Forget Tariffs, Canada & the U.S. Should Work Together to Increase Energy Trade

Forget Tariffs, Canada & the U.S. Should Work Together to Increase Energy Trade

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Forget Tariffs, Canada & the U.S. Should Work Together to Increase Energy Trade

Canada and the United States share one of the world's most comprehensive and successful bilateral trade relationships, with energy as a cornerstone. As geopolitical tensions rise and global energy security becomes increasingly uncertain, strengthening this partnership isn't just beneficial – it's crucial for North American prosperity and resource security at large.

The numbers tell a compelling story. In 2023 alone, Canada-U.S. energy trade reached an impressive US$153.7 billion (CA$220.6 billion), with Canada purchasing US$30 billion (CA$43.1 billion) in American energy products [1]. This isn't just about dollars and cents – it's about jobs, security, and mutual economic growth.

Canada has proven itself to be America's most reliable energy partner. Consider this: about 60% of U.S. crude oil imports come from Canada – more than 4 million barrels per day – accounting for one-quarter of U.S. refineries' daily intake [1]. The relationship is even more pronounced in the natural gas sector, with Canada providing 99% of U.S. natural gas imports every year [1].

But the energy partnership extends far beyond oil and natural gas. As North America advances renewable energy deployment, Canada's role becomes even more vital. As the world's second-largest hydro producer and sixth-largest for nuclear power, Canada accounts for 85% of U.S. electricity imports – much of which comes from these sources of electricity generation. Furthermore, Canada’s high-grade uranium mines help to fuel U.S. nuclear reactors that power approximately one in every 21 American homes [1].

Looking ahead, the critical minerals necessary for technologies such as electric vehicles and defence applications present another crucial opportunity for collaboration. Canada currently produces 19 of the 50 critical minerals on the U.S. Geological Survey list [1], with significant potential to develop more of its vast reserves. This positions both countries to lead in advanced technologies that require these essential materials while reducing U.S. dependence on less reliable trading partners.

However, recent discussions about potential tariffs from the incoming U.S. administration will likely damper this mutually beneficial relationship. Such measures could increase energy prices for Canadian and American consumers, eliminate countless jobs on both sides of the border, and compromise our shared energy security altogether.

Canada's energy relationship with the United States goes far beyond typical trade – our infrastructure is deeply intertwined.

Take U.S refineries, for example - particularly in the Midwest and Gulf Coast, but also in California - specifically configured to process heavy oil, representing billions in long-term infrastructure investments that cannot be easily modified to use other feedstock. This specialized infrastructure, combined with the sheer volume of energy trade – Canada providing 20% of U.S. oil demand, 25% of refinery oil feedstock, and 99% of natural gas imports [1] – makes Canadian energy exports irreplaceable for the U.S.

The interconnected power grid between Canada and the United States is another example of the depth of our energy partnership. Canadian electricity exports from Quebec, Ontario, Manitoba, and British Columbia help keep the lights on in numerous U.S. states [1].

Using the groundbreaking Champlain Hudson Power Express (CHPE) project as an example, a power transmission line connecting Quebec's hydroelectricity directly to New York City, demonstrates the continuing evolution of this critically important relationship. Once operational, this 339-mile (546-kilometre) project will deliver 1,250 megawatts (MW) of Canadian hydroelectricity to U.S. consumers [3] - enough to power over one million New York homes. This type of infrastructure investment strengthens our bilateral energy security and underscores the importance of continuing to develop the U.S.-Canada energy partnership.

Today, Canada exports enough electricity to power more than 5.6 million U.S. homes [4], a figure that is only growing with the addition of new projects like CHPE.

Looking at the numbers, one thing becomes clear: no other nation can match Canada's capacity, reliability, and integrated infrastructure network when it comes to supplying the U.S. with energy.

Canada’s energy sector - whether it be oil, natural gas, uranium, electricity, or renewables - supports millions of jobs in the U.S. [1]. Instead of erecting barriers, both nations should focus on strengthening their energy partnership. This means streamlining cross-border infrastructure projects like pipelines, harmonizing regulations wherever possible, and developing joint strategies for critical mineral supply chains.

The benefits of increased cooperation are clear: enhanced energy security, lower energy costs for consumers, the creation of more well-paying jobs, and a stronger position in the global energy market with the potential to reduce reliance on less transparent, less regulated, and less democratic suppliers abroad.

As the world grapples with energy security challenges, the U.S. and Canada have an opportunity to demonstrate how neighbouring countries can work together to create a stronger, more prosperous future.

The path forward is clear. Rather than hampering energy trade, both nations should work to expand it, building on a partnership that has served both countries well for generations. The future of North American energy security and economic prosperity may very well depend on it.

SOURCES

1 - https://connect2canada.com/canada-u-s-relationship/trade-and-investment/

2 - https://www.reuters.com/markets/commodities/china-bans-exports-gallium-germanium-antimony-us-2024-12-03/

3 - https://www.hitachienergy.com/ca/en/news-and-events/customer-success-stories/champlain-hudson-power-express-chpe

4 - https://connect2canada.com/wp-content/uploads/2020/05/20-Facts-about-energy.pdf