The U.S. needs less. Asia needs more. Failure to access global markets has cost Canada up to $50 million a day.
A revolution has taken place over the past decade, radically transforming the balance of power in global energy markets. These changes have brought oil and gas to the forefront of Canada’s national policy debate like never before.
The Canadian Chamber of Commerce – Canada’s largest business association – has recently completed a study entitled $50 Million a Day, which lays out the facts essential to understanding what the debate over oil and gas exports truly means for Canada’s prosperity.
- Canada’s only international oil and gas market is on a path of declining imports
The U.S. is essentially Canada’s only current foreign market for oil and gas: 98 per cent of our petroleum exports and 100 per cent of our natural gas exports go to our southern neighbour.
Thanks to technology advances, the U.S. is experiencing an almost miraculous revival in oil and gas production. Canada’s only natural gas market is expected to become a net gas exporter by 2020. Canada’s only foreign market for crude oil will experience zero growth in oil imports over the next thirty years.
The U.S. will continue to be an important customer for Canadian energy, but as it continues to reduce its reliance on imports, we can no longer assume that its patronage will be enough.
- New opportunities lie in Asia, but Canada lacks the infrastructure to get there.
The U.S.’ declining energy imports are a special case, as most of the world’s largest economies—the European Union, China, India and Japan—are expected to become increasingly dependent on energy imports over the next 20 years.
Much of this growth will be driven by China, where demand will rise 283 per cent for gas and by 73 per cent for oil over the next 20 years.
We simply do not have the infrastructure to get our oil and gas products to these markets. Canada has zero LNG export facility and only one pipeline capable of bringing oil to the West Coast. Our energy resources are essentially landlocked.
- Canada loses billions each year from its lack of access to global markets.
The lack of transportation infrastructure is holding Canada back from fully leveraging its oil and gas endowment for the benefit of all Canadians. CIBC argues that transportation bottle necks are causing Canadian oil to be sold well below world prices, resulting in a $50 million dollar a day loss to Canadian oil producers in 2012. While the exact amount of this discount ebbs and flows with market conditions, the problem will not truly go away until new transport infrastructure is built.
To put that number in context, in one day, $50 million could pay for infrastructure projects like the Powell Street Overpass project in Vancouver ($50 million).
In three days, $50 million could pay for one year of funding for the federal government’s Homelessness Partnership Program ($119 million per year).
- The world is not running out of oil and gas. Energy companies must be the catalysts to move to a low carbon energy future.
The transition to a low carbon economy will be led by changing energy our energy consumption and by advancing environmental innovation in our energy production. 70%-80% of emissions from a barrel of oil are created when gasoline or diesel is burned, not when crude oil is produced.
Failing to export Canadian oil and gas resources will do little to change global energy consumption. However, Canada can play a role in making energy production more environmentally responsible by developing and implementing new technologies to reduce impacts on air, land and water.
These are the facts. The speed with which we as a country can react to these realities will determine our ability to compete as a nation in the 21st century.
This piece was featured in the September edition of the Vancouver Board of Trade’s Sounding Board.