Message 25476230
From: teevee
Can tariffs on Canadian oil and natural gas be far off? Once a cap and trade scheme is put in place, it would be natural to accuse Canadians of cheating to justify a tariff on their energy exports to the USA. Canada is a captive energy supplier with no market diversification. In the case of softwood lumber, tariffs collapsed the Canadian lumber industry, allowing US lumber companies to buy up assets for 5 cents on the dollar. An energy tariff could help drive the price of Canadian oil and gas companies and their assets to record low prices, thereby creating an opportunity for US companies to buy them up cheaply.
U.S. drillers suggest Canada dumping oil
Producer want U.S. to start investigation
M ost oil drillers are fretting after crude prices fell 70 per cent since last July, but a group of Oklahoma oilmen pin much of the blame for their plunging profits on an unlikely culprit: Canada.
Producers led by driller Harold Hamm have asked local authorities, including Oklahoma's attorney general, to investigate whether Canada--the largest oil supplier to the United States--is selling crude at prices below production costs from its vast oilsands reserves.
The Oklahoma group, Domestic Energy Producers' Alliance, says it may seek to halt new Oklahoma-bound pipelines, or ask the state to temporarily fix prices -- a measure it once took in the 1930s. The group could also pursue Federal import tariffs on Canadian crude.
"We think Canadian oil is sold here at below what it costs to produce. As a result, we are getting less for our oil than it's worth,"Hamm said by phone. "They want to pump in another 1.5 million barrels a day. It would be a disaster."
Several trade experts and oil industry officials said Hamm was unlikely to succeed, but they expected him to fight.
Hamm, CEO of Oklahoma's Continental Resources, who ranked No. 42 on Forbes' richest Americans list last year, led an effort by drillers in 1999 to sue Mexico, Venezuela, Saudi Arabia and Iraq for allegedly dumping cheap oil in the United States. That effort briefly threatened to escalate into an international trade dispute, but ultimately failed.
Canada shipped 2.2 million barrels a day to the United States last year, double its average level in the 1990s. Some U. S. drillers complain the flood of Canada's oil is distorting the value of U. S.-produced oil. Hamm's group says it has received calls of support from drillers in eight other states.
Oklahoma pumps around 200,000 barrels a day (bpd) and receives 300,000 bpd of "upgraded," synthetic crude from Canada, Hamm said.The state currently lacks enough outbound pipelines to ship the oil elsewhere.
The problem could get worse once TransCanada Corp.' s Keystone pipeline, partly owned by ConocoPhillips, starts shipping oil-sands crude later this year, said Mickey Thompson, a prominent Oklahoma driller.
"We're not trying to lock them out, but we're concerned about our ability to continue to exist in the marketplace and what it means to our state," he said. "We just don't want to be dead bodies in the road of prosperity in Alberta and prosperity in Houston."
Thompson estimated the cost to turn Canadian oilsands crude to light oil is "probably well north of $45, maybe $60 or $70." The Canadian Association of Petroleum Producers puts the figure lower. Canada's most expensive synthetic crude costs $30-$35 a barrel to prepare for export, a spokesman said.
Oklahoma Attorney General Drew Edmondson met with Hamm and other oilmen last week to "discuss the Canadian oil situation," Edmondson's office said. "The information was given to our antitrust attorney for his review," a spokesman said.
Cushing, Okla., a pipeline crossroads and oil storage hub, is delivery point for the world's most-traded oil future, NYMEX West Texas Intermediate. Oklahoma's own light, sweet crude--prized because it is easy to refine--has been fetching $4-$6 a barrel below the price of U.S. crude futures, or less than $40 a barrel, sellers said.
Earlier this year, drillers sold Oklahoma barrels for an exceptional $10-$20 a barrel discount to Brent, European crude that is a major world benchmark.
Big oil buyers in Oklahoma, including refiners Conoco-Phillips and Sunoco say prices are low for Oklahoma oil because of a glut at Cushing, which recently stored a record 34 million barrels.
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