In the eyes of the federal government and the Canadian oil patch, Enbridge Inc.'s Northern Gateway pipeline is a path to profit, a $6-billion ribbon of steel that promises to raise the value of the nation's oil by $2 to $3 (U.S.) a barrel.
But higher prices aren't good for everyone. In fact, they're particularly bad for those buying the crude, like refiners – and could actually raise the cost of gasoline.
How bad is the pain?
Turns out, Enbridge has done the math. In documents submitted to the National Energy Board, it calculates that refineries will be hit to the tune of $8.77-billion (undiscounted) between 2018 and 2035. That's an average of $462-million a year – a hefty sum.
Enbridge is quick to point out that the net impact of higher crude prices is still positive. Even subtracting pipeline tolls, it works out to an industry gain of some $38-billion on an undiscounted basis, with a net present value in 2012 dollars of $24-billion, between 2018 and 2035.
And the refineries in Canada tend to be run by the same companies that produce oil – including Royal Dutch Shell plc, Suncor Energy Inc. and Imperial Oil Ltd. Presumably, those companies would see a net benefit, too.
What about consumers? According to Enbridge consultants, the price at the pump won't change, since refineries will be forced to eat the higher prices to remain competitive on gasoline prices.
"Under the types of conditions that prevail today, the cost would be borne by the refineries. That is, there would be a reduced margin," Robert Mansell, a consultant to Enbridge, told the joint federal panel currently reviewing the project.
But he has also done the math if the refineries don't swallow those costs. In that case, Gateway stands to raise gas prices by up to 1.5 cents a litre.