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16 March 2011 Issue No. 35 | Email not displaying correctly? View it in your browser.
Why it does matter where your oil comes from


Dear <<First Name>>
 

Current upheavals in North Africa and the Middle East (where Suncor also has operations) have once again reminded us how much the price of gasoline is intimately linked not only to demand for oil but also to the stability, or otherwise, of its supply.
 
This fact is not merely of academic interest. For the United States, their love affair with the automobile is as strong as ever. According to Wikipedia the U.S. has 260 million cars - 842 for every 1,000 people (by comparison, Canada has 563 cars for every 1,000 people, the 7th highest concentration in the world) - gasoline prices dramatically affect peoples’ cost of living and sense of personal freedom.
 
Consequently, one of the first things American politicians hear when the love affair is threatened by price increases is calls to open up the federal government’s Strategic Petroleum Reserve ("the Reserve"). 
 
Like a fine wine that you keep hidden away in a climate-controlled environment for special occasions, the Reserve is not supposed to be drawn down lightly – but when? For some, using it to mitigate price fluctuations is like taking a 20 year old bottle of wine and using it for cooking.
 
The Reserve, created after the 1973-74 OPEC oil embargo, was to offset temporary supply disruptions rather than smooth out price fluctuations. Moreover, the Reserve does not contain gasoline, but crude petroleum, so not only can it not make much of a difference to prices in the short term, but the amount of extra gasoline it can release is limited by America’s refinery capacity, which is already near its limit (and no new refinery has been built in the U.S. for 30 years).

But if nothing else, gasoline price increases have helped remind people of the insecurity of much of their energy supply, and to realize that there may be a solution. Many Americans are still surprised to learn that Canada is already their country’s biggest supplier of “foreign” energy. This is a point the American Petroleum Institute is working to get across with advertising (see Institute).
 
What Americans may now be appreciating, in the context of present Middle Eastern instability is that Canada is a stable and reliable source of energy. The bottom line is that with abundant reserves, Canada plays a crucial role in addressing American and global energy needs. In that sense, Canada is a strategic petroleum reserve.

 
The 1973-74 oil embargo caused panic at the pumps in the U.S. and prompted establishment of the Strategic Petroleum Reserve, the largest stock pile of government-owned emergency crude oil in the world. 
Photo credit: The U.S. National Archives 
http://www.flickr.com/photos/usnationalarchives/

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