North America’s real energy superpower. (Hint: it’s not Canada)

Jason Kirby on an energy revolution and the makings of an oil glut

by Jason Kirby

Yesterday the White House took to Twitter to boast that in 2014, for the first time in two decades, America will import less oil than it produces. Aside from the dubious notion that the Obama administration can claim responsibility for the development, the accompanying chart was fascinating. We’re witnessing a monumental shift in the balance of energy power in the world, one that’s likely to have a profound impact on the price of oil and kneecap the fortunes and aspirations of OPEC member countries. As Daniel Yergin, vice-chairman of IHS said last week, “The United States really is experiencing an energy revolution … Around the world—from China to the Middle East to Europe to Mexico—this surge from the United States has become a top focus of energy discussion and also a new factor in geopolitics.”

And Canada, don’t forget. In 2006 Prime Minister Stephen Harper stood before a crowd of world leaders and declared this country to be an “emerging energy superpower” thanks to rising oil sands production. At the time it looked like Canada was on track to surpass the U.S. in oil production. Not anymore.

 

Energy superpowers

To make this chart I took all the available data from the U.S. Energy Information Administration on Canadian oil production going back to 1980. Since 2006 Canada has indeed boosted its output. But whatever gains we’ve seen here are dwarfed by America’s energy revolution. New discoveries and extraction technologies like hydraulic fracturing have unlocked U.S. oil resources long seen as unviable and out of reach.

What this means for Canada is unclear. Oil sands output continues to grow at its own impressive pace. But with oil production coming back online in LibyaMexico promising reforms to unlock its reserves, and Iran trying to shed its pariah status to boost oil supplies, we have the makings of a good old fashioned oil glut.

It happened in the natural gas sector after a similar technological revolution unleashed America’s shale gas reserves. Gas prices plunged, blowing a hole in Alberta provincial finances—after generating $8.4 billion for the province in 2006, natural gas royalties added just $950 million to Alberta’s bottom line last year.

With America emerging as an superpower in the oil sector too, Canada’s own resource dreams risk being dashed.




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North America’s real energy superpower. (Hint: it’s not Canada)

  1. And an oil glut means lower prices. Alberta can’t win for losing.

    • Its why the CAD is dropping, as we are from a currency and high cost production, and Ottawa has decided to do the inflationary money print….

      But that also means we will pay more devlaued CAD dollars for gasoline and NG. Ottawa loves this as it even means more CAD GST.

      Its why I invest more offshore these days, more stable currencies and better earnings. Canadian oil in terms of CAD is up, in terms of USD its about the same and to the Chinese its cheaper. All due to mismanaged CAD currency. Ottawa is deliberately devaluing incomes and pensions.

  2. Can’t both canada and the us be energy superpowers?

    • Nope. Too much corruption, currencies losing value, and oil is everywhere. Just a mater of costs to get it to your gas tank.

      More and more countries are drilling and coming on line means high cost Canada isn’t going to be as good in the future as many people think.

      • Do you really think that Canada comes close to the corruption that exists in all OPEC countries, or China? If you ask me, that’s absurd.

    • Not unless there’s a way to make the cost per barrel similar to that of the current US oil play; even when you take into consideration the two products have different customers or uses – not when you factor in new energy producers flooding the market. I imagine we would need to see renewed demand and renewed price growth in order for the oil sands to feel secure.
      What should really scare us is what happens to the market once China and Russia follow the US lead on fracking…although I guess the same goes for Canada; but not necessarily Fort Mac

      • Oil sands production continues to grow alongside increased US production because oilsands remain highly profitable and because Canadian oil helps displace imports from less politically secure nations.

        • Not if the price per barrel slips below a certain threshold. You seem to have no concept of how even basic pricing and costs work.

          • the frac operations aren’t cheap either so a crash below the profitable point for existing installations is unlikely. new operations will probably halt though.

          • Fair enough. If fracking isn’t much cheaper that might well be good news for AB. However there still remains the question of a saturated market if others start fracking in a big way

    • =”Can’t both canada and the us be energy superpowers?”=

      Absolutely! And both are becoming energy superpowers.

  3. I have been onto this for over a year and since have reduced holdings in Canadian oil, preferring offshore, Asia, South America, Mexico and USA. My motive is simple, better returns and more stable currencies, less government tax greed, so when the CAD fails 6 cents I was worth more in terms of CAD. Some are even ont he TSX but really operate the majority of operations in USA and Mexico.

    What it means for Canada is currency based inflation and a lower value dollar and mounting pension shortfalls be it CPP, public or private pooled plans.

    Buy the end of 2014, the CAD will be woth less than 5 Yuan, less than 85 cents USD, as CAD is a rapidly depreciating currency that media is ignoring.

    http://www.xe.com/currencycharts/?from=CAD&to=CNY&view=2Y

    http://www.xe.com/currencycharts/?from=CAD&to=USD&view=2Y

    Yep, Ottawa funds excessive government consumption on devalued money, inflation as a compounding tax.

