I'm not going to call them out by name, but I've seen some progressive voices I respect making the argument that TMX is somehow "losing money" and/or failing to narrow the WTI/WCS differential. The facts beg to differ. Let's hear them out. 🧵 - ThreadSky

maxfawcett.bsky.social • 7 days ago

I'm not going to call them out by name, but I've seen some progressive voices I respect making the argument that TMX is somehow "losing money" and/or failing to narrow the WTI/WCS differential.

The facts beg to differ. Let's hear them out. 🧵

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timquerengesser.bsky.social•6 days ago

What were your thoughts on these stories? https://www.cbc.ca/news/canada/calgary/one-year-after-the-trans-mountain-pipeline-expansion-why-isn-t-it-full-1.7525284

maxfawcett.bsky.social•6 days ago

It's mostly a non-issue. Enbridge cut the tolls on its Mainline in advance of TMX coming into service in order to protect its share of non-contracted shippers. TMX will probably have to reduce its tolls a smidge to compete. But the optionality that tidewater offers makes it a golden asset.

sirschming.bsky.social•6 days ago

That supports what Max posted.

timquerengesser.bsky.social•6 days ago

Never said it didn't. I'm just curious what Max makes of that.

maxfawcett.bsky.social•7 days ago

I have, for example, seen this piece from last August cited *repeatedly* (and recently) as an example that TMX is failing to deliver on its promise.

https://www.reuters.com/business/energy/expanded-trans-mountain-pipeline-capacity-fails-lift-canadian-heavy-oil-price-2024-08-06/

maxfawcett.bsky.social•7 days ago

But if you actually dig into the piece, it makes it clear that the persistent differential was due to a refinery outage in the US. Experts cited in the piece suggested the differential would narrow in due course.

It has.

maxfawcett.bsky.social•7 days ago

Alberta Central's analysis showed that it led to $10 billion in extra upstream revenues in 2024 -- and higher royalties and corporate income taxes.

https://albertacentral.com/intelligence-centre/economic-news/tmx-is-already-showing-its-value-an-extra-10bn-in-revenues-in-2024-but-us-tariffs-loom-large-on-albertas-oil/

maxfawcett.bsky.social•7 days ago

One piece compared the WTI/WCS differential to 2020, which is a *flagrant* attempt to gerrymander the data.

The differential narrowed significantly in 2020 because the Alberta government ordered companies to curtail -- that is, restrict -- oil production.

maxfawcett.bsky.social•7 days ago

Less oil production = fewer exports = less pressure on existing pipeline systems. Of course the differential narrowed!

But the impact TMX has had on the differential should be beyond dispute by now. It's unfortunate that some want to keep re-litigating this.

maxfawcett.bsky.social•7 days ago

Here's how we know TMX has value: MEG Energy is arguing against a hostile takeover attempt on the basis that much of the company's value is tied to its contracts with TMX.

qivancouver.bsky.social•7 days ago

Good points Max. But a fair financial analysis needs to factor in the cost of the catastrophic $ damage when we have a oil disaster - which will eventually happen

maxfawcett.bsky.social•7 days ago

Go back over the last two decades of pipeline incidents in Canada. How much do you think TMX should be setting aside (notwithstanding the potential role of insurance here)?

timgoos.bsky.social•6 days ago

How about …. At least as much as is required of renewable energy projects in Alberta ….

jamiemackinnon.bsky.social•6 days ago

Possible. But transit via pipeline is orders of magnitude safer than transit by rail, which was increasingly common before TMX.

powderday.bsky.social•7 days ago

The WCS differential has not meaningfully changed. See attached

TMX did not make an obvious narrowing from its opening in May to the outage in Feb

BP Whiting closed Feb 1-Mar 18, can you point that out on the graph?

And then after reopening about the same…. Statistical noise at best

Data?

powderday.bsky.social•7 days ago

The differential certainly hasn’t collapsed as was predicted.

maxfawcett.bsky.social•7 days ago

Nobody ever predicted that it would completely collapse because the differential includes transportation costs -- which are never going to zero.

But has it closed meaningfully, and has the volatility been reduced. Without question.

powderday.bsky.social•6 days ago

Agreed no one predicted 0.

But the bulk of the diff reduction occurred in Q1 2024 before TMX expanded suggesting other factors. Refinery closings matter but they existed before TMX too

In a vacuum, it makes sense but there is a major global power transition messing with pricing too

It’s too soon

maxfawcett.bsky.social•6 days ago

I would bet heavily that more time will show that TMX has, in fact, created a structural improvement in differentials.

YMMV.

shane555.bsky.social•6 days ago

WCS cost more to refine than WTI.
Canadian upgraded sells close to WTI

gacross.bsky.social•6 days ago

Interesting. Thank you. So I don’t understand the Alberta push for one MORE pipeline to the west, rather than to the east. Can you provide any insight?

jymn.bsky.social•7 days ago

So unfortunate it's all about money. End of.

maxfawcett.bsky.social•7 days ago

Nope, it's not all about the money. But the money counts -- especially when declining to make it doesn't do anything good for the climate.

jymn.bsky.social•7 days ago

Your whole thread is about money.

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