Friendly advice to Tom Mulcair: forget about refineries, OK?

Don’t want to found ‘nation-building project’ on a temporary price spread

by Stephen Gordon

Yesterday, Aaron Wherry pointed us to this passage in this Calgary Herald story:

Mulcair told reporters the increasing supply of oil in the U.S., combined with soft demand, is already having an impact on the Canadian energy industry. He said while Eastern consumers pay higher prices for oil, producers in Western Canada are hit by the price differential — the discounted price they must accept for their crude as a result of surging production and jam-packed pipeline capacity in the U.S.

“It’s in the interests of everyone to try to get the best possible price for our natural resources, to add the jobs here,” Mulcair said at an NDP rally at a nightclub on 17th Avenue S.W. He said focusing on shipping oil from Western Canada to central and eastern provinces, and processing it domestically, could be a solution and a nation-building project on par with railroad construction in the 1800s. “It could be a win-win-win situation.”

Mulcair seems to be making the some of the same mistakes that Jeff Rubin made here, so here is a modified reprise of an earlier post:

  1. Refineries’ margins are paper-thin, and have been so for decades; that’s why North American oil companies stopped building them long ago and have been shutting them down. 
  2. The West Texas Intermediate (WTI) crude oil price set in Cushing, Oklahoma is currently trading at a significant discount from the Brent price set in the North Sea and which is used as the reference price everywhere where supplies are available by tanker, such as Eastern Canada. 
  3. Refineries buying WTI oil are more profitable than those buying Brent oil. 

From this, Rubin Mulcair concludes that the path to prosperity is for Canadians to get in on the business of refining WTI-priced oil – namely, the oil produced in Canada.

This makes no sense to me:

  1. If refining WTI-priced crude was the path to long-term prosperity, oil companies would be building refineries without any encouragement from Ottawa (or Washington, come to that).
  2. The WTI-Brent spread opened up sometime around January 2011. The economics of refining have been dodgy for decades.
  3. The WTI-Brent spread is an opportunity for arbitrage: buying in the low-price market and selling in the high-price market. Ordinarily, arbitrage is a cheap and riskless way of making money. As long as the price differential exists, demand will increase in the low-price market, and supply will increase in the high-price market. The reason why the Brent-WTI differential has persisted is that it was difficult and costly to buy oil in Cushing and transport it to the Gulf Coast, where the Brent price prevails.
  4. Unsurprisingly, the private sector is falling over itself to take advantage of this arbitrage opportunity. The Seaway pipeline reversal has already begun to ship oil from Cushing to Houston, and the southern part of the Keystone XL project is under way. It makes no sense at all to make policy based on the assumption that the WTI-Brent spread is an immutable constant.
  5. It won’t be long — a few years — before the WTI-Brent spread is arbitraged away, and we’ll revert to a world where refining is everywhere a marginal business with razor-thin margins, and in which oil production is lucrative – which probably explains why the private sector doesn’t see much point in investing in Jeff Rubin’s Tom Mulcair’s business plan.

Diverting capital and labour away from a lucrative industry towards a marginal one isn’t creating “value-added.” It’s creating value subtraction.

I would also add that if you’re looking for nation-building projects, you might want to choose one whose foundation is more solid than the hope that no-one will notice or take advantage of a pure arbitrage opportunity.

Update: According to Cansim Table 301-0006, some 7,000 people work at oil refineries. Doubling Canadian oil refinery capacity would increase employment by about 0.05%.

 




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Friendly advice to Tom Mulcair: forget about refineries, OK?

  1. It seems may economists often forget that one of the differences between private and public delivery of goods and services is that the private market delivers to those who can best afford it, while the public market should deliver to those who most need it — and these two sets are not equivalent.

    Thus the private market not doing something is no reason for government to not do something. It is, in fact, the very reason why government *should* do something if there is an unfulfilled need there.

    Unless you’re arguing that Brent refineries are all operating at a loss, then “razor thin” margins is still a profit margin — just one that oil companies don’t currently see as one which allows them to justify the capital expense of a refinery. However, for government, profit margin is not the justification they need to do something — public need is. If the public need is great enough to justify the capital expense, then why not build something that will operate at a very slim profit margin? Hell, if public need is great enough, government creates and operates programs at a loss all the time. That’s kind of why it’s public and not private.

