Why Canadian oil should be the preferred choice for the U.S.
To fill the hole left by banning imports of oil and oil products from Russia, the U.S. is looking to OPEC nations like Saudi Arabia, Venezuela and Iran to increase supply.
Meanwhile, the U.S. is shutting out more oil from Canada, its closest neighbor and ally.
The problem was clear even before Russia’s invasion of Ukraine. After cancelling the Keystone XL pipeline from Canada on his first day in office, President Joe Biden asked for OPEC nations and Russia to increase oil supply to lower pump prices for Americans.
They said no, and U.S. gasoline prices continued to rise. Amid the growing global energy security crisis, on average U.S. consumers are now paying more than US$1.30 per gallon than one year ago, according to the U.S. Energy Information Administration (EIA).
“[OPEC+] oil largely comes from areas that do not like the U.S.,” says Phil Skolnick, New York-based analyst with Eight Capital.
That increases risk for American consumers.
“We’ve ceded more control to OPEC, and Saudi Arabia and Russia, than people would have expected or hoped for,” says Dan Tsubouchi, chief market strategist with equity firm SAF Group.
The U.S. needs Canadian oil
U.S. domestic oil production surged over the last decade, and at the same time so did imports from Canada.
Renewable energy sources are growing, but oil and gas will continue to be critical for the foreseeable future.
The U.S. is expected to consume approximately 19 million barrels per day of petroleum and other liquids in 2050, an 11 per cent increase from 2021, according to EIA data.
Over decades, U.S. refiners have spent billions to be able to process more “heavy oil” like what is primarily produced in Canada, according to IHS Markit.
Ahead of the curve
The decision to look to OPEC instead of Canada ignores the progress Canada’s oil producers have made addressing greenhouse gas emissions.
Work has “materially outpaced” global oil majors, according to analysts with BMO Capital Markets.
Average emissions per barrel in Canada’s oil sands decreased by about 27 per cent from 2013 to 2019, compared to a decrease of just 13 per cent by other major global oil producers.
Several oil sands projects now have a GHG footprint that is lower than the global average, and major producers have jointly committed to decade-by-decade targets to reach net-zero emissions by 2050.
According to a recent study by consultancy IHS Markit, total oil sands emissions – not just emissions per barrel – are on track to start decreasing in the next five years, even as production continues to grow.
Americans should look to their northern neighbor for energy security, not OPEC nations.