Tuesday, February 18, 2014

Oil Extraction in L’Île-d’Anticosti

On February 13, 2014, Quebec’s Prime Minister, Mrs Pauline Marois, announced the decision of her government to invest US$ 115 million in oil prospecting and extraction in L’Île-d’Anticosti, a municipality of 231 people located in the region of Côte-Nord (Northern Coast). 

This project that will begin this summer will carry two parts: on the one hand a joint venture with the companies Petrolia Corridor Resources and Maurel & Prom and on the other hand another joint venture with Junex. 

This project would reduce Quebec’s dependence on foreign oil and its economic impacts over a thirty-year period would be US$ 45 billion.

If this project is viable, Quebec’s motorists and public transport organizations could expect in the coming years an increase in oil supply and thus a decrease in the price of gasoline. The price of gasoline keeps increasing everywhere. In Quebec, in December 2013, it was 85 % higher than its level in 2002. 

The province of Alberta followed by Saskatchewan are the two most important oil producers in Canada. In these two provinces where oil is extracted from sands, the increase in the price of gasoline was less compared to Quebec and other provinces. Last December, in Alberta, gasoline price was only 67 % higher than its 2002 level. At the same time in Saskatchewan, it was just 64% higher than its 2002 level. 

The figure below plots the consumer price index (IPC) of gasoline between January 1980 and December 2013 in Québec, Alberta, and Saskatchewan. The CPI of gasoline is the ratio of its current price to its price in 2002.

 Consumer Price Index of Gasoline (2002=100), 1980:M1-2013:M12, Source: Statistics Canada
            Consumer Price Index of Gasoline (2002=100), 1980:M1-2013:M12, Source: Statistics Canada

It is not only motorists that suffer from increases in gasoline price; commuters also do since public transportation organizations pass this increase on their pricing.

Until the democratization of electric vehicles, a solution to slow down the rise in the price of gasoline is to increase its supply. If there are as much as 46 billion barrels of oil in L’Île-d’Anticosti, its extraction will help motorists and commuters save money.