    Add to this that this plan would make it so that it is the WTI crude products that are being refined, and even at a lesser profit margin than currently enjoyed by WTI refineries, it’d still be a greater one than the “razor thin” ones currently taken by the Brent refineries. In addition, if publicly operated, those small profits would go back into the coffers of the government while the public got to use the cheaper energy.

    • There`s a public need for more refineries? How? Why?

      • There’s a public need for cheaper energy. Always.

        However, that’s not what I’m arguing, chiefly. I’m arguing what seems to be your underlying theme that building more refineries is a bad thing because it doesn’t make sense in the private market, and Mulcair is wrong for saying we should.

        I’m pointing out that the world is bigger than that, and Mulcair may not be wrong if you consider the larger picture.

        • So, to be clear: Canada has lots of refining capacity, so much that it’s been shutting refineries down for the past several decades due to lack of profitability. And your response to that fact is to suggest the taxpayer should instead bear the burden for building unprofitable refineries we don’t seem to need.

          Because that fits into some larger picture that no one can seem to explain.

          • What politician is specifically advocating that, Jen?

          • Mulcair, if you take his argument for more refining to its logical conclusion. Nationalize the refinery business by driving private operators out of business and then sell gasoline at a loss, subsidized through taxes.

          • Andrew, that is complete BS. And you know it.

            I’m beginning to believe the only logical conclusion in the Economics field is retirement.

          • No, I don’t.

            Mulcair wants Alberta oil shipped to the East and refined there. I’m pleased as punch to let him talk about it, as long as he doesn’t spend any money or force anybody to make it happen. What next? Is he going to tell our grocery stores where to import their bananas from?

          • TCPL just completed a feasibility study indicating it is economic to convert its underutilized gas line to ship AB light crude. It is in the process of gauging industry support. Do you really think that refineries in eastern Canada would NOT process some of this feedstock, rather load it ALL on tankers to points beyond? Give your head a shake.

            Prior to the 2008 recession, Irving Oil was planning a twinning of their refinery in St John, NB. You’ve heard of the outfit, no? The family practically runs the economy in the maritimes. Petro Canada (now Suncor) also previously had plans to upgrade to process AB feedstock. These plans are not developed within the bowels of the NDP war room.

            Do you suppose for one moment that if that plan is rekindled that this gov’t would not do everything in its power to cut down the red tape and expedite its approval?

            I think you guys are living in an ivory tower world (maybe you have the hangover from school) relying too much on Statistics Canada, and make stuff up for the sake of argument, or to “discuss amongst yourselves”.

            Is this an economics blog, or a political blog?

          • It’s great if the private sector thinks it is economically viable. They should go for it. Just as long as the government doesn’t need to get into the refining business, or the subsidy business, I’m happy. Clear red tape, whatever–go for it.

            Is this hard to understand? To me, saying the government should get into the refinery business is like saying they should get into the fast food business or the hotel business or amusement park business. It just does not make sense, and it scares me that there are people who think it does.

          • Is this hard to understand?

            No. Nor are straw man arguments.

          • You’re confusing logical conclusion with a rhetorical technique called “reduction ad absurdum”.

          • Reductio ad absurdum is valid and sound in predicate logic. I actually studied it… however it does not apply in this case. Reductio ad absurdum is the form:

            A and Not A => false.

          • We have the wrong type of refining capacity where it’s needed. And, yet again, my whole point was that basing the idea on whether something should be done solely on whether it’s profitable is missing the point of government.

          • If the government is going to do something ‘not profitable’ (another word for subsidies), why on earth should it be using tax revenues to lose money refining oil? I would rather see the government doing things that make sense. Poverty reduction, say. And if you want to argue that poverty can best be reduced through government-run oil refineries, I want you to give your head a shake.

          • Best? Nope.
            But yes, cheaper energy *does* reduce poverty.
            And once again, kindly cast your gaze back to the point of this thread, which was to argue against Gordon’s assertion that Mulcair is simply wrong to argue about government creating refining opportunities here in Canada.

            Since we’ve gotten to the point of your subjective opinion of what you’d rather, I suggest that the argument is by and large concluded. What remains now is a separate argument over whether that is the best way to reduce poverty.

            I agree that it isn’t.

            But I also suggest it’s a hell of a lot better than most of the supply-sider “solutions” currently being proposed.

