I have been reading an interesting book called “A Thousand Barrels a Second” by Peter Tertzakian. This book approaches the Oil Question from a very analytical perspective allowing the reader to appreciate the severity of the impending crisis.
Here was what I found most interesting. Although the Middle East holds the largest reserves of oil and is largest producer of oil worldwide, Canada is the largest supplier of oil to the US.
From the US Gov, Energy stats page; Rank Country of Origin Thousand Barrels/day
2. Mexico (1,598)
3. Saudi Arabia (1,495)
4. Venezuela (1,297)
5. Nigeria (1,078)
6. Iraq (655)
8. Kuwait (241)
9. United Kingdom (238)
10. Ecuador (232)
In order of amount produced in 2004 (MMbbl/d = millions of barrels per day):
1. Saudi Arabia (10.37)
2. Russia (9.27)
3. United States (8.69)
4. Iran (4.09)
5. Mexico (3.83)
6. China (3.62)
7. Norway (3.18)
8. Canada (3.14)
9. Venezuela (2.86)
10.United Arab Emirates (2.76)
So why do we never hear of Canada when we are discussing the current Oil crisis worldwide:
1. The Middle East supplies a grade of oil called Light Crude or Sweet Crude that has a low content of Sulfur, is easier to excavate, and easier to process due to its lighter viscosity. Until recently, it has not been commercially viable to extract a majority of the Canadian reserves.
2. Canada has a vibrant free market economy. There is nearly over a billion dollars worth of commerce that takes place between the 2 countries daily in everything from softwood lumber, cars manufactured in Canada, to agricultural products. The Canadian government has been a friendly and politically stable ally of the US and so Canadian Oil never makes the evening news.
3. The US has been the primary market for Canadian oil due to its proximity and the restrictive cost of transportation. This also guarantees America a steady flow of fair priced oil to be piped in through a relatively secure neighborhood.
Then why must the U.S care about Canadian Oil?
1. The risk of excavating and transporting crude has escalated due to the instability in the Middle East, and from traditional suppliers like Nigeria and Venezuela. This instability, coupled with better technology has made it viable to excavate Oil from the Canadian prairies in large quantities.
2. The demand for Oil from developing countries like India and China has steadily escalated. In response, Canada has begun a project to build a pipeline to pump Crude Oil from the Albertan prairies to the ports in B.C. This will make Canadian Oil a commodity in the open market, allowing Canada to demand a better price.
3. The recent trade spat between the Canadian government and the U.S at the WTO over Lumber, Canadian beef and Agricultural exports has made Canada wary of depending on just one supplier for their abundant raw material.
The energy question is undoubtedly the most important factor that will shape the future of International politics and interestingly enough the shape of U.S – Canada cross-border politics.
Here is an interesting article from a Canadian perspective http://www.macleans.ca/topstories/business/article.jsp?content=20050613_107308_107308