Energy
CANADA – U.S TRADE – A Deeper Dive on the Tos and Fros
From EnergyNow.ca
The biggest lesson from all this is that Canada must find a way to diversify its trade, especially when it comes to energy. We need to build more pipelines, we need to diversify our customer base
I cannot help myself. At my heart, I am a self professed nerd when it comes to data. With all of the headlines in Canada regarding the potential of 25% tariffs being levied on Canadian exports starting on February 1st, I wanted to understand for myself what the data actually looks like. Note that I only looked at 2023 as the information was readily available, it is reasonably clean (i.e. no significant COVID hangover) and the 2024 data won’t likely be available for a while.
Canada and the United States are significant trade partners. In 2023 Canada exported US$438 billion to the United States while the United States exported US$353 billion to Canada, resulting in Canada having a trade surplus with the United States of US$85 Billion and thus the (uninformed) consternation when it comes to current talk south of the border.
United Nations COMTRADE database
Looking at the top exports from Canada, I drew an arbitrary line at the top 20 exports. This was not to say that businesses that do less than this are any less important, rather I just wanted to make a chart that was actually readable. As one would expect, energy and auto lead the way, accounting for 43% of all of our exports to the United States in 2023.
United Nations COMTRADE database
However, as with all countries, we also import a tremendous amount as well. Why? Because in simplified terms it is good to focus on that which you do best, and have in abundance, and leave other aspects to other countries that are good at other things. As such, automotive as well as machinery, nuclear reactors and boilers account for 31% of the trade flow going north into Canada in 2023.
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United Nations COMTRADE database
When dealing with the border, it is important to remember that goods flow both ways, and the curious part as it pertains to oil is that despite Canada being awash in black gold, eastern Canadian refineries cannot access crude from the west, so Canada needs to export it to the US and re-import it to Canada. Weird. If only we had a pipeline that could do this…
I think it is also useful to look at the net balances, by category, to better understand the tos and fros of trade. Similar to previous charts, I made an arbitrary cut off line, this time at net exports exceeding US$1 billion in 2023. No real surprises here as energy dominates the landscape as Canada is a significant producer of oil and gas, and produces far more than it can consume internally and accounts for 76% of Canadian net exports to the United States.
United Nations COMTRADE database
In terms of net imports, the picture is more balanced, with the top two categories being machinery, nuclear, boilers and electrical, electronic equipment accounting for a significant portion of Canadian net imports (37%) from the United States.
United Nations COMTRADE database
Moreover, if you look at the breakdown of many of the components, and yes I am generalizing a bit, you will see that a lot of what we export are raw materials / base inputs, while what we import are value added finished products. As I have said many times, Canada is the proverbial resource bread basket that the rest of the world would crave to call its own.
If you exclude energy (mineral fuels, oils, distillation products) from the above analysis, you actually return to a more balanced trade picture between the two countries, and Canada actually is a small ($15 billion) net importer from the United States. Why do I think that is a fair way to look at things? The United States is a significant consumer of Canadian energy, and heavy oil in particular is something that Canada produces a lot of and is consumed by the complex refineries located in Minnesota, Indiana and in the U.S. Gulf Coast. If you want to learn more about this, I strongly encourage you to follow Rory Johnston as he does some brilliant deep dive analysis on this sort of topic and others.
At the end of the day, if the Trump administration really is about “fairness” in trade, we need calmer minds to prevail on this topic, as the data shows that the trade relationship is fair, and Canada is a valued (and economical) trade partner. I have my own suspicions that this issue extends beyond trade deficits and even beyond the issues he has also cited of illegal immigration and flows of fentanyl, and could even be as simple as “I am doing this, because I can, and I will do whatever I can to benefit my country.” Is this rational and fair? No.
The biggest lesson from all this is that Canada must find a way to diversify its trade, especially when it comes to energy. Canada’s need to build more pipelines, needs to diversify it’s customer base, and needs to start acting like a country that is looking out everyone, not just it’s own self interest.
Thanks for reading William’s Substack!
Subscribe for free to receive new posts and support my work.
From the Canadian Energy Centre
By Will Gibson
Alberta oil sands projects poised to grow on lower costs, strong reserves
As geopolitical uncertainty ripples through global energy markets, a new report says Alberta’s oil sands sector is positioned to grow thanks to its lower costs.
Enverus Intelligence Research’s annual Oil Sands Play Fundamentals forecasts producers will boost output by 400,000 barrels per day (bbls/d) by the end of this decade through expansions of current operations.
