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Derek H. Burney is senior strategic adviser for Norton Rose Canada LLP and a director of TransCanada Pipelines Ltd. Fen Osler Hampson is director of global security at the Centre for International Governance Innovation.
There has been a lot of loose talk of late about the United States becoming “energy independent” by the end of this decade. A more accurate prediction is that North America may become more energy independent in that time frame as the result of developments under way in both Canada and the U.S.
Today, the U.S. consumes 15 million barrels of crude oil a day and imports eight to nine million barrels, more than half of what it needs. The U.S. Energy Information Administration forecast in 2012 that the U.S. will continue to import 7.5 million barrels a day into 2035.
Canada currently exports about 2.2 million barrels of crude oil a day to the U.S., an amount that could easily double if additional pipeline capacity were available. At present, there is little spare capacity, which is why some shippers are turning to rail transport. This limited pipeline capacity contributes to the sharply discounted price ($30 a barrel) for Canadian crude, a discount that negates some $6-billion in taxes and royalties annually for the Alberta treasury.
Deposits in Texas will compete with light, sweet crude from the Bakken region in North Dakota but not with Canadian heavy crude oil. Gulf Coast refineries, which would receive crude oil through the Keystone XL pipeline, prefer Canadian heavy oil because they are set up to run on heavy crude (today mainly from Venezuela) and cannot easily or economically switch to new light oil in large quantities. And the relative longevity of a predictable oil sands supply versus shorter-lived shale plays further underscores that preference.
Estimates about the future may vary, but all analyses confirm that world energy demand, particularly for oil, will grow for the next 20 years and that the U.S. will continue to use more fossil fuels and import several million barrels of crude oil each and every day.
So if oil is not shipped in increasing quantities by pipeline from Canada – a secure, stable ally – the U.S. will be obliged to rely on crude oil from more volatile Middle Eastern and South American suppliers who share neither American interests nor values.
Under NAFTA, Canada provided security of oil supply to the U.S., including supply on a pro rata basis in times of shortage, in exchange for security of demand. No other oil supplier has made a similar commitment to the U.S.
For the rest of this column, please go to the Globe and Mail website: http://www.theglobeandmail.com/commentary/pipelines-are-the-ticket-to-north-american-energy-independence/article8952216/%3bjsessionid=mCp7RnRFGmK4CQCg53cgnB7gWqTB3yxPnGSg82Z1ShLQpHMHcJS6!979510097/?ord=1