(North) American energy security and Canada

Larry Hughes

Last Thursday, Thomas Donohue (president and CEO of the U.S. Chamber of Commerce) and Perrin Beatty (president and CEO of the Canadian Chamber of Commerce) wrote that many readers might be surprised to learn that America’s largest oil supplier was not the Middle East but Canada (Stronger Canada-U.S. oil ties are a win-win, Globe and Mail, 14 April 2011). They went on to explain the importance of Canada’s oil to North American energy security and why the Keystone XL pipeline needs to be built.

One can appreciate that, as an American, Mr. Donohue’s view of North American energy security would start and end with the United States; however, Mr. Beatty’s understanding of North American energy security might appear somewhat confusing.

According to the U.S. Energy Information Administration, in 2009, the United States imported about 3.2 billion barrels of crude oil, of which the Middle East supplied about 18% and Canada was responsible for almost 22%. Since 2005, the volume of U.S. crude oil imports from the Middle East has fallen by about 200 million barrels, while imports from Canada have increased by over 112 million barrels.

What might surprise many readers to learn is that despite Canada’s apparent abundance of crude oil in Western Canada and offshore Newfoundland and Labrador, in 2009, according to Statistics Canada, Eastern Canada (i.e., Ontario, Quebec, and Atlantic Canada) imported slightly over 21% of the crude oil it refined from Middle Eastern sources—a percentage almost identical to that of the United States.

In fact, because of the globalization of the oil trade, in 2009, crude oil supplies from Canadian sources met slightly under one-third of Eastern Canadian crude oil demand—the remainder was imported from a variety of countries, not all of which can be considered secure suppliers. Of the 11 international crude suppliers listed by Statistics Canada, a number have peaked (Mexico, Norway, the U.K., and the U.S.) and others have peaked, face political challenges, or both (Algeria, Iraq, Nigeria, Russia, Saudi Arabia, and Venezuela).

At present, the predominant view of energy security in Canada is that of an energy producer wanting to find a secure and reliable importer. This is illustrated by Prime Minister Harper’s repeated assertion that Canada is an “energy superpower”, articles such as the one by Mr. Beatty, and the seemingly endless stream of Canadian politicians, oil executives, and lobbyists to Washington, arguing for the use of the tar sands in the United States.

When an energy-producing jurisdiction can meet its own energy needs—thereby improving or maintaining its energy security—exporting any excess production may make sense. Although Canada produces sufficient crude oil to meets its domestic demand, political decisions taken over the past fifty years (from the National Oil Policy in the 1960s to NAFTA in the 1990s) have led Canada to the point where it is on a par with OPEC countries such as Iran and Nigeria that export their crude oil but are forced to import refined products to meet their own needs.

Exporting increasing volumes of crude oil from Canada to the United States—while importing crude oil for Eastern Canada—will not improve the energy security of most Canadians.

If Mr. Beatty and the Canadian Chamber of Commerce continue calling for more exports of Canadian crude oil to the United States—under the guise of improving (North) American energy security—they should be equally vociferous in calling for the development of a Canadian energy security policy to reduce oil demand and restrict consumption of energy to sources that are not petroleum-based. Mr. Beatty should also ensure that the policy includes provisions to support Canadian scientists, engineers, and industries in the development of the transformational energy conversion and distribution technologies that will be needed by Canadians (and Americans) in a world of increasingly unstable oil prices and oil supply challenges.

Submitted to Globe and Mail 17 April 2011 — Unpublished (surprise!)