          • You could argue that any policy could reduce poverty. Canada should build a moonbase because the effort would create jobs here and theoretically lower poverty? I’m interested in things that will work. Giving people marginally cheaper gasoline (and raising their taxes to make it possible) seems like a strange strategy to reduce poverty, if that is the stated goal.

            I’d start with the policy goal and devise a strategy to achieve it from there. You are starting with the instrument and searching for a policy rationale to justify it.

          • Good for you. Maybe you should start a blog.

            Here, however, what I was discussing was Gordon’s dismissal of Mulcair’s proposals based on examining it from the lens of private markets.

            However, if you’re going to play the reducto ad absurdum game, you could also argue that no policy eliminates poverty, so none of them work and we shouldn’t have any. Building a moon-base, or subsidizing twinkie production would, I expect, have a markedly lesser effect than building a refinery and having Canadians purchase product that hasn’t been shipped half way across the globe.

          • Nope. We’re talking efficacy. Units of welfare improvement/dollar of public expenditure.

            My vote goes to giving poor people money (guaranteed annual income). If you really think giving everybody slightly cheaper gasoline is better than this, I’d like to hear your argument why. After all, Venezuela and Iran have massive subsidies on gasoline–how is that working as a poverty reduction measure?

          • Well then you’re talking to yourself, because that wasn’t the conversation I was having, no matter how hard you attempt to change the subject.

            For the record, however, I agree, GAI would be a better use. That wasn’t what Gordon proposed, however, now was it? He just declared that any attempt at publicly supporting refineries was a bad thing because it doesn’t make sense for the private market to do.

            If he’d suggested it was a bad thing because there are more efficient ways to fight poverty, well that would be an entirely different conversation.. but he didn’t, and it wasn’t.

          • You’re the one who is trying to dress this up as poverty reduction (a bizarre claim). Poor people don’t even own cars… As you say, this has nothing to do with poverty reduction. This is someone with communist urges second guessing the private market. Mulcair is free to flap his gums, but if he wants to use tax dollars on uneconomic refinery investments, he’ll need to justify how that is the best use of those funds. I’d rather help poor people than perhaps slightly reduce the price of gasoline. In my book, the government should not intervene in the economy unless it has a very good case for doing so, in order to correct market failures or to improve social equity and welfare. Cheaper gas doesn’t cut it…

        • So cheaper energy through government taxation + selling gasoline at a loss?

          • I think I’ve already argued that it wouldn’t be at a loss. If refining wasn’t profitable, it wouldn’t be done except by public actors.

            That it is currently being done by private actors indicates there is some profitability to doing so. What it takes is efficient refineries that operate at a large enough scale to maintain profitability. As shown here: http://energyanswered.org/questions/why-are-we-shutting-down-u.s.-refineries-doesnt-that-lead-to-less-supply-an

            Who is better able to build a refinery large enough to take advantage of economically scaled opportunities than government?

            Beyond that, however, your argument could also be phrased as “So cheaper transportation through government taxation + maintaining roads at a loss”, or “So cheaper policing through government taxation + fielding police officers at a loss”, etc. You’re essentially making the same mistake the Gordon is making — assuming if a certain thing can’t be done at a profit, it shouldn’t be done.

          • Then you are arguing that oil refining/gasoline is a public good, with positive externalities, which cause it to be underproduced vs the social optimum.

            Do you really think there is a market failure in oil refining? If there are sufficiently profitable refining opportunities, why are private operators not making the investments?

            Roads and police are public goods, with significant positive externalities. The private sector would not provide these goods in nearly the quantity that is socially optimal. That is why it makes sense for governments to intervene. You haven’t made the argument that this applies to oil refining.

          • “sufficiently” is the key term there.

      • Right now oil-sands oil is selling at a 30% discount because there is an oversupply in the US. Refining oil in Canada will eliminate the discount and lead to a cheaper price on gas (which currently stays high no matter how much the price of oil drops…)

        “The so-called Canadian discount on crude oil jumped above $30 a barrel this month, thanks to a lack of pipeline capacity to the West Coast and a glut of oil supply at refineries in the U.S. Midwest.”
        http://www.vancouversun.com/business/Canadian+discount+hits+Midwest/6369176/story.html

        • The U.S.A does not get a discount on oil based on oversupply. back in the 80′s Canada and the U.S. signed a greement that locked in a set price for oil. like phone contracts, once you sign you are locked in for 3 years and pay a certain amount a month. The deal with the U.S has a locked price. Due to higher oil production costs, prices are raised in canada because the agreement does not allow canadian oil to be sold to the U.S for a higher price.

