What inferences can you draw from the fact that Enbridge (Northern Gateway project) wants to sell oil to China and other countries in the Far East?

1 Answer | Add Yours

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

If I remember correctly, your questions have focused on the subject of economics so I will focus on economic inferences in my answer to this question.  There are a number of things that we can infer about the economic situation in Canada and in Asia from this situation.  Let us look at three main inferences that we can arrive at.

The first thing that I would infer from this is that China and other countries in Asia are experiencing economic growth.  As countries grow economically, they generally demand more oil.  As they demand more oil, they look for more sources from which to get that oil.  The Canadian oil from this project is a source that can help to fulfill this demand.

The second thing that I would infer is that Canada does not have any other buyers for this oil that would be willing to buy it for a better price than the Chinese would.  The firms that control the oil will want to get the maximum profit for their product.  Therefore, they will only sell to China if that country is the buyer that offers the greatest profit.  I infer that Canada cannot make as much money selling oil to the United States, to domestic users, or to any other buyer.

Third, I infer that there is relatively free trade between China and Canada, at least with respect to oil.  In order for this oil to be sold to buyers in China, it is necessary for trade to be more or less free.  If there were high trade barriers, the sale of this oil would either be illegal or it would be made too expensive (through tariffs) to be economical. If the pipeline owners can plan to sell this oil to China, trade must be free enough to make that both possible and profitable.

Thus, we can infer from this that China is growing economically, that trade with China is free, and that sales to China offer the best hope for profits in this situation.

Sources:

We’ve answered 318,991 questions. We can answer yours, too.

Ask a question