Trans Mountain will raise pump prices 15 cents a litre, according to Kinder Morgan president

Robyn Allan - Posted: Feb 1st, 2014 - Vancouver Observer

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Kinder Morgan Canada President Ian Anderson told analysts in Houston, Texas last week that the Canadian economy is losing big because of limited access to markets—a problem he says his $5.4 billion Trans Mountain expansion will help solve once the project receives regulatory endorsement and Harper Cabinet approval. He expects that could be as early as mid-2015 with a late 2017 in service date for the new pipeline.

Explaining the drive behind oil producer demand for BC west coast access, Mr. Anderson told his audience “tight capacity’s going to be out of the Western Canadian Sedimentary Basin for some time…and as a result of limited access to global markets we continue to see discounts between Brent, WTI and Canadian Mixed Sweet blends… the differentials Canadian producers see adds up to about $50 million a day in lost revenues and profits to the Canadian economy.”

What Mr. Anderson didn’t do is connect the dots. If he’s right, and new, heavy oil pipelines like Trans Mountain raise oil prices and remove the discount, there will be a huge wake-up call for consumers at the pumps. We all know that when crude oil prices are higher at the refinery gate—which is exactly what would have to take place if Canadian producers are paid more for their oil—Canadian refiners faced with these higher costs pass them onto consumers, otherwise their profits fall.

Fifty million a day in “lost” producer revenues translates to an average of $25 per barrel.  If crude prices rise by that amount, when refineries pass it on it would mean roughly 15 cents a litre at the gas station.

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