Since I speak faster in French, I will read my statement in French.
Let me start by thanking the Standing Committee on National Resources for the invitation issued to the Montreal Economic Institute.
Our organization is dedicated to economic research and education. We are an independent, non-partisan and non-profit group. We accept no government financing.
The Montreal Economic Institute supports the diversification of the Canadian oil market for the following four reasons. Canada and the world will need oil for a long time to come. Diversification will help maintain and create well-paid jobs across Canada. It will reduce the prices paid by refineries in eastern Canada. Diversification can be done with respect for the environment.
I will begin with an overview of the energy situation. I will then discuss the advantages of diversification in oil markets. I will end my presentation with some suggestions.
Canada, which has a highly diversified energy portfolio, is a major oil producer and exporter. Oil production is important for the Canadian economy and for ensuring a high standard of living and well-paid jobs for Canadians. Moreover, 41% of Canadian energy consumption consists of oil products.
At the global level, the International Energy Agency forecasts that the quantity of oil consumed will rise by 14% between 2010 and 2035. Therefore, an initial conclusion may be drawn: Canada, as a whole, like the rest of the world, produces and needs various forms of energy. Oil is one of those needs. The shale oil revolution in the United States has helped lead the country from a continuous decline in domestic production to a rapid increase since 2008. This is occurring at the same time as a rapid increase in Canadian production.
The investments required to increase oil shipment capacity—especially through pipelines—have yet to be made. Therefore, producers—whether American or Canadian—find themselves with production surpluses in relation to their shipment capacity. The result is a lower relative price for this resource. Western Canada Select oil is selling for $17 less than WTI, which in turn is selling for $15 to $20 less than Brent crude. The extremely low market price of Canadian oil is endangering investment in oil production, which accounts for about 15% of investment in Canada. Therefore, it is crucial to address the existing bottlenecks.
Settling this problem will enable Canadian oil to bring greater benefits to Canadians. A better flow of oil products in Canada and North America would have a number of impacts. It would reduce the price gap between western oil and world levels, enabling Canadian producers to obtain a higher price. That would stimulate investment in this sector and increase private and public revenues. It would also reduce the prices paid by eastern Canada refineries, which are currently supplied with more expensive imported oil.
A recent poll conducted for the Montreal Economic Institute found that 73% of Quebeckers prefer to consume Canadian oil over imported oil. A better price would enable the two refineries in Quebec and the single refinery in New Brunswick to remain competitive and to maintain highly paid direct jobs and employment in manufacturing. That would also protect producers from a breakdown in the distribution chain, such as the problems that have recently led to a broadening of the gap in crude oil prices, to Canada's disadvantage.
Finally, by opening up the industry to fast-growing Asia, we would reduce risks by keeping Canada from having to put all its eggs in the same basket, especially in light of the oil industry renaissance in the United States.
Every day, the equivalent of 15,000 truckloads or 4,200 tanker cars of oil is being shipped by pipeline in Canada. Pipelines are much safer than other means of transportation. They use less energy, and they cost less to operate.
What can the federal government do in this area?
We believe that the federal government can directly help create added value and oil-related jobs in four ways.
First, it can inform the public of the advantages of a flourishing Canadian oil industry. A Montreal Economic Institute poll shows that people in Quebec and across Canada are poorly informed, but that their attitude becomes supportive of the Canadian industry when they are better informed.
Second, the government can facilitate investment to extend the existing pipelines eastward and to build other pipelines. Pipelines are safer, environmentally sounder and less expensive to operate than currently used rail or road transportation.
Third, it can continue to make representations to Washington for the Keystone pipeline to be approved and to defend the Alberta industry.
Fourth, it can continue to apply environmental standards that are among the toughest in the world.
We will now be pleased to answer the committee members' questions.
Thank you for your attention.