        • So we should invest several billion dollars in new refining capacity on the expectation that that discount will persist?

          The answer is a pipeline, not a refinery.

      • 1) There is a Canadian need for a diversified outlet of our (well really Alberta’s) oil sands.
        2) If it goes towards Houston it is not diversified.
        3) There is an dangerous route to get the bitumen to China. How dangerous? Ask David S.
        4) I am told the refined product is much safer to transport.
        5) It is clearly easier (if longer) to run a pipeline east from Alberta rather than west.
        Taking 4 as a given, then the externalities associated with the difference in that danger should be taken into account.
        Also government “investments” routinely make assessments that are different from the public sector in part because government is in a position to benefit directly (albeit only fractionly) across the board. In casino parlance, they are the house. So for the government, the net calculation of profit would be the costs of the refinery balanced against the income of the government due to the existence of the refinery. That would include any government stake in profits, taxes paid by the refinery, taxes paid by refinery employees plus enhanced taxes from the local community due to expenditures by the refinery & its employees.
        Does that not change the economic picture substantially?

        • I don’t think David S is qualified to speak to the safety of pipelines. He’s a biologist, not an engineer.

          • wow so I guess our man stephan should shut his yap….
            or maybe those in favour should make there case in a fashion that all can understand.
            I don’t know what do you think Andrew?

    • “It seems may economists often forget that one of the differences between private and public delivery of goods and services is that the private market delivers to those who can best afford it, while the public market should deliver to those who most need it — and these two sets are not equivalent.”

      Wrong and wrong.

      Private markets deliver to everyone who can afford and is willing to pay the marginal cost, and public markets deliver to those whose political value or influence outweighs their cost. The people most in need live on the streets of Toronto or in squalid reservations in northern Ontario. Yet we get tax rebates for sports teams and piano lessons and granite countertops.

      • Again, read. Think. Then comment.. although if you actually followed through on the second step, you’d see there’s no need.

        Case in point, the word “should”. That the CPC is incompetent does not in any way invalidate this point. Especially considering that Mulcair is not of the CPC.

        Also, your description of private markets is, while cute in it’s naivety, completely destroyed by pretty much any interaction in the real world. Want a real easy case to see how it’s false? What’s the marginal cost of another copy of MS-Office? Hint: It’s not the $130 price tag they’re charging.

  2. “If refining WTI-priced crude was the path to long-term prosperity,
    oil companies would be building refineries without any encouragement
    from Ottawa (or Washington, come to that).”

    Prospertity for Canada includes good-paying jobs, while good-paying jobs are an expense for oil companies. I believe Mulcair’s concern is with Canada’s prosperity.

    • Refineries are massively capital-intensive and don’t require many people to run. According to Cansim Table 301-0006, there are about 7,000 people who work at refineries.

      • Which is, in many ways, what makes them ideal for a government project. A capitally intensive project that doesn’t require a lot of long-term expenditure to operate. That’s almost the perfect stimulus project for when times are difficult and we need to get more money into more people’s hands — hopefully while creating things that will have lasting benefits for the wider population.

        • Yes, corporations want to pipe tens of thousands of refinery jobs to the American south to save money on labor costs. What’s good for corporations is not necessary good for Canadians.

        • Alberta doesn’t need stimulus. They have a red hot oil sands industry sucking up every skilled construction worker available.

          • Actually no, they don’t.

          • Who said anything about building a refinery in Alberta?

          • I thought the argument was to ship refined oil products, not diluted bitumen. In which case the refinery would need to be in Alberta. If we’re shipping bitumen, ship it to the left coast and on to China, as the discount will disappear anyway.

          • Well in that case, we’re working from different base assumptions.

            One of those being that there are no additional externalities to shipping it to the left coast.

          • Is shipping bitumen to the west coast bad, but shipping it to the east coast good? It’s fine if we spill oil into the great lakes?

          • Apples and Oranges, and I’m sure you’re aware of that.

            Presumably we wouldn’t build a pipeline across environmentally sensitive areas and require tankers to navigate treacherous waters to reach it.

          • Apples are not oranges but they are both fruit.

