By Mark Milke
and Lennie Kaplan
Canadian Energy Centre
Imagine you’re in Germany and wonder if it’s a good idea to rely so heavily on natural gas imports from Russia, where the governing regime is accused by German politicians of killing journalists and the attempted murder of Russian opposition leader Alexei Navalny.
In response to the attack on Navalny, the head of Germany’s parliamentary committee on foreign affairs, Norbert Röttgen, urged the cancellation of the Russian natural gas pipeline, Nord Stream 2.
Ultimately, the official German government position is that the pipeline should go ahead, with the hope that the new U.S. administration of President Joe Biden and Congress will drop their opposition.
Non-democratic and illiberal governments have never had a problem using energy exports as a weapon in pursuit of their regime’s power. Examples abound, ranging from the 1973 oil embargo to Russia’s natural gas cutoff to Ukraine in mid-winter 2009 to Saudi Arabia’s regular manipulation of oil production levels and thus prices.
In contrast, liberal democratic countries have less ability to weaponize oil and natural gas. That’s in part because most energy companies in most democracies are in the private sector. They’re not state-owned firms subject to political diktats. Politicians can’t and shouldn’t instruct such energy companies on where their products should end up.
What governments in democracies can do is obstruct other nation’s energy firms – something two American administrations (under Barack Obama and now Biden) have done to Canadian oil companies, in particular on the Keystone XL pipeline.
That’s why it may be helpful for Americans to know how much foreign oil they’ve imported over the past several decades, and from which countries.
Between 1993 and 2020, Americans bought nearly $4.2 trillion (all figures in American dollars unless otherwise noted) of foreign oil, with $1.8 trillion or 43 per cent of that shipped by countries considered not free, such as Saudi Arabia and others. (In our report on U.S. foreign oil imports, we use freedom categories from the U.S. think-tank Freedom House, which ranks countries as free, not free or partly free.)
Just under $1.2 trillion or 28.4 per cent of oil came from partly free countries, with just over $1.2 trillion or 28.6 per cent having originated in free countries.
Canada is an example of a free country that has exported significant amounts of crude oil to the United States, $956 billion worth between 1993 and 2020. That made Canada the top supplier of foreign crude oil to the United States.
Of the top 10 suppliers of foreign crude oil to the United States in those years, Canada was the only free country. Five countries were ranked not free (Saudi Arabia, Venezuela, Iraq, Angola and Algeria) with four ranked as partly free (Mexico, Nigeria, Colombia and Kuwait).
FROM THE ARCHIVES: Why America shouldn’t cut off Canada’s energy supplies by Mark Milke and Lennie Kaplan
Separate out U.S. foreign oil imports for 2020 and the ratio of free nations improves dramatically. As of last year, over 61 per cent of foreign oil imports came from free countries – $47.2 billion, mostly imports from Canada, with minor amounts from others.
Imports from not free and partly free countries constituted just under 39 per cent of all U.S. foreign oil imports and were worth nearly $30 billion.
However, the increased share of U.S. foreign oil imports doesn’t mean the various attempts to obstruct Canadian crude oil have been unsuccessful.
Whether the Obama administration’s blocking of Keystone XL or the self-harm in Canada where pipelines Northern Gateway and Energy East were killed by a combination of politics and activism (tanker bans on the northern coast of B.C. for the former, and federal regulation and anti-oil activism in Quebec on the latter), such killing of alternative markets to the Americans has been costly.
Fraser Institute estimated that from 2013 to 2017, after accounting for quality differences and transportation costs, the depressed price for Canadian heavy crude oil resulted in C$20.7 billion in foregone revenues for the Canadian energy industry. In 2020, IHS Markit estimated the loss of income for Canadian producers at US$14 billion (between 2015 and 2019 inclusive). IHS Markit called that number “conservative.”
When American politicians and others block Canadian oil, such actions are costly to Canada – precisely the goal of some such actors. And sure, American importers do have other options. But none of them are as friendly and free as Canada.
Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report U.S. Foreign Oil Imports: $1.8 Trillion from Tyrannies and Autocracies Since 1993.