In The News

Tariffs and the U.S.-Canada Energy Interdependence

Abstract

In the world’s developed countries, access to low-cost energy is a prime mover that enables productivity and economic expansion. This article considers the energy interdependencies of two major North American countries, namely the United States and Canada. Together these countries jointly produce more oil than anywhere else on Earth. They are complementary and interdependent regarding their primary supplies of energy. This article details the resources and trade relationships of these two allies regarding key sources of energy, particularly oil, natural gas, uranium and electricity. The infrastructure of these two counties is designed to support bilateral energy distribution and trading. Mapping the energy relationships between countries is a complex process. Canada exports almost all its oil and natural gas production to the U.S. Regions of the U.S., such as the upper Mid-western States and the Northeast, are highly dependent on Canadian crude oil, natural gas and electricity. The U.S. also exports energy to Canada albeit in lesser volumes. This article delves into the issue of tariffs applied on the importation and exportation of energy resources such as petroleum and electricity. The author concludes that the new tariffs being applied to energy resources by the U.S. on Canadian energy imports are counterproductive and create uncertainties for businesses and industries on both sides of the border.

Introduction

The U.S. and Canada are each other’s largest energy trading partners as measured by the value of energy commodities. They share the world’s longest common unfortified border which stretches 8,891 kilometers (5,525 miles) much of it along the 49th parallel. The population of the U.S. is 345.2 million. Canada’s population is 41.5 million, slightly more than the U.S. state of California which is 38.9 million. About 90% of the Canadian population lives within 160 km (100 miles) of the U.S. border. Though Canada is slightly larger geographically, both countries have just under 10 million km2 (3.9 million square miles) of land area. Each of these countries is blessed with vast natural resources that include energy. The U.S. is the world’s leading oil producer; Canada is the world’s 4th largest. In the U.S., Texas produces over 40% of the total volume of oil; the province of Alberta in Canada produces over 80% of the oil in Canada. Proven Canadian oil reserves are 171.0 billion barrels (bbl), far more than the U.S. total of 44.5 billion barrels which includes its Strategic Petroleum Reserve (SPR) that contains 0.4 billion barrels. Neither country is a member of the Organization of the Petroleum Exporting Countries (OPEC). Petroleum encompasses both crude oil and the refined petroleum products. Petroleum products result after crude oil is refined into fuels like gasoline, jet fuel, or propane.

Canada is a major and dependable energy supplier to the U.S., providing 58% of the volume of hydrocarbons imported by the U.S. in 2023. Hydrocarbons are an organic compound consisting entirely of hydrogen and carbon which serve as the foundation for crude oil, natural gas and coal. In 2021, Canada supplied 61% of U.S. crude oil imports, 98% of natural gas imports, 93% of electricity imports, and 28% of its uranium purchases [1*]. These are significant contributions to the energy needs of the U.S. [1].

The oil production of these countries is complementary. Canada’s oil exports to the U.S. are primarily heavy oil from oil sands [2*]. U.S. production is primarily light oil from the Permian Basin in Texas and

New Mexico [2]. Many U.S. refineries, primarily in the Midwest and Gulf Coast regions are configured to process heavy oil. Interestingly, the amount of oil that Canada exports to the U.S. is about equal to total U.S. oil exports. This partnership is crucial for both economies, creating jobs and ensuring energy security. A network of pipelines along with fleets of rail, marine, and freight vehicles, transport crude oil, natural gas, natural gas liquids (NGLs), and refined petroleum products (RPPs) between Canada and the U.S.

Read the full article here.

This article was originally published in the International Journal of Strategic Energy and Environmental Planning (IJSEEP Vol. 7, Iss. 6, 2025) by Stephen Roosa. *sources [1] and [2] can be found in the article document.

In The News

Tariffs and the U.S.-Canada Energy Interdependence

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