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Debate over Canadian crude continues

Scott Tong Jun 16, 2011

Debate over Canadian crude continues

Scott Tong Jun 16, 2011

Steve Chiotakis: Those oil sands are the subject of a Senate committee hearing this week. Lawmakers are looking at whether the U.S. government should buy that controversial crude from Canada. Their question: how it’ll affect the environment. If Washington says not good, Ottawa threatens to sell the oil to China instead.

From the Canadian oil sands in Alberta, Marketplace’s Scott Tong reports.

Scott Tong: At Canadian oil company Cenovus, executive Drew Zieglegansburger knows that the U.S. is his chief market. And that’s rough, since Americans are debating if Canadian crude is environmentally too dirty.

Drew Zieglegansburger: So right now we’re standing on the wellpad.

Zieglgansburger’s answer: nuh uh.

Zieglegansburger: These trees around these wellpad will not get disturbed, because we’re extracting the oilsands from underneath.

Critics say yeah, but pumping Canadian oil takes lots of energy, and therefore carbon emissions. Some argue it’s the dirtiest oil on the planet.

Zieglegansburger: The U.S. has some choices to make, whether they still want us to access their market. At the same time, though, we are also looking at other markets.

Like China.

Political? No, it’s rational business. For the next two decades, Asia will be the growth market. In fact, Canadian oil already goes there.

Industry consultant David Goldwyn.

David Goldwyn: Canada already has a western export line, which brings oil by pipe to the west coast. Oil also moves by rail.

More pipelines and deeper ports are under discussion in Canada, all going west.

Peter Tertzakian: We need to participate in global growth markets, not singular, stagnant markets.

That’s Calgary economist Peter Tertzakian, and yes, “stagnant market” is you and me. He figures U.S. demand peaked five years ago.

Tertzakian: It is permanent. You can see it in the data, people are starting to drive a little bit less. And then importantly, people are buying more commonsensical vehicles.

Canada’s China card is meant to provoke an emotional response, but economist Phil Verleger doesn’t worry. He says if China buys Canadian crude, we will simply go somewhere else. And he thinks the risk of a big supply disruption is overdone.

Phil Verleger: The United States has a strategic reserve of 720 million barrels of crude oil, which provides us more security than we need for almost all occasions.

Whether that’s right or not, one thing is clear: more of the world’s oil will flow to Asia.

In Alberta, I’m Scott Tong for Marketplace.

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