Alberta Drivers Get Relief at Pumps, Producers Struggle with Lower Prices

Alberta drivers are in for some relief at the pumps as the province suspends its 13-cent-a-litre fuel tax from October 1 to the end of the year. This comes after North American oil prices averaged nearly US$91 a barrel over the last month.

The higher prices will not, however, translate to better deals for Alberta's oil producers, who are selling their heavy crude at a bargain of about US$21 a barrel below North American benchmarks.

The reason behind this discrepancy lies in Illinois, where ExxonMobil Holdings Corp. shut its refinery in Joliet due to a power outage last week. The Joliet refinery, which can process up to 275,000 barrels a day, has been a key buyer of Canadian crude by pipeline.

Richard Masson, former chief executive of the Alberta Petroleum Marketing Commission, expects producers will continue to sell their heavy crude at discounted prices until at least February. He attributes this to production growth and full pipelines, which he believes will lead to wider discounts over the winter months.

On the other hand, Matthew Lewis, founder of Denver-based Plainview Energy Analytics, sees room on pipelines out of southern Alberta this winter, even as producers grow output. He predicts that if there's no constraint on pipelines and refineries are back up, the differential between Western Canadian heavy oil and North American benchmarks will narrow.

Traders, however, expect the gap to remain wide, with forward contracts indicating that Western Canadian heavy oil will continue to trade for US$21 less than North American benchmarks through 2026 and early 2027.