Big oil, others engaged in ‘ fraud’: B. C. economist
Critics question her analysis; one says she’s a conspiracy theorist
Oil interests encourage sympathetic elected leaders, bankers and media to pick up their cause and make it their own.
ROBYN ALLAN B. C. ECONOMIST
OTTAWA — A B. C. economist who has been a thorn in the side of the Harper government and Canada’s oilpatch has launched her most scathing critique yet at the proponents of Enbridge Inc.’ s proposed Northern Gateway pipeline.
Robyn Allan alleges that governments, industry, Enbridge, a major bank, a prominent western Canadian think- tank and the media is engaged in a “fraud” that is promoting “Big Oil’s” interests while masking industry pricing methods that “gouge” Canadian consumers.
Allan, who is portrayed as a conspiracy theorist by one of her critics, is taking on Canada’s business and political elite. They have argued it is in the national interest for Canada to approve two proposed pipeline megaprojects to the B. C. coast to ship oil, especially diluted bitumen, to Asian markets.
The lack of pipeline capacity, industry advocates argue, forces the landlocked industry to rely on the U. S. market, where a supply glut means Canada is getting a discounted price for its oil. That is costing the Canadian economy from $ 30 million to $ 100 million a day, according to various reports and speeches.
Allan goes after the assertion that Canada’s oil suffers a “double discount” in that it is priced more cheaply than West Texas Intermediate, the U. S. benchmark grade of light sweet crude, and even lower than Brent, the international benchmark grade of light sweet crude.
“The double discount is a fraud,” Allan, who has testified against the $ 6.5- billion Enbridge project at National Energy Board hearings, writes in her latest essay posted on her website. “Oil interests encourage sympathetic elected leaders, bankers and media to pick up their cause and make it their own. Some of the bitumen export pipeline pushers know better and are engaging in deliberate misrepresentation, some of them don’t, and are played like pawns in big oil’s game.”
Few critics of pipeline projects have had as much influence as Allan. Last year she testified before the federal government’s Joint Review Panel to argue that Enbridge’s insurance coverage was inadequate, and called for a dedicated $ 1- billion insurance fund to deal with potential environmental disasters. Last week the National Energy Board told Enbridge it needed $ 950 million in insurance coverage for that purpose.
In the 1980s, Allan was a frequently quoted senior economist with the B. C. Central Credit Union, but in 1992 her profile soared after she was named interim chief executive of the Insurance Corp. of B. C. by the NDP government.
It was described as a patronage appointment — a charge she rejects — because the B. C. Central Credit Union was the NDP’s “farm system for talent,” according to the Financial Post.
In her latest critique Allan makes several points:
• Bitumen is a “junk” crude which, because it requires upgrading and complex refining and considerable transportation costs, “has always sold at a discount” that has “not changed significantly” and the change “isn’t related to pipeline capacity.”
• While major oil companies and their supporters complain they are suffering greatly due to the price discount, they are mostly integrated companies involved in upgrading and refining, and are boasting to their shareholders that their profit margins from processing operations have soared due to the cheaper Canadian crude they process.
• Western Canadian consumers were gouged to the tune of roughly 14 cents a litre in 2012 because these discount prices are not passed on at the gasoline pumps.
• The “supply glut” at the U. S. industry hub of Cushing, Okla., was “largely industry induced” and will be sorted out within the next “year or so” — long before the proposed Keystone XL pipeline and the Enbridge and Kinder Morgan projects could ever be completed.
Enbridge issued a statement last year challenging a previous Allan critique suggesting Northern Gateway would harm the Canadian economy.
The company, in addition to challenging her “flawed” conclusions, noted that she assumed the ICBC chief executive post under Mike Harcourt’s NDP government, and pointed out she was challenging economists with doctorate degrees ( Allan has a master’s degree).
An Enbridge spokesman declined to comment on her latest criticism and referred The Sun to a University of Calgary economist, Robert Mansell, academic director at the university’s School of Public Policy and a witness at the NEB hearings.
“There are some things she has straight but her big conspiracy theories, that someone is pulling the strings and this will cause the sky to fall — yeah, it really loses credibility there,” he said in an interview.
Mansell said her analysis of the glut in Oklahoma misses the point that even if the current problem is sorted out, rising oil production in Canada and the U. S, combined with declining demand, mean Canadian producers will continue to need access to markets in Asia.
And her argument about refining profits overlooks that the vast majority of companies’ profits come from exporting oil rather than from processing, a business that historically has had tight profit margins. Making money at the refining end doesn’t come close to matching lost opportunity costs in export markets, he said. “She just pulls these things out of the air,” Mansell said.