Open markets and more pipelines are necessary to make North America the world’s new Saudi Arabia of energy supply, panelists said during a Manhattan Institute discussion Monday.
Speaking during the panel discussion, John Prato, Consul General of Canada in New York, encouraged the United States to capitalize on rapidly growing oil production in Canada — even as the U.S. expands its own oilfield activity — to maintain “the largest trading relationship in the world.”
The U.S.-Canadian energy trade is worth more than $100 billion dollars annually, according to the Energy Information Administration.
Still, some aspects of the relationship have weakened. Canadian exports of natural gas to the United States have fallen amid the U.S. shale gas boom. And U.S. coal exports to Canada have abated as the northern neighbor shifts to cleaner forms of power generation.
Meanwhile, imports of Canadian crude to the United States hit a record high during the first eight months of 2012, reaching 2.5 million barrels per day. Canada has remained the nation’s top oil supplier – providing more than 25 percent of all crude imports – even as the United States has cut the total number of barrels it buys, according to the EIA. Saudi Arabia is a distant second and Mexico comes in third.
“You’re producing more and your imports are going down,” Prato said of the U.S. oil market. “But Canada is taking a bigger piece of what you import and we have the potential to supply even more.”
Canada’s oil production is projected to double to 6 million barrels per day by 2030.
“Next door you have a neighbor that is oil rich and the question for America is how much Canadian oil do you want?” Prato said.
He added that the Keystone XL pipeline is key to easing not only trade between the countries, but movement of domestic crude through the Unite States.
Much of the crude production from the Bakken Shale in North Dakota is being moved by rail because of limited pipeline capacity. Pipelines are viewed as a more efficient, lower cost and safer form of moving fuel.
“Keystone XL is not only important to Canada, it’s important to the U.S.,” he said, noting that Bakken crude would be moved along the pipeline as well as Canadian oil.
Luis de la Calle, managing director of consulting firm De la Calle, Madrazo & Mancera, said he hopes Mexico will capitalize on the strong trading relationship by opening its energy production to the private sector and allowing the market to set prices. Currently, Mexican state-owned oil company Pemex controls the nation’s hydrocarbons.
“We need Pemex to be competing against other companies,” de la Calle said. “It’s possible to devise a mechanism where you have 100 percent monopoly on ownership of fields and 100 percent competition on everything else.”
Mark Mills, senior fellow at Manhattan Institute, said North America stands to surpass the Middle East and Russia as the world’s primary source for that energy. As U.S. energy consumption moderates, expanding middle classes are rapidly expanding demand for energy in developing countries, he noted during the panel discussion.
“The world has shifted. It’s turned upside down,” he said. “The world is going to consume energy. It has to buy from somebody. It should be us.”