            The great lakes are not Kitimat, but they are both environmentally sensitive. A oil spill in the great lakes is tolerable, but not off BC’s coast?

          • Wow. You really have trouble with this whole “reading” concept don’t you? Was it the contraction that screwed you up? It was, wasn’t it. Okay. A quick primer: “n’t” is short for not. So “wouldn’t” means “would not”.

          • Then why do you advocate a ‘dangerous’ bitumen pipeline to the east?

      • Without knowing how much refining those 7000 jobs represent, or how that compares with what Mulcair is proposing, that number doesn’t mean that much to me. But according to Statscan those 7000 workers make more that double the average wage in Canada and represent more than 800 million in annual wages.

  3. He’s just trying to get elected, that’s all.

    Refineries are expensive, take years to put in place, and there is already an overcapacity in the world.

    • OK—-who are you and where did you put Emily ?

      You`ve captured exactly what Mulcair is up to, while others are spewing nonsense about governments getting into the refinery business when the marketplace says it`s a bad idea.

      • The question is, why do you assume everyone other than yourself is NDP or leftwing?

        • Yes, conservatives are always trying to smear their opponents with labels like “socialist”. Part of it is rhetoric; the other, their sheer ignorance of the left/right economic spectrum.

      • The marketplace said banking regulations were a bad idea in the 2000s — before its banking deregulation schemes caused a global economic meltdown.

        Corporations want to pipe tens of thousands of refinery jobs to the American south to save money on labor costs. What’s good for corporate profits is not necessarily good for Canadians.

        • Do you actually believe the recession in 2008 was caused entirely by lax banking regulation? Do you believe that if the US government had more control over the banking sector, the last 20 years would have proceeded as they have, only without a recession in 2008? You don’t think that government policies giving banks incentive’s to hand out loans to people they knew couldn’t pay them off had anything to do with the housing collapse? Are the people who took out loans they knew they couldn’t afford not to blame AT ALL?

          • I don’t believe it. It is a fact. There was predatory sub-prime mortgage lending which fooled people about the actual terms of the loans (skyrocketing interest rates after a period of time which is why the US housing bubble crashed so spectacularly — the Japan housing bubble took 12 years to deflate.) Then these junk mortgages were bundled up and sold as securities which free-market bond rating agencies gave triple-A ratings. There was paper-stretcher financial innovation schemes that an investor needed to be a rocket scientist to figure out the risk. There was also the emergence of an unregulated shadow banking sector.

            The fact is prior to the mid-1930s, there would be period bank panics that wreaked economic havoc. These were put to a stop with centrist regulations (like government-insured bank accounts.) Free-market deregulation schemes brought basically brought one back after 80 years of banking stability. They also brought about a moral hazard: heads banks win on risky loans; tail taxpayers lose.

            Are people responsible for being roped into a speculative housing bubble founded on predatory lending? That’s like saying if we deregulated prescription medication and a wave of painkiller addiction swept the country it would be the people’s fault. Clearly we need regulations that protect consumers and investors from scams that obfuscate the risk of loans and investments — and central bankers that keep an eye out for inflationary asset bubbles (which Greenspan failed to do because he was a free-market true believer…)

          • Oh please, said “predatory lending” didn’t fool anybody about the terms, it’s all right there in writing. If people signed mortgages that they didn’t fully understand, that’s 100% their fault.

            While there’s no doubt that the ratings agencies were dead wrong, that just raises the question of where the SEC was (you know, the regulatory agency). The problem isn’t that there wasn’t enough regulation, it’s that the regulations in place were ignored by the agencies who’s job it is to uphold them. You can have all the regulations in the world, but they won’t matter for squat if their not enforced.

            Freddie and Fannie were backing and repackaging these so-called “predatory” loans, and they’re arms of the federal government. As insurers of mortgages, it would be their responsibility to regulate the loans they insure and re-sell to investors, but they were just as complicit in the whole fiasco as any private entity.

            As for your idea that people aren’t responsible for any of their own actions, I suppose we’ll have to agree to disagree. I don’t hold the federal government for everybody who’s addicted to smoking, just because cigarette’s aren’t sufficiently regulated. I don’t believe the federal government is responsible for alcoholism just because booze isn’t dolled out by a pharmacist. Individuals make decisions, and all too often they’re bad ones. Sure, the government could just throw a blanket ban on everything and only allow people to do things that it deems 100% safe, but that would be the most awful society on the planet.