“Existing oil sands projects deliver some of the lowest-breakeven oil in North America at WTI prices lower than $50 U.S. dollars,” said Trevor Rix, a director with the Calgary-based research firm, a subsidiary of Enverus which is headquartered in Texas with operations in Europe and Asia.
Alberta’s oil sands currently produce about 3.4 million bbls/d. Individual companies have disclosed combined proven reserves of about 30 billion barrels, or more than 20 years of current production.
A recent sector-wide reserves analysis by McDaniel & Associates found the oil sands holds about 167 billion barrels of reserves, compared to about 20 billion barrels in Texas.
While trade tensions and sustained oil price declines may marginally slow oil sands growth in the short term, most projects have already had significant capital invested and can withstand some volatility.
Cenovus Energy’s Christina Lake oil sands project. Photo courtesy Cenovus Energy
“While it takes a large amount of out-of-pocket capital to start an oil sands operation, they are very cost effective after that initial investment,” said veteran S&P Global analyst Kevin Birn.
“Optimization,” where companies tweak existing operations for more efficient output, has dominated oil sands growth for the past eight years, he said. These efforts have also resulted in lower cost structures.
“That’s largely shielded the oil sands from some of the inflationary costs we’ve seen in other upstream production,” Birn said.
Added pipeline capacity through expansion of the Trans Mountain system and Enbridge’s Mainline have added an incentive to expand production, Rix said.
The increased production will also spur growth in regions of western Canada, including the Montney and Duvernay, which Enverus analysts previously highlighted as increasingly crucial to meet rising worldwide energy demand.
“Increased oil sands production will see demand increase for condensate, which is used as diluent to ship bitumen by pipeline, which has positive implications for growth in drilling in liquids-rich regions such as the Montney and Duvernay,” Rix said.
“If Ottawa had it’s way Albertans would be left to freeze in the dark”
The ineffective federal net-zero electricity regulations will not reduce emissions or benefit Albertans but will increase costs and lead to supply shortages.
The risk of power outages during a hot summer or the depths of harsh winter cold snaps, are not unrealistic outcomes if these regulations are implemented. According to the Alberta Electric System Operator’s analysis, the regulations in question would make Alberta’s electricity system more than 100 times less reliable than the province’s supply adequacy standard. Albertans expect their electricity to remain affordable and reliable, but implementation of these regulations could increase costs by a staggering 35 per cent.
Canada’s constitution is clear. Provinces have exclusive jurisdiction over the development, conservation and management of sites and facilities in the province for the generation and production of electrical energy. That is why Alberta’s government is referring the constitutionality of the federal government’s recent net-zero electricity regulations to the Court of Appeal of Alberta.
“The federal government refused to work collaboratively or listen to Canadians while developing these regulations. The results are ineffective, unachievable and irresponsible, and place Albertans’ livelihoods – and more importantly, lives – at significant risk. Our government will not accept unconstitutional net-zero regulations that leave Albertans vulnerable to blackouts in the middle of summer and winter when they need electricity the most.”
“The introduction of the Clean Electricity Regulations in Alberta by the federal government is another example of dangerous federal overreach. These regulations will create unpredictable power outages in the months when Albertans need reliable energy the most. They will also cause power prices to soar in Alberta, which will hit our vulnerable the hardest.”
Finalized in December 2024, the federal electricity regulations impose strict carbon limits on fossil fuel power, in an attempt to force a net-zero grid, an unachievable target given current technology and infrastructure. The reliance on unproven technologies makes it almost impossible to operate natural gas plants without costly upgrades, threatening investment, grid reliability, and Alberta’s energy security.
“Ottawa’s electricity regulations will leave Albertans in the dark. They aren’t about reducing emissions – they are unconstitutional, ideological activist policies based on standards that can’t be met and technology that doesn’t exist. It will drive away investment and punish businesses, provinces and families for using natural gas for reliable, dispatchable power. We will not put families at risk from safety and affordability impacts – rationing power during the coldest days of the year – and we will continue to stand up for Albertans.”
“Albertans depend on electricity to provide for their families, power their businesses and pursue their dreams. The federal government’s Clean Electricity Regulations threaten both the affordability and reliability of our power grid, and we will not stand by as these regulations put the well-being of Albertans at risk.”
Related information
- Conference Board of Canada socio-economic Impacts of Canada’s 2030 Emissions Reduction Plan – (April 2025)
- Alberta Electric System Operator’s position on Canadian Energy Regulations
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