In regards to National Energy Board purpose of supposedly looking after interests of Canada, during the September 2012 questioning of Enbridge at the Northern Gateway hearings, I attempted to bring to the attention of the proponent and NEB that increasing the supply of oil to the market (e.g. via one or more pipelines) could lead to a decrease in the price of oil.
Towards that point, I provided (entered into the record with permission of the author) a document by a Harvard economist that with the increasing supply of shale gas product the supply would increase and the price thus likely decline. This has happened (price of oil roughly halved) in a short period of time.
The response of questioning of the expert from Enbridge to my query was that the volume of oil being proposed shipped (500,000 barrels a day) would be insignificant compared to world demand/consumption (roughly 90 million barrels a day).
What we did not know, and I didn’t know protocol enough at the time to ask for an action item, is, “Just what volume would have to be added to the market to affect (lower) the price and by how much?”
However, the NEB should have wanted to know the answer to that question. It should have been making that determination, particularly, in looking at multiple pipelines being proposed.
In this, the NEB has failed Canadians – the citizenship and the industry. Whether or not the pipeline is safe, wanted, environmentally sound or a benefit through some employment created is the question of whether we can benefit financially by depleting our resources.
We have been played on our forestry products and coal resources by over producing and diminishing our assets to the detriment of the environment and short-term booms (then busts) to communities.
Even if we didn’t know and were not willing to speculate how much extra oil on the market would affect (and significantly affect) price we know now – it is around one million barrels a day (some say 700,000, some say two million extra barrels) extra on the market.
Whether the reason is because of wanting to undermine the Russian or Iranian economy, bring the shale gas producers in line or some effort to retain market share only a small increase in supply (one to two per cent) drops the price of oil.
The NEB’s failure to predict that is indicative of the inadequacy and uselessness of the NEB to look after Canada’s interest.
Instead of looking at each pipeline individually, a recognition that maybe only one pipeline would benefit Canada would be in order and the onus on the NEB to recommend which one.
The oil markets may be expected to rebound in late 2015 (as shale gas producers and others drop out) but that puts the notion of having multiple pipelines into question. Perhaps just the threat/potential of having a pipeline is effective in reducing the price of oil (to preclude them being built).
Building two, $5 billion pipelines, without any oil flowing through them, can pay for themselves if the price of oil decreases just $1 a barrel for three years (say one nation’s import of 10 million barrels a day for 1,000 days equals $10 billion). Thus the pipeline is a benefit to them even if it is not transporting oil.
Again, the NEB let us down in not requiring the proponent to reveal who was behind the funding.
Terry Vulcano,
Intervenor, Northern Gateway Proposal
