportation — rail and truck — instead of new pipelines.

READ MORE: B.C. gas prices to hit highest levels in years: GasBuddy forecast

READ MORE: Alberta cuts oil production to help deal with low prices

The glut: Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can’t be shipped out. Roughly 35 million barrels, about twice the normal level, are in storage.

Cutting production: The province has ordered the output of raw crude oil and bitumen to be reduced by 8.7 per cent, or 325,000 barrels per day, starting in January. As the excess storage clears, the reduction is expected to drop to 95,000 barrels a day until the end of next December. The move is expected to narrow the differential by at least $4 per barrel.

Winners and losers: Calgary economist Trevor Tombe says $4 per barrel doesn’t sound like much but, over a year, it’s worth about $1 billion to the Alberta government’s budget. While some companies will also benefit, those with their own refining and upgrading operations may not.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

B.C. Indigenous communities receive funding for hands-on trades training

Nuxalk, Witset, Penticton Indian Band, TRU Williams Lake, and Camosun College among beneficiaries

MISSING TEEN: Williams Lake RCMP ask public’s help in finding Angel Emile

Emile was last seen on Windmill Crescent in Williams Lake Jan. 16

Cariboo female hockey players help make history at outdoor BC Winter Classic

Brette Kerley, Paige Outhouse, Pyper Alexander and goaltender Cadence Petitclerc-Crosby took part

EDITORIAL: Embrace literacy

Family Literacy Week is from Jan. 26 to Feb. 2

VIDEO: WHO says China virus not global health emergency

The decision came after Chinese authorities moved to lock down three cities on Thursday

VIDEO: Rare ‘ice circle’ spotted on Kamloops river

An ice circle or ice pan, has formed in the chilly waters just east of the Yellowhead Bridge

Interior Health issues drug alert in Kamloops

Testing of two samples of drugs sold as crystal meth was positive for fentanyl

Investigators in wildfire-torn Australia head to site of B.C. airtanker crash

The B.C. government sends condolences to Port Alberni-owned Coulson Aviation

VIDEO: Person in wheelchair narrowly avoids collision with car in Kelowna

There were no injuries in the scary looking near-accident last week in Rutland

B.C. still struggling to control non-resident medical care fraud

Unpaid bills, out-of-province claimants a costly legacy of MSP

Father to B.C.’s first MLB hall-of-famer is one proud dad

Larry Walker Sr. talks baseball background and son’s base running gaffe

Councillor in Revelstoke withdraws proposed 67% pay hike amid backlash

There was significant backlash to the proposed $25,000 and $70,000 wages

Electric charging stations in 100 Mile now open to the public

‘People have called from as far away as Kamloops’

Most Read