    For the long term, Mexico is the winner, then USA and then Canada. Part of Canada’s problem is we are too expensive and bureaucratic to get anything done. Decisions like pacific coast access should take weeks not decades. Canada is too inefficient.

    • Canada takes the legitimate concerns of its citizens seriously. We don’t want oil in BC.

  4. Lots of oil in this world.

    Myth: There is a oil shortage.
    Truth: What does it cost to get it?

    And Canada is too costly so I expect oil sands to stagnate until our debt-tax inflated economy collapses a bit.

    I only invest in Canadian companies that can pass on the inflation from currency devaluation and pay daddy while we wait out the Canadian decline. But as of earlier in December, I am no invested more offshore than in Canadian.

    Hey, if Ottawa isn’t defending the value of CAD money, why have it? Money is like a depreciating stock, holding it when it depreciates faster is NOT a good idea.

    • Ottawa is gently devaluing the Canadian dollar to assist Ontario and their manufacturing base regain their competitive footing. We can do fine with a 90 cent dollar.

  5. “…one that’s likely to have a profound impact on the price of oil and kneecap the fortunes and aspirations of OPEC member countries”

    Thank goodness you wrote that last sentence. There’s just no way I can see OPEC being more thoroughly knee capped then our own oil sands. And of course it does nothing to make the claim of “ethical oil” anything other then the ludicrous hyperbole it already was/is.

    • Of course Canadian oil is ‘ethical oil’. It always has been. The oil companies operate to strict environmental standards, pay enormous wages, enormous taxes and enormous royalties all in a stable democratic country.

      Ethical oil? You bet our oil is. The less we bring in from the Middle East the better.

      • The oil companies operate to strict environmental standards,

        Canada has one of the worst environmental records in the OECD group. It’s record in dealing with its aboriginals is even worse. Don’t you realize how empty and shallow the phrase “ethical oil” is? You might as well be defending slavery,

        • you dont actually get what he meant~~

        • Are you confusing OECD with OPEC?

          You know that there are actual slaves in OPEC countries, that are funded by oil revenues, right? It would seem that you’re the one who’s actually defending slavery.

          • So then Rick Omen retorts (thinking himself as terribly clever)

            Are you confusing OECD with OPEC?

            No. And I don’t feed trolls. You know that, troll

          • I missed seeing you out on the picket line back in the day. I guess your ethics are entirely situational and relative …at least when it comes to slavery?

        • Harper defines ethical as, being in accordance with the rules or standards of the Petro Industrial Complex.
          And the Petro Industrial Complex, like Big Pharma embrace the motto, maximize profits at all cost.

          • Oil and Gas amount to less than 12% of the Canadian economy. Hardly a Petro Industrial Complex. Youre a joke.

  6. Yes, Canada remains an energy superpower. What has happened is increasing US production has displaced imports from Mexico, Venezuela and the Middle East, but not from Canada, which has seen, and continues to see, steady increases.

    The US wants to continue buying Canadian oil because we are a friendly neighbour without any of the foreign policy/political hassles of dealing with less stable regimes of the world.

    This situation is truly win/win for Canada and the US economically and politically.

    • Evidence please! Your point is ridiculous as long as demand outstrips supply. There’s always another willing buyer…in that sense ethical oil is a silly gimmicky concept that only the politically gullible would swallow.
      Your last point is absurd, it completely overlooks the basic rules of the marketplace.

    • I see our friends from CAPP have joined us.

      • I had a feeling I recognized that handle.

  7. Whatever geopolitical clout comes from being a so-called energy superpower seems to be going to waste in the hands of our current PMO. If Harper has some sort of positive-sum, multilateral foreign policy strategy, he has yet to reveal it to us.

    • Does anybody else get the sense that there is a growing lack of leadership in Canada? Certainly very little in the way of vision.

  8. Through their climate policies (or lack thereof), Canada has gotten itself “landlocked” in bitumen and in doing so given the Americans ample time to develop their own oil sources. The only think Canada (or Alberta more precisely) seems “super” at is masochism.

  9. Even Canada’s oil production is misleading. Some of those figures include liquids used to dilute bitumen. These liquids are imported from the US and re-exported again. In fact, Canada’s NET oil exports have stopped going up because our imports, mostly from the US are going up faster than our production.

  10. The beauty about America is it is a Superpower in almost all fields. It is the powerhouse in important fields such as Software, Hardware, Semiconductors, Cloud Computing, Operating Systems, Enterprise software technology, Avionics, Space Science, Super Computers and high Medical research. It has been and always be Agricultural and resource super power. No other nation has such diverse dominance.

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