We have, at least so far, weathered a major political dust storm in the form of the U.S. presidential election. It seems that we must therefore be capable of solving the medical fog harbouring this pandemic.

Political problems can be raised and discounted with the flick of an election switch as these really are man-made disasters. But this pandemic is a nature induced disaster that with time and international cooperation will be solved.

One problem that doesn’t seem to be able to find a way out of the fog though is the ability to get Alberta oil out of Alberta.

Think it’s tough now? Just wait. Because the tough part just got tougher with the proclamation by the Democrat governor of Michigan that the Enbridge Line 5 has 180 days to shut down. This, after being granted an easement 67 years ago allowing the flow of some 550,000 bpd of Alberta crude through the Straits of Mackinac to provide feedstock for refineries in Michigan as well as Ohio, Indiana, Illinois, Pennsylvania, and the southern Ontario refinery hub in Sarnia.

Is it just me, or is it just a coincidence that this hammer has hit the anvil just days after the left leaning Biden overcame the right winged Trump to become the next White House tenant?

Why has it taken some six decades to decide that this pipeline is now — by some calculation — an environmental problem and always has been a problem?

The total number of leaks from Line 5 over its lifetime has amounted to ZERO.

The only harm I see in the immediate future is for the consumers of all refined products; not only in this governor’s home state, but those in neighbouring Michigan as well as its northern border pal in Ontario.

If Line 5 were forced to close, this would have a severe and immediate impact on refinery operations with combined capacities of 1,050,000 bpd in the U..S Midwest (MI, OH, IL, PA, IN) and 393,000 bpd in Sarnia. As Line 5 continues as Line 9 from Sarnia to Montreal, consumers in Quebec will not escape the wrath of the governor from Michigan who, I believe, along with President elect Joe Biden, is on a crusade to shut down the Canadian oil industry.

AHHH! But at what cost? And who will pay?

Let’s say the pipeline shuts down tomorrow.

Like it or not, there is a prolonged weaning period needed for consumers and heavy industry to switch to some, ‘magic foo-foo energy dust’ to continue to support the economy. The refineries will have to find some other delivery mode of (once again) crude oil to fossil fuel the economy. The hard facts are: If the alternative to shipping by pipeline is by rail then the price at the pump and/or racks will increase by 4.5 cents per litre; and, if by road transport, look for an overnight increase of 10 cpl.

And, that’s just the increase due to delivery costs.

This all assumes refiners will even want to continue operating under the political storm cloud of unreliable supply.

Of even more importance to them would be that without Western Canadian Select as their feedstock, they would have to revert back to processing West Texas Intermediate (WTI), which today demands a 32% price premium over the Alberta product — and that assumes that WTI can even be delivered, and if so, by what means.

If that’s the case then the choice for refiners is no choice… “It’s been a slice, we’re outta here!”

One thing that can be relied upon is the sensitivity consumers and the electorate have on pump prices. Something politicians on both sides of state and international borders may want to consider before hammering the gavel of environmental righteousness.

They should watch their fingers and the consumer’s toes.

– Roger McKnight – B.Sc., Senior Petroleum Analyst

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