Crude Oil Production and Distribution
Every day, Canada’s pipelines move about 14.8 billion cubic feet of natural gas and three million barrels of crude oil.
Transportation costs are the main reason why crude oil prices vary from place to place. If the price offered by buyers in one market is too low, then sellers will ship their oil to another market – if they can afford the transportation cost and there is available transportation capacity.
In addition, pipeline tariffs for heavy oils are higher because more energy is required to move them through the pipeline, and because they move more slowly through the pipeline system, restricting the amount of crude oil that can be shipped. The price also depends on the sulphur content: high-sulphur sour crude sells for a lower price than sweet crude because more processing is required.
Prices are referenced based on so-called benchmark crudes, a crude oil with which others are compared to determine their price. North America’s two most referenced benchmark crudes are West Texas Intermediate (WTI) and Brent Blend. Canada’s major crude oil benchmarks are Edmonton Par (Western Canadian light oil) and Western Canadian Select (heavy oil).
Canada’s oil exports amount to about 73 per cent of its production. About 99 per cent of these oil exports go to the United States, primarily the Midwest, which has 29 refineries and the Cushing Oil Hub.