Gluts, price differential: 6 things to know about Canada’s oil-price gap

Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can’t be shipped out

Gluts, price differential: 6 things to know about Canada’s oil-price gap

The Alberta government has ordered a mandatory cut to crude oil production next year to deal with historically low prices being paid for Canadian oil. Here are six things to know about Canada’s resource:

Light or heavy: Each type of oil around the world has its own price. New-York-traded West Texas Intermediate (WTI), delivered at Cushing, Okla., is the benchmark price for light crude oil in North America. Western Canadian Select (WCS) is the reference price for heavy crude oil from the oilsands delivered at Hardisty, Alta.

Price differential: Canada’s heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.

Record gap: The differential is usually between US$10 to US$15 per barrel. The biggest gap — US$52 per barrel — was recorded in October. Experts say the extreme discount happened due to a reliance on high-cost transportation — rail and truck — instead of new pipelines.

READ MORE: B.C. gas prices to hit highest levels in years: GasBuddy forecast

READ MORE: Alberta cuts oil production to help deal with low prices

The glut: Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can’t be shipped out. Roughly 35 million barrels, about twice the normal level, are in storage.

Cutting production: The province has ordered the output of raw crude oil and bitumen to be reduced by 8.7 per cent, or 325,000 barrels per day, starting in January. As the excess storage clears, the reduction is expected to drop to 95,000 barrels a day until the end of next December. The move is expected to narrow the differential by at least $4 per barrel.

Winners and losers: Calgary economist Trevor Tombe says $4 per barrel doesn’t sound like much but, over a year, it’s worth about $1 billion to the Alberta government’s budget. While some companies will also benefit, those with their own refining and upgrading operations may not.

The Canadian Press

Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Firefighters respond to a fire on Heatherly Road in Colwood Jan. 19. (Photo courtesy of View Royal Fire Rescue)
December and January, so far, have seen their share of rain. (Black Press Media file photo)
Potential for snow in Greater Victoria after unusually wet December, January

Winter is on the way, says Environment and Climate Change Canada

Victoria police say the number of business break and enters in the city has been rising for the last four months. (Twitter/VicPD)
Business break and enters on the rise in Victoria

Sophisticated techniques used to defeat alarm systems, police say

A female prisoner sent Langford police officers a thank-you card after she spent days in their custody. (Twitter/West Shore RCMP)
Woman gives Victoria-area jail 4.5-star review in handwritten card to police after arrest

‘We don’t often get thank you cards from people who stay with us, but this was sure nice to see’: RCMP

Rendering offers an overhead view of proposed tiny home community using repurposed shipping containers in the Caledonia/Vancouver street parking lot next to Royal Athletic Park. Council voted to allow Aryze Developments apply for a temporary use permit as part of the project. (Courtesy Aryze Developments)
Anonymous donor boosts shipping container housing project in Victoria

Donor promises to match further donations until $500,000 goal is met

Provincial health officer Dr. Bonnie Henry prepares a daily update on the coronavirus pandemic, April 21, 2020. (B.C. Government)
B.C. adjusts COVID-19 vaccine rollout for delivery slowdown

Daily cases decline over weekend, 31 more deaths

Health-care workers wait in line at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Canadians who have had COVID-19 should still get the vaccine, experts say

Pfizer-BioNTech and Moderna vaccines were found to have a 95 per cent efficacy

An empty Peel and Sainte-Catherine street is shown in Montreal, Saturday, Jan. 9, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Poll finds strong support for COVID-19 curfews despite doubts about effectiveness

The poll suggests 59 per cent remain somewhat or very afraid of contracting COVID-19

Egg producers in B.C. aren’t obligated to reveal their production sites. (Sarah Simpson/Citizen)
Officials say there’s not enough Vancouver Island eggs to meet demand

BC Egg Marketing Board doesn’t regulate labelling, supply needed from off-Island

A Courtenay resident labours to remove the snow build-up from around her car in February 2019. The area may see snow throughout the coming weekend. Black Press file photo
Snow, winter might not be done with Vancouver Island quite yet

Flurries, snow and cold temps predicted for the weekend for mid-Island

An elk got his antlers caught up in a zip line in Youbou over the weekend. (Conservation Officer Service Photo)
Elk rescued from zip line in Youbou on Vancouver Island

Officials urge people to manage items on their property that can hurt animals

A Trail man has a lucky tin for a keepsake after it saved him from a stabbing last week. File photo
Small tin in Kootenay man’s jacket pocket saved him from stabbing: RCMP

The man was uninjured thanks to a tin in his jacket

Tla-o-qui-aht First Nation Chantel Moore, 26, was fatally shot by a police officer during a wellness check in the early morning of June 4, 2020, in Edmundston, N.B. (Facebook)
Frustrated family denied access to B.C. Indigenous woman’s police shooting report

Independent investigation into B.C. woman’s fatal shooting in New Brunswick filed to Crown

Most Read