It appears undoubtedly true that the Canadian economy is hanging on a balance, and there is an urgent need to focus on establishing reliable economic approaches to shape the Canadian economic future.
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Currently, Canada is focusing on exploiting their natural energy resources to strengthen its economy. Such a decision is believed to cause substantial impact on the livelihoods of all Canadians, as well as, the Canadian Government revenues in the future.
Some of the most fundamental economic approaches that have been proposed are the Northern Gateway pipeline and the Keystone XL pipeline, which are designed to expand the oil sand refineries to other markets.
In the early 1990’s, Canada embarked on expanding the oil sand industry through the establishment of the three oil sand refineries: Suncor Energy, Syncrude Canada and Shell Scott, to harness bitumen revenues, as well as, creating job opportunities to millions of Canadians.
Consequently, the demand for Canadian petroleum products has increased considerably. Therefore; Canada requires an additional refining capacity to meet the arising need. This is the principal reason, as to why, the Gateway and Keystone XL pipeline projects have been proposed.
The Northern Gateway pipeline project, which has been proposed by Enbridge Inc., will transport crude oil to the west for export into the Asian markets, from Alberta oil sand. The tanker port in Kitimat will receive crude oil through two pipelines from Bruderheim Alberta, which are estimated to hold a capacity of 718,000 barrels of crude oil daily (Whiticar par. 2).
On the other hand, the Keystone XL pipeline has been designed to expand the Alberta oil sand to the United States. In general, the two proposed pipelines will enable Canada to alleviate the high costs incurred on loyalties, amounting to about US$ 20 billion annually.
Therefore, it is believed that the Northern Gateway and Keystone XL pipelines are essential for the Canadian economic future because; these projects encompass numerous economic benefits.
Some of the principal economic benefits of the Alberta oil sand expansion through the Northern Gateway and the Keystone XL pipelines include the creation of employment opportunities to millions of the Canadian population, improving oil products export and increasing the Canadian energy output.
Economic reports show that, an estimated share of US$48 billion will go into the pockets of the Canadian workers who will be involved in the construction of the two pipelines. In addition, a section of the Canadian population will acquire permanent employment at the newly established oil refineries; thus, the proposed projects will serve as avenues of job creation to Canadians.
It is also estimated that the Alberta oil sand expansion will enable Canada to earn foreign exchange, especially through crude oil export to the Asian markets. The Northern Gateway pipeline will transport crude oil to the tanker port at Kitimat, which is meant for export purposes. Consequently, the shipping infrastructure will also be improved for efficient transportation of oil products to the foreign countries in the Asian continent.
Economic analysts have sited the lack of efficient shipping infrastructure as one of the principal drawbacks for the expansion of the Canadian oil sand refineries into the foreign markets. According to the CIBC World Markets reports, “Alberta energy producers may be losing $18 billion a year on crude oil sold due to the lack of infrastructure for shipping and refining” (Whiticar par. 3).
The report also indicated that oil production in Alberta exceeds the capacity of the existing oil refineries; thus, producers are forced to trade the commodity below market values, leading to a substantial loss of revenue. Market reports indicate that most crude oil producers in Canada sell a barrel at a cost of US$ 50, far below the International Brent price of US$112 per barrel.
Another economic benefit for the Northern Gateway and the Keystone XL pipeline projects is that, the two projects will boost the Canadian energy production significantly; thus, reducing the cost of energy importation for industrial and domestic purposes.
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The proposed projects are expected to increase oil production by three-folds by 2025 because; the current output of 1.7 million barrels per day will be increased to 4 million barrels per day. This will probably be possible due to the improved shipping infrastructure and the establishment of high capacity refineries. Therefore, the projects will lead to supply growth in Canada and the United States (O’Meara par. 7).
Moreover, the Alberta oil sand expansion will bring enormous economic benefits to Alberta, British Columbia and Canada as a whole for over 30 years through tax revenues and business investment. Enbridge predicts, “Canada’s GDP would grow by $270 billion over the next 30 years” (Whiticar par. 4).
In conclusion, it is blatantly true that the Keystone XL and Northern Gateway pipelines are essential for the Canadian economic future. Despite the fact that Canadian workers reap full value from bitumen refinery because all the bitumen is refined locally, there is the need to expand the Canadian crude oil industry through exports.
An AU Canada member remarked, “We should also understand that the building of the Keystone XL Pipeline is essential in moving both our treated and untreated bitumen to market” (AU Canada par. 5).
From a critical perspective, Canada will gain a competitive advantage in the global market through diversification of its oil industry. Therefore, the Keystone XL and the Northern Gateway pipeline projects hold immense value for prosperity of the Canadian economy.
O’Meara, Dina. “Alberta Oil Producers Lose $18B a Year to Discount.” 14 Mar. 2013. Web.
UA Canada, 2013, Why the UA Canada Supports the Keystone XL Pipeline. UA News 7 March 2013: Web.
Whiticar, Michael 2012, The Northern Gateway Oil Pipeline. HTML file. Web.