Economy, Law & Politics The big squeeze: pain ahead if Alberta cuts oil flow to B.C.

A spike in gasoline and other fuel prices would be one of the penalties paid by British Columbians if Alberta follows through on its threat to reduce crude oil exports to B.C.

The Trans Mountain pipeline between Alberta and B.C. supplies a large percentage of the West Coast’s energy needs | BIV files

(Editor’s note: This story has been updated. The original stated that Parkland gets about half its crude oil from Trans Mountain pipeline, and the rest by rail. That is no longer the case. Since 2015, Parkland has received all of its crude from the Trans Mountain pipeline.)

When GasBuddy petroleum analyst Dan McTeague made predictions recently about Lower Mainlanders paying $2 per litre for gasoline, he wasn’t talking about a worst-case scenario. A worst-case scenario, should New Alberta Premier Jason Kenny make good on threats to throttle back oil from Alberta to B.C., looks a bit more like paralysis. B.C., after all, is dependent on Alberta for its crude oil, gasoline, diesel and jet fuel, most of which comes in via the Trans Mountain pipeline.

The Alberta owned Parkland Fuel Corp. (TSX:PKI) refinery in Burnaby processes 55,000 barrels of oil per day (bpd) to produce gasoline, diesel and jet fuel. It currently gets all of its crude oil from the Trans Mountain pipeline. The refinery supplies 20% to 25% of B.C.’s gasoline and diesel. Alberta refineries supply approximately 50% to 60%.

And even the fuels B.C. brings in from Washington refineries to supplement a lack of local refining capacity are made from Alberta oil supplied via the Puget Sound pipeline system – a spur of the Trans Mountain pipeline with a capacity of 180,000 bpd.

B.C. drivers might be hit with more than gasoline price spikes should Alberta decide to play hardball.

“It would be also supply shortages,” McTeague said. “It would affect your mining, your agriculture, your ferries, your truck transportation. I think Vancouver, for all intents and purposes, would be shut down.”

Andrew Leach, associate professor at the University of Alberta’s Alberta School of Business, has suggested his province’s energy leverage has been overstated.

In a Twitter exchange with B.C. chemist and energy blogger Blair King, he wrote: “If you’re going to be left short fuel, being so with a deepwater port and a refining complex around the corner isn’t really the worst circumstance.”

King countered that Vancouver’s terminals are not set up to receive and store the volume of refined fuels that would have to be barged in from U.S. refineries, in the event the Parkland refinery in Burnaby suddenly had its supply of Alberta crude reduced or cut off.

And even if it was, McTeague noted, refining capacity on the West Coast is already tight. He pointed to a recent planned maintenance shutdown at Parkland that, according to his calculations, drove gasoline prices in Vancouver up by about $0.10.

“If a well-advanced, well-telegraphed planned shutdown of 25% of your production in the way of Parkland can cause $0.10 disruption, you can imagine what 40% to 60% would do if Trans Mountain were completely shut off. There’s no way under the sun you could replicate the amount of fuel coming in via pipeline through alternative rail.”