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With world oil prices staying comfortably above US$100 a barrel, Alberta should be living large and cashing in on the boom. Instead, Albertans have been robbed of their windfall by a shortage of pipeline space and by competing new oil production in the United States.
The mix has depressed Canadian oil prices so much that the provincial government warned Monday its March 7 budget for 2013/2014 will make a big course correction from big spending to big belt-tightening.
The province is facing a “perfect storm” because Canadian oil sold in the U.S. is selling at a deep discount, world markets seem increasingly out of reach and resource revenues have plummeted, Doug Horner, Alberta’s Finance Minister, said in Calgary.
“No storm is good and this one is going to be severe,” Mr. Horner told reporters after addressing the Calgary Chamber of Commerce.
Mr. Horner said the gravity of the problem hit home just in the past few months and it was only before Christmas that Alberta, the federal government and industry realized the magnitude of the North American oil glut.
“Our biggest problem is that Alberta is landlocked,” Mr. Horner said. “In fact, of the world’s major oil-producing jurisdictions, Alberta is the only one with no direct access to the ocean. And until we solve this problem — and that means all of Canada must work together — the differential will remain large. And it’s significantly affecting Alberta’s bottom line, to the tune of billions of dollars.”
Indeed, Alberta’s bitumen is getting $30 a barrel less than oil in Mexico or Texas, and lighter varieties are getting $50 less than oil from the Middle East. Almost a third of the province’s revenue comes from oil and gas royalties.
For the rest of this article, please go to the National Post website: http://business.financialpost.com/2013/01/21/landlocked-alberta-facing-budgetary-perfect-storm-as-oil-price-gap-stings-horner/?__lsa=cf3c-1f3b