Canada’s Status as an Oil Producer, Current Conditions and Prospects

The late comedian Robin Williams once said Canada is like a loft apartment, a really great party. Indeed, with a considerably smaller population and much less drama, Canada is often overshadowed by the US. However, it also holds the third largest oil reserve in the world, despite Russia selling the oil-rich region of Alaska to the US in 1867, there are still 170 billion barrels worth of oil north of the Canada–United States border.

Canadian Oil Production and Exports

As of 2016, Canada produced 4.5 million barrels of oil, while its 38 million population consumes around 2.5 million barrels every day, and the rest is mostly exported to the United States. Unlike many other oil-producing countries, the oil and gas industry only takes up about 5% of the nation’s GDP, with real estate (13.01%) taking the helm in 2017.

Even though the United States boasts a production rate three times over Canada, it still relies heavily on Canadian energy imports. But due to a lack of infrastructure, Canada could not export huge amounts of oil and gas to other countries, this puts the US in an advantageous position over Canada, ending up with a discount of around $20 per barrel.

A Limited Expansion

High costs and environmental impacts have been the main impediments to expanding the oil and gas industry in Canada. The Keystone XL pipeline has been canceled by President Biden on his first day in office, the project would allow a more efficient means to transport oil instead of using the railway, which is less efficient and more costly.

The nature of Canada’s oil reserves also contributes to its sluggish development, oil sands produce heavy sour crude in contrast to Texas’s sweet light crude, and they are also more water and energy-intensive to extract with higher pollution discharge. Because of a lack of great economic incentive to overcome the downsides of pollution, Canada is not heavily motivated to aggressively grow its oil and gas industry.

Canadian Oil, More Important After the War in Ukraine

In light of Russia’s invasion of Ukraine, the US turned to Canada for more energy supply. According to Alberta Premier Jason Kenney, the oil-producing province has 900,000 barrels of unused capacity, though it can only be achieved gradually. Although the latest WTI oil futures stands at $82.39 a barrel, as the US Strategic Petroleum Reserve depletes further, Great White North could come to the rescue of its southern neighbor. Check the latest oil price here.