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Why Canada’s heavy oil is an integral part of U.S. production

Anyone who thinks the U.S. can do without Canadian oil, especially heavy oil, is misinformed. Canadian oil is critical to the Americans The United States banned exports of crude oil in the mid-1970s, as the result of an oil embargo directed at the U.S….

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2 years ago

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Anyone who thinks the U.S. can do without Canadian oil, especially heavy oil, is misinformed. Canadian oil is critical to the Americans

The United States banned exports of crude oil in the mid-1970s, as the result of an oil embargo directed at the U.S. by Middle Eastern countries.

The embargo began as a result of American support for Israel during the 1973 Yom Kippur War. In response, some members of the Organization of Petroleum Exporting Countries (OPEC) halted shipments of oil to the U.S. The OPEC embargo ended in 1974, but U.S. Congress, fearful of a repeat, banned most American oil exports to preserve stocks for domestic use.

It was only in December 2015 that President Barack Obama lifted restrictions on exports of U.S. oil to the rest of the world, effective the following year. The result has been a boom in crude oil exports, rising from 465,000 barrels of oil daily in 2015 to almost 3.2 million barrels a day in 2020.

America’s lifting of its self-imposed 40-year ban on oil exports meant the U.S. was now in competition with Canada for oil export customers.

It also meant that some U.S. refineries would need more Canadian heavy oil. As Oil Sands Magazine has pointed out, this need arose as a result of increasing production from U.S. shale fields.

Heavy oil has a relatively high American Petroleum Institute (API) density. API measures the density of a crude oil or refined products. Crude oil will typically have an API between 15 and 45 degrees. (The higher the API, the lighter the crude, the lower the API, the heavier the crude.)

The problem for some U.S. refineries is that as the American-sourced domestic supply of crude became increasingly lighter, approaching 40 degrees on the API scale. That created a mismatch with the desired refinery feedstock density, which averages about 32 degrees.

That’s where heavier Canadian crude oil from the oil sands comes in, as refineries seek to blend light domestic crude with heavy and medium-grade oil imports. By adding imported heavy crude oil to domestic light crude oil during production, the U.S. has significantly increased its ability to export refined oil.

Declining exports from U.S. heavy oil suppliers in Venezuela and Mexico have also opened the door to more Canadian heavy oil in the Gulf Coast refining cluster, which is the world’s largest heavy-oil processing area.

The percentage of total imports of Canadian heavy oil to the U.S. rose from 25.1 per cent in 2000 to 55.8 per cent in 2019. American imports of oil from Canada have risen from 1.3 million barrels daily in 2000 to two million daily in 2010 and reached 3.8 million barrels daily in 2019.

This American need for heavy crude oil has been positive for Canada’s oil exports. However, increasing Canadian oil exports to the United States doesn’t mean the various attempts to obstruct Canadian crude oil exploration, production, pipelines and exports have been unsuccessful.

The Obama administration blocked the Keystone XL pipeline, then former president Donald Trump allowed it to proceed, followed in January by President Joe Biden killing the project on his first day in office.

In Canada, proposed pipelines such as Northern Gateway and Energy East were thwarted by a combination of politics and activism: tanker bans on the northern coast of B.C., and anti-oil activism and political opposition in Quebec.

Killing access to markets that would have offered Canada an alternative to American sales has been costly. A lack of extra pipeline access to coasts means it’s difficult for Canadian producers to sell oil into non-American markets.

And crude oil shipped by train is sold at a discount to its price if shipped by pipelines.

Before the COVID-19 pandemic temporarily cut into demand, Canadian oil-by-rail shipments to the United States reached nearly 412,000 barrels of oil daily in February 2020, a monthly record. In 2012, the earliest year of data, daily crude oil shipments peaked at only 125,000 in December and had been as low as 9,725 barrels in January.

Shipping oil by rail presents higher risks and is more expensive. In 2019, the Fraser Institute estimated that from 2013 to 2017, after accounting for quality differences and transportation costs, the depressed price for Canadian heavy crude oil resulted in C$20.7 billion in foregone revenues for the Canadian energy industry. In 2020, IHS Markit estimated the loss of income for Canadian producers at US$14 billion between 2015 and 2019. IHS called that number “conservative.”

If anyone thinks the U.S. can do without Canadian oil, especially Canadian heavy oil, they’re misinformed. Canadian oil is critical to the United States and, increasingly, for blended oil for its own oil exports.

By Mark Milke
and Lennie Kaplan
Canadian Energy Centre

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report Analyzing the Contributions of the Canadian Crude Oil Sector to U.S. Petroleum Refineries.

 

Courtesy of Troy Media.

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Costco Tells Americans the Truth About Inflation and Price Increases

The warehouse club has seen some troubling trends but it’s also trumpeting something positive that most retailers wouldn’t share.