    • Actually, US refineries are paying a discounted price for Alberta’s heavy oil — 30% off — because there is an oversupply of oil:

      “The so-called Canadian discount on crude oil jumped above $30 a barrel this month, thanks to a lack of pipeline capacity to the West Coast and a glut of oil supply at refineries in the U.S. Midwest.”

      http://www.vancouversun.com/business/Canadian+discount+hits+Midwest/6369176/story.html

      • Yes, we all know that too.

        • You speak for everyone? Or do you just think you do…

          • Only Cons have a problem with the word ‘we’, Ron.

        • So you can speak for us, but Rae better shut up? ;)

          • Stop it Andrew NotPork

          • Ow, my feelings!

  4. You can get whiplash trying to keep up with NDP and their ideas – I thought we were supposed to be frightened of global warming and oil is bad. Surely NDP should be against oil production and be in favour of subsidies of unicorn farts or somesuch for our vehicles to run on.

    • a) The NDP has kept the same ideas for about 60 years. Mulcair is changing some of them this year. I really doubt you’ll get whiplash from that.

      b) Global warming affects everyone. It was never a partisan situation.

    • Clearly someone who thinks in black and white must get a lot of whiplash whenever venturing into the real world.

      But the facts are simple enough. For one, the NDP is not putting forward a policy to ban oil. Two, since Canadians use oil, it makes much more sense to use “ethical oil” produced in Canada than oil imported from abroad. Three, where we get our oil has nothing to do with our obligation towards progress on environmental responsibility (which the NDP and Liberals are committed to and the Conservatives are clearly not.)

  5. Great blog post.

    Refining is a horribly difficult, highly regulated, low margin business. One should only do
    the minimal amount of refining necessary to maintain the price of the raw resource, oil or bitumen, which is where the real value and profit and government royalty revenue is.

    It is dangerous to rely on such a low margin business for jobs long term. It is better to have those workers in more sustainable profitable industries.

    That said. Oil should come east into Ontario and Quebec and the Maritimes from the West because North American oil will almost certainly trade at a lower differential far into the future than Brent or world oil, so consumers and industry in Eastern Canada would benefit enormously with lower gasoline and diesel prices.

    The WTI-Brent differential is back to $25 dollars, over 30%.

    This would mean the old Shell refinery in Montreal could be reopened (it had been scheduled to be shutdown if I remember correctly), and the refineries in Atlantic Canada could shift to cheaper more secure Alberta oil. Bitumen need not be shipped east. It can be upgrade bitumen which is super light oil, and the light oil from the tight oil plays like the Pembina Cardium and the Saskatchewan Bakken.

    There would also be the potential to expand the refineries to supply the Eastern US market with refined products.

    So the refining industry could expand modestly, but it is not going to expand significantly, because refining is a lousy business 95% of the time.

  6. Here are some reasons why building more refineries in Canada makes sense:

    1) It’s absurd to export “ethical oil” from one end of the country and import “conflict oil” from the other. We should supply our own energy needs. (While progressing towards greener sources of energy, of course.)

    2) The bitumen dollar is 25% overvalued which inflates labor costs by 25%. So oil corporations just want to export tens of thousands of refinery jobs to the American south to save money. (What’s best for corporate profits is not necessarily best for Canadians.)

    3) US refineries are now actually “oversupplied” with sulfur-laden oil-sands oil and pay only 70% the going rate for heavy oil. So the need for increased refinery capacity is certainly there.

    4) We have lost 500,000 export-related jobs because oil sands development and exports has distorted the value of the dollar by 25%. Therefore creating refinery jobs would hardly be a case of “diverting labour from lucrative industry.” That ship has already sailed…

    • 1) Oil is fungible. If we don’t consume that ‘conflict oil’ someone else will, especially when we consume the ethical oil that would otherwise would have been exported. Net result: more money wasted on transportation and refining.

      • Money is certainly wasted on transportation if we are shipping oil from half way around the world, especially when we can get the refined products right here in Canada.

        • Perhaps it is more cost effective to ship it from halfway around the world than to ship it across Canada. If this was not the case, why are private operators stupidly paying more for their inputs than necessary?

