More oil on the market won’t raise its price

Re: “Pipelines would help boost dollar’s value,” letter, Jan. 30.

The letter-writer seems to postulate that putting more product on a glutted market will raise the value of the product. Economics 101 teaches that price is based on supply and demand. At the moment, the world market is awash in oil, and since Canada relies on royalties from oil, the lower price means the value of royalties has fallen with the market, taking the Canadian dollar with it.

This is not to say the building of oil export infrastructure is a bad thing — as long as we are talking about oil and not diluted bitumen. One thing that might improve public confidence in such infrastructure would be the building of oil refineries in Alberta or Chetwynd to produce a free-flowing, far less toxic product that is lighter than water. However, refineries are expensive, and no one knows when the glut will be taken up either through hoarding, slow steaming or cutting refinery capacity, which makes the building of new refineries in Canada a question.

More product, even refined oil, transported by pipeline to tidewater in an already oversupplied market would not increase revenues in the short term, but given the time it takes to build such infrastructure, it might a decade down the road — assuming the world is still wedded to hydrocarbons as a fuel source, and has not moved on to a host of renewable energy options. Richard Mackenzie Saanich