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13 mins ago

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May 28, 2023

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Costco has been a refuge for customers during both the pandemic and during the period when supply chain and inflation issues have driven prices higher. In the worst days of the covid pandemic, the membership-based warehouse club not only had the key household items people needed, it also kept selling them at fair prices.

With inflation -- no matter what the reason for it -- Costco  (COST) - Get Free Report worked aggressively to keep prices down. During that period (and really always) CFO Richard Galanti talked about how his company leaned on vendors to provide better prices while sometimes also eating some of the increase rather than passing it onto customers.

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That wasn't an altruistic move. Costco plays the long game, and it focuses on doing whatever is needed to keep its members happy in order to keep them renewing their memberships.

It's a model that has worked spectacularly well, according to Galanti.

"In terms of renewal rates, at third quarter end, our US and Canada renewal rate was 92.6%, and our worldwide rate came in at 90.5%. These figures are the same all-time high renewal rates that were achieved in the second quarter, just 12 weeks ago here," he said during the company's third-quarter earnings call.

Galanti, however, did report some news that suggests that significant problems remain in the economy.

Costco has done an incredibly good job at holding onto members.

Image source: Xinhua/Ting Shen via Getty Images

Costco Does See Some Economic Weakness

When people worry about the economy, they sometimes trade down when it comes to retailers. Walmart executives (WMT) - Get Free Report, for example, have talked about seeing more customers that earn six figures shopping in their stores.

Costco has always had a diverse customer base, but one weakness in its business may be a warning sign for its rivals like Target (TGT) - Get Free Report, Best Buy (BBY) - Get Free Report, and Amazon (AMZN) - Get Free Report. Galanti broke down some of the numbers during the call.

"Traffic or shopping frequency remains pretty good, increasing 4.8% worldwide and 3.5% in the U.S. during the quarter," he shared.

People shopped more, but they were also spending less, according to the CFO.

"Our average daily transaction or ticket was down 4.2% worldwide and down 3.5% in the U.S., impacted, in large part, from weakness in bigger-ticket nonfood discretionary items," he shared.

Now, not buying a new TV, jewelry, or other big-ticket items could just be a sign that consumers are being cautious. But, if they're not buying those items at Costco (generally the lowest-cost option) that does not bode well for other retailers.

Galanti laid out the numbers as well as how they broke down between digital and warehouse.

"You saw in the release that e-commerce was a minus 10% sales decline on a comp basis," he said. "As I discussed on our second quarter call and in our monthly sales recordings, in Q3, big-ticket discretionary departments, notably majors, home furnishings, small electrics, jewelry, and hardware, were down about 20% in e-com and made up 55% of e-com sales. These same departments were down about 17% in warehouse, but they only make up 8% in warehouse sales."

Costco's CFO Also Had Good News For Shoppers

Galanti has been very open about sharing information about the prices Costco has seen from vendors. He has shared in the past, for example, that the chain does not pass on gas price increases as fast as they happen nor does it lower prices as quick as they sometimes fall.

In the most recent call, he shared some very good news on inflation (that also puts pressure on Target, Walmart, and Amazon to lower prices).

"A few comments on inflation. Inflation continues to abate somewhat. If you go back a year ago to the fourth quarter of '22 last summer, we had estimated that year-over-year inflation at the time was up 8%. And by Q1 and Q2, it was down to 6% and 7% and then 5% and 6%," he shared. "In this quarter, we're estimating the year-over-year inflation in the 3% to 4% range."

The CFO also explained that he sees prices dropping on some very key consumer staples.

"We continue to see improvements in many items, notably food items like nuts, eggs and meat, as well as items that include, as part of their components, commodities like steel and resins on the nonfood side," he added.

  

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Government

‘Kevin Caved’: McCarthy Savaged Over Debt Ceiling Deal

‘Kevin Caved’: McCarthy Savaged Over Debt Ceiling Deal

Update (1345ET): The hits just keep coming for Speaker Kevin McCarthy, as angry Republicans…

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2 hours ago

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May 28, 2023

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'Kevin Caved': McCarthy Savaged Over Debt Ceiling Deal

Update (1345ET): The hits just keep coming for Speaker Kevin McCarthy, as angry Republicans have been outright rejecting the debt ceiling deal which raises it by roughly $4 trillion for two years, doesn't provide sticking points sought by the GOP.

In short, Kevin caved according to his detractors.

Some Democrats aren't exactly pleased either.

"None of the things in the bill are Democratic priorities," Rep. Jim Himes (D-CT) told Fox News Sunday. "That's not a surprise, given that we're now in the minority. But the obvious point here, and the speaker didn't say this, the reason it may have some traction with some Democrats is that it's a very small bill."

*  *  *

After President Biden and House Speaker Kevin McCarthy (R-CA) struck a Saturday night deal to raise the debt ceiling, several Republicans outright rejected it before it could even be codified into a bill.

