Our Essential Energy Relationship With Canada Underscored by New Study
Posted April 8, 2021
A new ICF study assessing U.S.-Canada cross-border petroleum trade finds that there is growing integration of North American energy markets, which in turn leads to lower costs for consumers and increased energy security for both countries. Frank Macchiarola, API senior vice president of Policy, Economics and Regulatory Affairs, talked about the study’s findings during a virtual conference hosted by the Canadian Association of Petroleum Producers:
“It is clear from this study that enhanced trade between our two nations has produced a paradigm shift. For years, policymakers have talked about North American energy security. We now have it. We have it because of this important trade relationship coupled with the ingenuity of the oil and natural gas industry on both sides of the border. We must collectively urge policymakers to value this partnership and to promote this important trade relationship that has been so beneficial to our two great countries.”
Highlights of the study:
U.S.-Canada petroleum liquids trade doubled over the past decade
Petroleum liquids trade increased to nearly 5.5 million barrels per day (b/d) in 2019, up from about 2.75 million b/d in 2010. Each country relies on the other for approximately 15% of total liquids supply, ICF found.
The value of that petroleum liquids trade has fluctuated between $59 billion and $126 billion over the past decade, accounting for about 10% to 20% of total U.S.-Canada trade in goods. The petroleum liquids trade in 2019 totaled $96 billion – nearly as large as total U.S.-Canada trade in vehicles ($102 billion).
Canadian oil has helped make the U.S. more energy secure
According to ICF, U.S. oil imports fell 70% between 2010 and 2019, from 5.1 million b/d to 1.5 million b/d, shown in the chart below (gray-shaded blocks):
Canada is the No. 1 supplier of imported oil to the U.S. and has been since 2004, according to the U.S. Energy Information Administration. Having that relationship with neighbor and ally Canada – combined with increased domestic U.S. production – has made the U.S. more secure and less dependent on oil imports from more volatile regions of the world, as well as from unfriendly suppliers. These imports could further be reduced with completion of new pipeline capacity – like the Keystone XL – to ship heavy oil from Western Canada to the U.S. Gulf Coast.
Economic benefits have come to refiners in U.S. states
In the map below, you can see the economic benefits to various states from processing Canadian heavy crude oil – delivered to the U.S. via existing pipeline, marine and rail transport routes, including via the original Keystone Pipeline System, in 2019.
These economic benefits enabled a more than $3.2 billion increase in Gross State Product in 2019, led by Illinois ($2.2 billion), Minnesota ($773 million), Indiana ($626 million) and Oklahoma ($512 million). Macchiarola:
“None of this would be possible without the cross-border energy infrastructure that enables the safe and efficient transport of these energy resources. Continued development and maintenance of this critical infrastructure is essential to furthering the success and mutual benefits of this important trade relationship.”
The point we’re underscoring is the larger context for the disappointing Keystone XL decision, as that cancellation works against economic and energy security benefits supported by a growing North American energy zone. Jobs were lost, American families were harmed, and U.S. growth and security were not helped. Macchiarola:
“The pipeline cancellation was very disappointing. And I would note that the decision, much like the [federal] leasing [pause], is likely to produce minimal, if any, emissions reductions. Oil demand will remain. But the negative consequences of this decision, actually serve to highlight the essential relationship between Canada and the United States when it comes to trade, and specifically petroleum.”
To be sure, the U.S. energy relationship with Canada shouldn’t be taken for granted. Canada deserved better treatment than it got with Keystone XL. Looking forward, we need to building and enhancing infrastructure so that the energy ties that bind the U.S. and Canada are strengthened, not weakened.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.