Canada and the United States are one of the world’s foremost power couples, literally.
The Great White North is America’s largest crude oil supplier, and the countries’ interconnected electrical grids and pipeline networks keep them as close as ever.
Energy independence
News of impending U.S. energy self-sufficiency, however, has pundits whispering about cracks forming in the snuggly North American energy love nest. Some have suggested rising levels of unconventional shale oil and natural gas production south of the border has this marriage all fracked up.
Is there still room for Canada in this power union, even with the U.S. energy star firmly on the rise? A closer look at the countries’ energy trading relationship suggests there is.
Take crude oil, for example. According to the U.S. Energy Information Administration (EIA):
- U.S. imports of Canadian crude hit record levels during the first eight months of 2012;
- Canada accounted for approximately 25 per cent of U.S. crude oil imports in 2011, averaging 2.2 million barrels per day;
- Canada holds top spot as the largest foreign oil supplier to the U.S., with almost 99 per cent of Canadian oil exports being sent to the U.S. market;
- Canada accounts for a growing share of total gross U.S. imports, with the U.S. now importing more of Canada’s crude oil, even though the total amount of crude the country purchases from other foreign suppliers, like Saudi Arabia, Mexico and Venezuela, is falling.
And according to a recent report from U.S.-based energy research firm IHS, the U.S. appetite for Canadian crude will remain strong for the remainder of this decade. IHS predicts that significant growth in domestic oil production will not dampen the need for oil imports, including product from the Canadian oil sands.
Integrated infrastructure
Crude oil trade is only one dimension of an arrangement which forms the largest integrated energy market anywhere. Energy trade between the two nations topped $100 billion USD in 2011, including petroleum products, natural gas, hydropower and coal.
It’s not just the volume of goods that’s significant either; the countries are also snuggled up real close, sharing:
- Interconnected power grids, cross-border electricity markets and reliability entities;
- An integrated pipeline network;
- Numerous trading-point benchmarks, like the AECO-C natural gas hub in Alberta, that inform price discovery and commercial decision-making; and
- Joint ownership of some energy assets and infrastructure.
Let’s stay together
Not only is the relationship fulfilling for both partners, polling data indicates there’s strong support for preserving the status quo, with most Americans viewing Canada as a secure, reliable and environmentally responsible supplier.
A recent poll conducted by Anderson Insight for the Canadian Association of Petroleum Producers found that:
- 74 per cent see Canada as the best choice among oil suppliers in terms of the “economic interests of America,” compared to 14 per cent who pick Mexico, nine per cent Saudi Arabia and three per cent Venezuela;
- More than 80 per cent hope their “elected representatives support more use of Canadian oil instead of oil imported from other countries” to meet U.S. demand.
While the Canada-U.S. energy relationship may change gradually over time as good partnerships do, it appears its one bond that will likely endure for many years to come. Both partners are in deep and would lose a great deal by going their separate ways. Besides, think of the negative tabloid headlines.