Here's what's in it;

  • The deal raises the debt ceiling by roughly $4 trillion for two years, and is consistent with the structure of budget deals struck in 2015, 2018 and 2019 which simultaneously raised the debt limit.
  • According to a GOP one-pager on the deal, it includes a rollback of non-defense discretionary spending to FY2022 levels, while capping topline federal spending to 1% annual growth for six years.
  • After 2025 there are no budget caps, only "non-enforceable appropriations targets."
  • Defense spending would be in-line with what Biden requested in his 2024 budget proposal - roughly $900 billion.
  • The deal fully funds medical care for veterans, including the Toxic Exposure Fund through the bipartisan PACT Act.
  • The agreement increases the age for which food stamp recipients must seek work to be eligible, from 49 to 54, but also includes reforms to expand who is eligible.
  • Claws back "tens of billions" in unspent COVID-19 funds
  • Cuts IRS funding 'without nixing the full $80 billion' approved last year. According to the GOP, the deal will "nix the total FY23 staffing funding request for new IRS agents."
  • The deal includes energy permitting reform demanded by Republicans and Sen. Joe Manchin (D-WV)
  • No new taxes, according to McCarthy.

Here's McCarthy acting like it's not DOA:

Yet, Republicans who demanded deep cuts aren't having it.

"A $4 trillion debt ceiling increase?" tweeted Rep. Andrew Clyde (R-GA). "With virtually none of the key fiscally responsible policies passed in the Limit, Save, Grow Act kept intact?"

"Hard pass. Hold the line."

"Hold the line... No swamp deals," tweeted Rep. Chip Roy (R-TX)

"A $4 TRILLION debt ceiling increase?! That's what the Speaker's negotiators are going to bring back to us?" tweeted Rep. Dan Bishop (R-NC). "Moving the issue of unsustainable debt beyond the presidential election, even though 60% of Americans are with the GOP on it?"

Rep. Keith Self tweeted a letter from 34 fellow House GOP members who are committing to "#HoldTheLine for America" against the deal.

"Nothing like partying like it’s 1996. Good grief," tweeted Russ Vought, President of the Center for Renewing America and former Trump OMB director.

In short:

Tyler Durden Sun, 05/28/2023 - 11:30

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Government

“Hard Pass”: Here’s What’s In The Debt Ceiling Deal Republicans Are About To Nuke

"Hard Pass": Here’s What’s In The Debt Ceiling Deal Republicans Are About To Nuke

After President Biden and House Speaker Kevin McCarthy (R-CA)…

Published

5 hours ago

on

May 28, 2023

By

"Hard Pass": Here's What's In The Debt Ceiling Deal Republicans Are About To Nuke

After President Biden and House Speaker Kevin McCarthy (R-CA) struck a Saturday night deal to raise the debt ceiling, several Republicans outright rejected it before it could even be codified into a bill.

Here's what's in it;

  • The deal raises the debt ceiling by roughly $4 trillion for two years, and is consistent with the structure of budget deals struck in 2015, 2018 and 2019 which simultaneously raised the debt limit.
  • According to a GOP one-pager on the deal, it includes a rollback of non-defense discretionary spending to FY2022 levels, while capping topline federal spending to 1% annual growth for six years.
  • After 2025 there are no budget caps, only "non-enforceable appropriations targets."
  • Defense spending would be in-line with what Biden requested in his 2024 budget proposal - roughly $900 billion.
  • The deal fully funds medical care for veterans, including the Toxic Exposure Fund through the bipartisan PACT Act.
  • The agreement increases the age for which food stamp recipients must seek work to be eligible, from 49 to 54, but also includes reforms to expand who is eligible.
  • Claws back "tens of billions" in unspent COVID-19 funds
  • Cuts IRS funding 'without nixing the full $80 billion' approved last year. According to the GOP, the deal will "nix the total FY23 staffing funding request for new IRS agents."
  • The deal includes energy permitting reform demanded by Republicans and Sen. Joe Manchin (D-WV)
  • No new taxes, according to McCarthy.

Here's McCarthy acting like it's not DOA:

Yet, Republicans who demanded deep cuts aren't having it.

"A $4 trillion debt ceiling increase?" tweeted Rep. Andrew Clyde (R-GA). "With virtually none of the key fiscally responsible policies passed in the Limit, Save, Grow Act kept intact?"

"Hard pass. Hold the line."

"Hold the line... No swamp deals," tweeted Rep. Chip Roy (R-TX)

"A $4 TRILLION debt ceiling increase?! That's what the Speaker's negotiators are going to bring back to us?" tweeted Rep. Dan Bishop (R-NC). "Moving the issue of unsustainable debt beyond the presidential election, even though 60% of Americans are with the GOP on it?"

Rep. Keith Self tweeted a letter from 34 fellow House GOP members who are committing to "#HoldTheLine for America" against the deal.

"Nothing like partying like it’s 1996. Good grief," tweeted Russ Vought, President of the Center for Renewing America and former Trump OMB director.

In short:

Tyler Durden Sun, 05/28/2023 - 11:30

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