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Canada concerned by cheap Alberta crude prices

02.07.2013  | 

There has typically been a slight discount, of roughly $10 to $20 a barrel, on the price of Western Canadian Select oil compared to the benchmark West Texas Intermediate blend. But that discount has widened to nearly $40, economists say, and they warn it could balloon further due to pipeline capacity constraints.

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By PAUL VIEIRA

OTTAWA -- The widening spread between Alberta crude and other international blends poses a risk to Canada's fiscal outlook, Canadian Finance Minister Jim Flaherty said Wednesday.

"It is obviously a concern," Mr. Flaherty said at a press conference following a speech in Ottawa. "The reality is that Alberta crude is being sold at a very substantial discount. And it affects our budgeting, because it affects the level" of tax revenue that the federal government collects.

There has typically been a slight discount, of roughly $10 to $20/bbl, on the price of Western Canadian Select oil compared to the benchmark West Texas Intermediate blend.

But that discount has widened to nearly $40, economists say, and they warn it could balloon further due to pipeline capacity constraints in Canada and the increasing supply of crude produced in the US.

The government of Alberta has warned the lower price fetched for its crude could reduce provincial tax revenue in the current fiscal year by roughly 6 billion Canadian dollars ($6.02 billion), or the equivalent of what the province spends annually on education.

Despite worries about commodity prices in Canada, Mr. Flaherty said the federal government has implemented an austerity program that will save taxpayers up to C$5.2 billion a year in expenses.

As a result, his Conservative government remains "on track" to hit its target of returning to a budget surplus some time in 2015, he said.


Dow Jones Newswires



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