NAFTA talks continue. Goods like milk, lumber and auto parts are all under the negotiators’ microscopes. Oil is clearly visible, too. Last year, the bilateral trade of energy (including natural gas, oil and power) between the U.S. and Canada was about US$55 billion, with oil being 80 per cent of the total. It’s dollar amount dwarfs other industries, but negotiators may need to view this vital commodity using a different lens.
Beyond size, the upstream oil business between America and Canada reveals big shifts in dollar and volume trade over the past few years.
The United States has long been its northern neighbour’s biggest oil customer. Yet since 2014, it’s reciprocally grown to become Canada’s biggest supplier too. As a result of this bilateral exchange of barrels, the growth in the oil trade deficit (from the American perspective) has slowed down somewhat. That’s notable for negotiations. But of more interest is that both countries have pushed out a large portion of their “foreign oil” suppliers.
So, the upshot of NAFTA vis-à-vis oil may be less about trade and more about mutual energy security — a qualitative market consideration that also calms down price volatility.
Oil prices are less jittery if North America and the western world feel more resilient to supply shocks. The threat of real shortages a la the 1970s is a distant memory that’s reserved for industry veterans; most oil traders today weren’t even alive back then.