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Originally Posted by DFO
Yeah, that is what I thought. The part I don't understand is why we'd get more than WTI/heavy oil prices just because it gets all the way to the gulf? The US will still be buying it will they not? I work in the upstream part of oilsands - admittedly I don't know the in's and out's of exports & marketing.
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Oil values are totally impacted by location, a barrel up here is worth a lot less since no one really has the ability to do anything with it. It has to get somewhere usable (ie refinery) which costs money, and then theres supply and demand at the various hubs based on the refining capacity available and a thousand other factors.
Just think of it this way. A block of ice is worth a lot more in the Desert than it is in Yellowknife. You've got a chuck of ice that you can sell for $5 in Yellowknife, but if you can get that same chunk down to scorching hot California, you can charge $50 for it. Sure keeping it cold and shipping it might cost $40, but then you're still making $10 for that $5 chunk of ice. Similar-ish sort of scenario.
Generally speaking of course, if you look at Louisiana Sweet (gulf), its worth a decent amount more than WTI @ Cushing or SCO @ Hardisty. Once you get the oil to the Gulf it can be exported a lot easier and there is a much larger refining market there as well. Louisiana Sweet is priced much like Brent as such.
Oilsands operators are so keen on the XL pipeline since it allows them to tap those higher differentials and a larger market.