          My point is, we are not living in a communist country. I don’t want my government centrally planning how much refined gasoline I need, where it will be produced, and from which oil. That model doesn’t work, and has been amply demonstrated to be a failure.

          • Thank-you for using the c (communist) word to describe the planned state-owned oil refineries. I seem to invite backlash ( partly my own fault, I`ll admit) when I use such a word to describe the ramblings of others here.

            If we equate the need for subsidized state-owned refineries for our auto fuel, to the need for state-owned highways and state -operated police forces, will we not also soon need a state-owned Twinkie factory since the private one is shutting down ?

          • You people are ignorant of the meaning of communism. On the economic spectrum, communism is 100% left which means full government control over the economy.Free-market libertarianism is 100% right which means no government involvement in the economy. In the center, is the Keynesian mixed-market system North Americans used in the post-war era (with unprecedented success.)

            The mixed-market system blends socialist and capitalist concepts together on a case-by-case basis. So yes we have socialist elements like state run public education and a market economy that is mostly free but constrained with regulations that protect consumers, investors, etc.

            Although Mulcair is not pushing for state-owned refineries, the time when government gets involved in the economy is when there is a public democratic desire. In a democracy, the people decide what kind of economy they want.

          • Free-market ideology has amply been demonstrated to be a colossal failure twice: it collapsed in two global economic meltdowns (1929 and 2008.)

            The only economic system that has been proven to get results is the Keynesian mixed-market system which is in the center. It created modern living standards in the post-war era, had much stronger GDP growth and productivity growth than the past 30-year era of free-market reforms, and allowed governments to pay down most of their debts.

            But the reason oil corporations want to pipe the raw bitumen out of the country is simply to save money on labor costs. As the 2008 housing and financial market meltdowns clearly show: what’s in the best interest of corp execs is not always in the best interest of everyone else.

          • “But the reason oil corporations want to pipe the raw bitumen out of the country is simply to save money on labor costs. ”

            You say that like it’s a bad thing. That’s how trade works. We ship oil, minerals, timber to Asia to be turned into goods like clothing, of which some is shipped back to Canada. Why? Low labour costs, in part. And those clothes are far less expensive than domestically made clothes would be. This contributes to the wealth of Canadians. It’s like the Iowa car harvest. Iowa ships its grain to Japan and harvests cars. Iowans are better off than they would be if they quit growing grain and instead made cars.

          • Value-added goods and services produce more wealth, job and business opportunities than farming and resources. So there is no even trade there.

            I understand the free-market gospel. I also understand that it is a fallacy because the economy is a complex system it utterly fails to describe.

            Over the past 20 years of free-trade agreements, living standards and economic growth have gone down the tubes. The 2000s was the worst decade for GDP growth since the Great Depression. The 2010 recovery was the worst recovery.

            Free trade doesn’t remove barriers to trade, it puts them up by destroying first-world markets for global goods and services. In order for trade to work, there have to be markets on both sides of the trade deals, not deteriorating markets on one side and wage slaves on the other who can’t afford to buy goods and services sold on the world market.

            Ignorant ideology fails to take most factors into consideration. That’s why it produces utter failure.

          • If this is what ‘utter failure’ looks like, I’ll take capitalism over the most successful years of communism. Flat incomes orders of magnitude greater than the average in communist russia? Rich world problems…

            I think you’re failing to look at the world objectively. People living in capitalist countries are enjoying the best quality and standard of living in human history. Your ‘utter failure’ of capitalism has caused moderate hardship for a small percentage of unemployed. Some loss of wealth in bailing out a financial system that failed. The system is still in place and strong, just not presently producing the gains in wealth and income we had become accustomed to. Prior to the industrial revolution, zero growth was the norm.

            You complain about the low growth this past decade in the West. That is a price I’m willing to pay for the stunning increase in standard of living in the developing world. They need the growth in income more than the West. Anti-trade types never mention these gains, as the only people whose welfare they care about are the people themselves.

          • I said “free market capitalism” is a failure, not capitalism itself. The fact is Keynes developed the centrist mixed-market system during the Great Depression to save the capitalist system from the threats of communism and fascism.

            I’m not anti-trade. Everyone should have the right to buy and sell goods and services in the global marketplace. I just realize the truth that free trade destroys all the progress made in the post-war era when modern living standards were created (by creating a race to the bottom.)

