Quote:
Originally Posted by Bownesian
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Oil is a global commodity and the cost to ship it is relatively small compared to its value (and a fair amount smaller than the 15% difference in the USD:CAD). Thus, the wholesale price is pretty similar in all interconnected jurisdictions with no tariff difference (such as North America). If a barrel is selling for $100 US in Cushing Oklahoma, and your bid as a refinery operator for that barrel was $100 CAD and there was a 15% difference in the dollars, I wouldn't sell it to you, I would sell it to the refiner in Cushing. Thus the prices stay very similar to each other.
The geographic variance we see is first and foremost dependent on which province/state you are talking about (HST/PST/GST, excise taxes, carbon taxes), and then much further down the list is the distance to a refinery and market size.
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Well, gasoline is not really a global commodity, because transporting it for long distances is not overly popular. It is actually more of a local commodity.
The numbers in your post are not what has been said by various corporate officials, politicians and administrators over the past 10 years. They all say (said) that by the time Alberta oil reaches distribution hubs in Texas and Oklahoma, it could net our exporters approximately 50% of the market price for crude they sell due to very high transmission and transportation costs, as well as taxes and other charges. This, in fact, was (and still is) one of the biggest factors for lobbying the new inter-provincial pipelines.
If the above is true, then it would make sense for the producers to sell for less to local refineries without too many transportation hassles and realize the same or higher profit (which means that they can still sell excess supply to other markets for less profit).
If the above is untrue, then we've been lied to all along, suggesting ... well... at least some kind of a bad thing...