New rail cars aren't short-term fix for oil crunch, Morneau says

Finance Minister Bill Morneau. Image: Canadian Club of Toronto

(Bloomberg) — Canadian Finance Minister Bill Morneau is signalling he won’t cough up money for new rail cars to ship Alberta oil, saying it would take months and wouldn’t solve the current price collapse.

Morneau, in an interview with “The West Block” on Global News that aired on Sunday, said the province of Alberta could buy rail cars with industry should it choose to, but that the federal government was focused on building the Trans Mountain oil pipeline expansion. Rail cars take a significant amount of time to acquire, he said.

“Our estimate is it might take at least nine months, perhaps longer, to actually get more rail,” Morneau said, according to a transcript. “If that’s a decision that the Alberta government and the industry wants to take, that’s a decision that can be taken.”

Canada’s government is said not to favour Alberta’s proposal to buy trains to boost crude shipments on rail by 120,000 barrels daily. Alberta Premier Rachel Notley has said she might buy the rail cars herself. Morneau’s budget update, released on Nov. 21, included billions in broad-based tax breaks for business but was criticized for not doing enough to help Alberta during its oil crunch.

Morneau said the government has “been really clear that the decision around Trans Mountain was the first best way for us to get resources to international markets.”

Cheap Alberta oil is having a wide-ranging impact on Canada’s economy, including sowing doubts that the country’s central bank will raise interest rates at its January meeting, as had been widely expected until recently.

Western Canada Select crude, the main blend sold by the nation’s oilsands, closed at $13.46/bbl on Nov. 15, the lowest in data compiled by Bloomberg stretching back to 2008. Its discount to U.S. benchmark crude exploded to as much as $52.40/bbl last month, also a record.

“The spread is so extreme, the cries of pain from Alberta are so loud, I don’t think they can just put blinders on and carry on as if no thing’s changed,” Doug Porter, chief economist at Bank of Montreal, said in a Nov. 22 interview about the central bank’s deliberations.

© 2018 Bloomberg L.P.

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.