'No point' addressing plunging oil price with curtailment, Kenney says
Premier says industry is voluntarily curtailing production due to 'ridiculously low' price
Government-mandated oil curtailment is "not relevant" given the plunging price of oil amidst the COVID-19 pandemic, Premier Jason Kenney said during the province's coronavirus briefing Friday.
"There's no point in using curtailment. The industry is going to be curtailing voluntarily at prices at that level, ridiculously low level," Kenney said.
Western Canadian Select (WCS) traded below $5 US a barrel Friday, falling to a record low of $4.58 per barrel that morning. West Texas Intermediate, the North American benchmark, fell to $21.55 US.
Although curtailment was not being considered, Kenney said other options were on the table — including introducing tariffs on foreign oil exports.
"I am [opening] a conversation with our friends in the [United States] for coordinated action to protect the North American energy industry, which is a key part of our economy and represents millions of jobs in the American continent," the premier said.
Kenney also suggested an investigation could be opened, in cooperation with the United States, into the price war between Russia and Saudi Arabia and what he called "predatory dumping" of crude by the Organization of the Petroleum Exporting Countries (OPEC) into North America.
"Once we get through the [COVID-19] downturn and see demand return, then I think at some point in the future we may want to pursue something like a coordinated approach to curtailment of production across North America," Kenney said. "These are all conceptual policy instruments at this point.
"What I'm trying to remind our partners in Washington and places like Texas of is, we must be partners on a North American basis."
Global oil prices
Kent Fellows, an economist with the University of Calgary's school of public policy, said Kenney's decision didn't come as a surprise.
"I think he's very correct in that, because while curtailment can impact the discount that we face versus the [WTI] price, it doesn't affect world prices. We're really too small a player to have any impact on the global price," Fellows said.
"We have some control over our own price here if they step in with curtailment, and we've seen that before, but not a lot.
"We're already in a situation where any control we have is likely already expended on that."
The price war between Saudi Arabia and Russia already had a "pretty dramatic" impact on Alberta prior to COVID-19, Fellows said, hitting Alberta producers still struggling with pipeline constraints.
"World prices are down, and we've followed them down," he said.
Federal Finance Minister Bill Morneau said Wednesday that help for Canada's oilpatch was coming in "hours, maybe days," adding that the federal government had been in "hourly" contact with the energy sector.
Alberta increased the oil curtailment limit from 10,000 to 20,000 barrels per producer per day in August 2019, extending the program to December 2020.
The province would later ease curtailment for those operators who shipped extra barrels by rail and opened a loophole for oil well operators.