President Barack Obama wants to slash U.S. oil imports by a third in the next decade, a commitment that would shrink Canada's only existing market for crude exports.
But Western Canadian oil producers can take some comfort in the fact that Mr. Obama has singled out his northern neighbour as a secure and reliable source of crude. By doing so, the President signalled that even as the United States tries to reduce its appetite for oil from the Middle East or Venezuela, it will rely on growing production from Canada's oil sands.
Canadian oil producers are confident they can increase exports to the United States, even if demand continues to drop, by taking a larger slice of a smaller pie. They expect declining production from Mexico and Venezuela, and a shift among Middle East producers to supply the growing Asian market.
In a speech at Georgetown University on Wednesday, Mr. Obama also promised to work with Congress to provide new incentives to increase natural gas consumption in both the transportation and power sectors. That is good news for North American gas producers who face depressed prices due to a glut of production from prolific new shale gas plays.
The President said his country remains far too dependent on oil, and on imported crude in particular. He warned global crude prices will likely remain high as demand from emerging economies outstrip new production.
As a result, he set a goal of reducing U.S. crude imports by a third - or more than 3.6 million barrels per day - from 2008 levels by 2025.
"I set this goal knowing that we're still going to have to import some oil," he said. "And when it comes to the oil we import from other nations, obviously we've got to look at neighbours like Canada and Mexico that are stable and steady and reliable sources."
While Mr. Obama said the United States needs to boost its own oil production to reduce the dependency on oil imports, he emphasized the need for greater fuel efficiency, as well as efforts to expand the use of biofuels, natural gas-powered vehicles and electric cars.
Financial markets reacted to Mr. Obama's endorsement of increased natural gas consumption by bidding up shares of companies in the sector. Canada's largest gas producer, Encana Corp., climbed 1 per cent to $33.69 in Toronto, while U.S.-based Chesapeake Energy Corp. rose 3 per cent to $34.33 (U.S.) on the New York Stock Exchange, where the natural gas index was up 1.23 per cent.
Mr. Obama faces challenges to his energy strategy from Republicans in Congress, who want an all-out effort to boost U.S. oil production but oppose new fuel-efficiency standards and would eliminate spending aimed at commercializing advanced biofuel technology and electric cars.
In fact, the United States has reduced its reliance on imported oil from 60 per cent of its fuel consumption in 2005 to just under half of total demand last year. That reduction was the result of lower overall oil demand, increased domestic crude production and the growing market share for ethanol and other biofuels.
Mr. Obama did not mention specific plans to boost Canadian exports to the United States, including TransCanada Corp.'s Keystone XL pipeline that would deliver oil sands crude to the U.S. Gulf Coast. The U.S. State Department is scheduled to release a new environmental impact statement next month, and then conclude the approvals process toward the end of this year.
Industry officials were encouraged that he acknowledged the role of Canada in meeting U.S. oil demand, and hope that indicates administration support for new pipelines like the Keystone XL.
"The President, by singling out Canada and a couple of others as countries that provide reliable supply, made pretty clear that Washington and the President view Canada as part of the solution rather than part of the problem," said Tom Huffaker, vice-president for policy and environment at the Canadian Association of Petroleum Producers in Calgary.
But environmental groups say TransCanada's project is not needed because there is plenty of spare capacity in the existing pipeline network. And they believe the President is determined to reduce reliance on oil, no matter what the source.
"He set the goal of cutting oil imports from all foreign sources by a third - that includes Canada," said Elizabeth Shope, an advocate at Natural Resources Defense Council, an environmental action group.
"Canada is our leading source of oil imports and while that's not likely to change any time soon, this speech shouldn't be misconstrued as an endorsement of any specific project or product."