            Free trade globalization does little benefit workers in developing nations who are poor, exploited and oppressed like we were in the 19th century. These countries need to implement the same kind of regulations that first-world countries have to ensure there is a global economic tide that raises all boats — not just the yachts.

            “the only people whose welfare they care about are the people themselves.”

            LMAO.

          • Nobody became a commie because there was money in it. With ya, Ron.

          • Recessions are not evidence of the failure of capitalism.

          • The first global economic meltdown produced the “Great Depression.” The second had government intervention which prevented the Great Depression 2: trillions in government bailouts and Keynesian stimulus spending.

            These were not recessions but painfully-obvious evidence of the failure of free-market capitalism…

    • Here’s another reason to build more refinery capacity: hurricanes. Every time there is a hurricane, oil refineries end up getting shut down and the price of gas goes up.

      Hurricane Sandy is expected to raise the price of gas between $1.20 and $1.40 a liter.

      If we have an oversupply of gasoline, consumers will pay less at the pumps. Instead we keep paying high prices even when the price of oil drops. This is due to a lack of refinery capacity.

      Expect to pay more for gas and heating this winter: NEB
      “As a result of U.S. refinery outages in the autumn, including the aftermath of Hurricane Sandy and low inventories in the U.S., Canadians can expect to pay slightly more for their gasoline this winter,”
      http://business.financialpost.com/2012/11/15/expect-to-pay-more-for-gas-and-heating-this-winter-neb/

  7. Unreal.
    E
    Where does Mulcair claim it would be gov’t policy to subsidize new refineries? Can he not express an interest/support of shipping AB bitumen east similar to Danielle Smith, David Dodge, Mark Carney, Frank McKenna, CAPP, Parkland Institute, TCPL, GPC, etc. etc. etc.

    Yes, upgrading existing refineries to process AB bitumen is part of a number of possible business cases the private sector is investigating. And yes, that would mean employment wherever the refineries currently exist.

    To claim otherwise is, frankly, a familiar Pavlovian response to the acronym “NDP”.

    • Is it me, or is it anything that does not support bitumen to Kitimat is being shot down?

      • No, the industry has awoken with the opposition to Northern Gateway. A whole host of options are being considered.

        Frankly, political support of other options (including the p/l east) is only good for project proponents (TCPL on the conversion of some underutilized existing gas p/l ) and resource companies looking to get their product to market.

        Unfortunately, it does require some depth of knowledge of the industry to comment intelligently on these issues.

    • As long as he sticks to talking about it, everything if just fine.

  8. Oddly enough, another big proponent of shipping alberta oil east for refinement is Ontario PC leader Tim Hudak (the idea appears on a facebook note where he talks about how awesome Alberta is and how much Ontario sucks).

    Regardless of the economics, it would be delicious to see Mulcair call out Mr. Hudak on this issue and challenge him to stand up to Harper side by side with the NDP on this issue. (Actually I just like seeing conservative politicians cringe and lie as they’re hoisted by their own petard, esp. when they are in opposition and it isn’t hurting the country like when it’s the actual government).

    • When has Harper ever opposed shipping AB oil East? I’m 100% sure he’d be supportive of the project, if it were instigated by the private sector. What Mulcair is suggesting is the government of Canada get involved in the oil refining business. That Harper would rightfully oppose, because it’s a stupid idea.

  9. Boy, Mulcair really think’s we’re all a bunch of idiots (and he might be right, judging by many of the comments here).

    1st he claims that manufacturing in Ontario is suffering because of increased oil exports, and the solution to that is to tax carbon so that we export less oil.

    Then he comes out saying that the NDP is in favour of trade deals with other countries.

    Now he’s suggesting that we ship AB oil East to maximize profits on oil, and to minimize Ontario’s oil costs.

    Am I the only one who sees the clear trend here? Tax the hell out of AB oilsands to lower international demand, while subsidizing the costs of Ontario’s oil imports from AB so that bustling manufacturing sector in Ontario can export cheap junk to other countries with the government taking a massive slice of it all.

    I used to think he was just talking out of both sides of his mouth, but it’s starting to become clearer that his plan is ti implement NEP v2 .0 which would probably be politically popular in Quebec, but as we’ve seen before, would be disastrous for the country as a whole.

  10. Why does he puzzle you Stephen? Because he hasn’t compromised his principles yet to go and grab for power?

  11. the little frog that can’t

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