Canadian oil and gas captive to the American market

American President-elect Donald Trump’s threat to impose 25% tariffs on Canada on our energy exports and other Canadian products recalls a well-known truth in the energy sector: security requires diversification of its suppliers, but also from its customers.

Currently, almost all of Canada’s fossil fuel exports go to the United States^⁠1. With almost only one country buying its oil and gas, Canada has placed itself in a vulnerable situation that the tariff threat is starkly exposing.

This dependence on the American market creates an uncomfortable situation: it removes Canadian producers from any negotiating power with their customers south of the border.

Donald Trump’s threat also reveals another vulnerability in the field of fossil energy in Canada: its difficult access to the sea and the difficulty of transporting it to export ports for customers other than the United States. . Canada’s fossil fuel industry could earn greater revenues if its oil and gas could be sold elsewhere than in the United States.

By participating in the energy supply of other countries, despite the necessary decline in fossil fuels to combat climate change, the country could also consolidate valuable alliances, particularly in Europe and Asia.

This hold on the American market is due to geography. Alberta and, to a lesser extent, Saskatchewan, the main oil-producing provinces, lack access to the sea and deep-water ports that can transport their resources to other markets.

Trans Mountain, an opening to other markets

This is the objective of the Trans Mountain project, which will transport Alberta oil to a port located in British Columbia. Inaugurated last year, this project finally allows Alberta oil to reach other international customers.

Meanwhile, in the United States, hydraulic fracturing and horizontal drilling technology, mastered in the mid-2010s, quickly enabled the country to produce so much shale oil and gas that it was able to export it in large quantities. quantities overseas from the Gulf of Mexico.

In 2016, a few years after this shale revolution, the United States set up eight terminals to export its gas to Europe, then to Asia.

In just 10 years, they have become the world’s leading gas exporters. Half of the liquefied gas imported by Europe comes from the United States, which considerably increases its political and economic influence on the Old Continent.

However, Canada, the world’s fourth largest gas producer, will only export its first molecule this year, almost 10 years after the United States. Thanks to the commissioning of the LNG Canada project in British Columbia, Canadian gas will meet part of Asia’s immense energy needs.

Energy, a divisive issue

Unfortunately, energy is a divisive issue in Canada. We have clearly seen this under the current Liberal government: its policies towards the fossil fuel sector are creating a lot of frustration in Western Canada. In 2022, Alberta even adopted a Sovereignty Within a United Canada Act to protect its interests against Ottawa.

It is different in other producing countries. Norway is both a large fossil producer and a leader in renewable energy.

The country produces 2 million barrels per day, meets 3% of global gas demand and devotes part of the resulting revenue to accelerating its transition to a green economy ^⁠2.

Norwegians widely recognize the challenge of climate change. But there is a fairly well-established consensus not to give up their place on the global energy scene, knowing that this would benefit other producers who are less concerned about the environment.

The Norwegians have also considerably increased their gas exports to Europe since 2022, following interruptions in gas exports from Russia after its invasion of Ukraine. Norway has even replaced Russia as the main gas exporter to the continent.

A new approach in sight for Canada?

In Canada, a survey by Nanos Research and Positive Energy, at the end of 2024, seems to be in line with the Norwegian approach. “For the first time since our tracking polls began, Canadians are divided on whether protecting the environment at the expense of the economy (46%, a historic low) or growth and job creation at the expense of the environment (44%, a historically high level) should be the top priority,” says the survey ^⁠3.

In short, it seems that Canadians also want to get the most possible benefits from their immense resources, while maintaining environmental leadership in favor of low-carbon energies.

This requires access to markets other than that of the United States, which currently does not hesitate to mistreat a partner known for its reliability.

1. Visit the page “The United States absorbed almost all of Canada’s crude oil exports in 2023”

2. Read “Can Canada Follow Norway’s Energy Transition Example?” ” (in English)

3. Read “Evolving climate ambitions: After outpacing the environment, jobs and the economy are now statistically on par with the environment for the first time”

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