Oil exports likely to go unscathed from rail strike; farmers fret over harvest

If there’s a silver lining to this week’s looming rail strike it’s that Alberta’s main export — crude oil — will likely go unscathed when the pickets go up at both of Canada’s national rail lines on Thursday.That’s because oil-by-rail shipments that hit nearly half a million barrels per day (bpd) are at decade lows thanks to the start of the Trans Mountain Expansion earlier this year. According to the US government’s Energy Information Agency (EIA), Canada now exports just 55,000 bpd of the 4.2 million bpd shipped to US refineries — mainly by pipe.That’s in sharp contrast to 2019 when oil producers faced severe bottlenecks due to a lack of takeaway capacity and ongoing delays to the aforementioned TMX. Instead, a desperate Rachel Notley in February 2019 spent $3.7 billion to lease more than 4,400 rail cars in a bid to head off crippling price differentials that were costing $80 million a day in lost revenues..How times have changed.The Trans Mountain Expansion added 890,000 bpd of much-needed takeaway and analysts say there is enough space to suck up any backlogs.Consequently, discounts that averaged about $18.65 per barrel in August of 2023 had shrunk to $12.25 as of today. The fact they’ve shrunk means demand for Canadian barrels remains robust.“Crude-by-rail is not as essential to the Canadian market as it was prior to the Trans Mountain expansion," said Jeremy Irwin, a senior oil markets analyst at consultancy Energy Aspects, as per Reuters..The same can’t be said for Western Canada’s other main export — grain and agricultural commodities that are moved almost exclusively by rail.In fact, the Calgary-based Wheat Growers’ Association is calling the federal government’s response to the looming rail walkout as “shameful.”It said it has met with Liberal Labour Minister Steve MacKinnon on several occasions to express their concerns for the potential loss of $150 billion in gross domestic product to the Canadian economy.That’s because grain terminals and elevators need a steady movement of grain to alleviate storage constraints and meet export commitments..Association president Gunter Joachim said it is “appalling” that MacKinnon refuses to impose binding arbitration on the parties, noting that there have been 12 various transportation strikes affecting prairie producers in the past 14 years.“It is shocking that the Minister of Labour will not use the tools available to him, including Section 107 of the Labour Act to thwart the pending rail strike,” he said. “It is unprecedented in recent memory, that both railways will be shutdown simultaneously. This government is failing all Canadians, rather than prioritizing our national economy.”Rail companies have already initiated embargoes on the movement of goods, including grain, to safely shutdown the system. If a full strike by both railways is implemented, it will take weeks to bring the system back up to speed once a strike is over, continued Jochum. Meanwhile grain companies have stopped their sales efforts forcing international customers to source from other countries. “This has both an immediate and long-term impact to farmers, grain companies and other stakeholders,” Jochum continued.“Damage to our reputation as a reliable supplier will take years to rebuild, if ever.”

Oil exports likely to go unscathed from rail strike; farmers fret over harvest

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