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America is banking on a lot more Canadian bitumen exports to supply it with oil in the future. Already the single largest source of imported oil, the Alberta oil sands' supply could soon form almost a third of America's total oil imports-apart from the fact that it's far from clear whether or not the rest of the Canadian economy could afford the consequences.



Whether Canadians like it or not, their dollar has become a petro-currency. Currently trading near parity against the greenback, it wasn't that long ago that the Canadian dollar was trading as low as 61 cents against its bigger cousin. But of course back then oil was trading at close to $20 (U.S.) per barrel, and at that price Alberta's tar sands were a marginal energy resource.



At $80 per barrel, the oil industry is pumping one and a half million barrels per day, and the once-marginal Canadian resource has suddenly become second only to Saudi Arabia in proven reserves. At triple-digit prices, the oil sands will produce three to four million barrels per day. In turn, the tandem of soaring oil prices and soaring oil production will propel the Canadian dollar to heights it's never seen.



A soaring currency may bring long-lost NHL franchises back to Winnipeg, Quebec City and maybe even Hamilton from Dixie and the desert, but that's about all the Canadian economy can expect from its major trading partner. Other than Canadian bitumen exports, American consumers won't be buying much from their northern neighbor.



That won't pose much of a problem for Alberta, whose exports are almost all energy-based. Unfortunately the same can't be said for the rest of the Canadian economy: shipments to the U.S. market account for three quarters of the country's total exports. Or at least they do-for now.



How long can Ontario remain the single largest producer of motor vehicles in North America if the Canadian dollar is trading at a double-digit premium to the greenback? For that matter, what segments of the Canadian manufacturing sector are likely to survive that exchange rate in the first place?



Will the morphing of the Canadian dollar into a petro-currency be Alberta's revenge for the still-loathed National Energy Program? Back in the early 1980's, Ottawa transferred billions of dollars of petro-wealth from Alberta to subsidize manufacturing in Ontario and Quebec by forcing domestic oil prices below world levels. Are the tables about to turn?



Will the price for more mega-projects in the oil sands spell the end of the manufacturing sector in Ontario and Quebec? If so, what will the political feedback be from a region of the country that still controls the majority of seats in Canada's parliament?



As more and more Canadian auto and steel plants are closed in the wake of a soaring currency, America may have to look elsewhere for its future oil supply.

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