On the 413th day of his presidency, Joe Biden imposed new sanctions on Russia, cutting off almost 700,000 barrels a day of oil the United States imports from that country – aiming an economic missile at the “main artery” of Vladimir Putin’s economy.
But on the very first day of Mr. Biden’s presidency, way back in January of 2021, he imposed an economic punishment on his closest ally, when he roadblocked a potential 830,000 barrels a day of oil from Canada, by cancelling the permit for the then-under-construction Keystone XL pipeline.
That same month, the U.S. imported 649,000 barrels a day of oil and petroleum products from Russia. It was only a small part of U.S. imports – Canada is the leading supplier, providing more than half – but it is glaring that additional future exports from Canada were made more difficult, even as Russian oil flowed freely, right up to this week.
It was absurd then. It is much more so now. The U.S. was happy enough to keep on buying Russian oil until an invasion of Ukraine forced a turning off of the tap. Now, the U.S. is courting Saudi Arabia, Iran and Venezuela to fill the gap.
Hey, America, look up north.
In the hypothetical world of what might have been, Keystone XL oil could have been flowing today. The pipeline was first spiked by Barack Obama back in 2015.
More than six years later, Europe and the U.S. have suddenly realized why they need to kick their addiction to Russian fuel. As the world’s fifth-largest producer of gas, fourth-largest producer of oil, and repository of the third-largest oil reserves, Canada can help. Or at least it can help, if given years to ramp up.
Had Keystone XL opened several years ago, oil companies might have increased production to match the export capacity. But Canada’s industry has no gushing spigot that it can instantly turn on.
Europe’s big oil names, Shell and BP, abandoned the Alberta oil sands several years ago. Some of that was about oil prices – the oil sands are a relatively high-cost source. But the oil sands were also deemed to be “dirty.” Strangely, Western oil companies and governments until now had no such qualms about the cleanliness of Russian oil.
In the global oil and gas business, the lowest price has always won, even if it was Mr. Putin or a Saudi king at the sales register. Canada was not the low hanging fruit. There’s a reason why Europe chose to be the voracious buyers of Russia’s vast gas supplies. It was cheap – before the costs of war obliterated that equation.
For Europe, Russia’s invasion has exposed previously ignored energy risks. Europe’s dependence on Russian oil and gas, which in the absence of regime change in Moscow it must lessen, is an opportunity for Canada. This country can still be committed to its climate goals. The oil sands are working toward net zero, and rapidly speeding up that work would be a smart investment. But oil demand will be strong for years and Canada now has a competitive advantage. In addition, a big new export valve, the Trans Mountain oil pipeline expansion, is scheduled to open in 2023.
Natural gas is tougher. Many companies proposed projects a decade ago, but today, Shell is the only one building a large export plant on the Pacific. On the East Coast, the Spanish company Repsol in 2016 considered a plan to convert a gas import terminal in Saint John into an export plant. But it ultimately concluded that the economics of a shipping gas across the Atlantic simply didn’t add up. It is now taking another look.
To end its Russian addiction, Europe needs a lot more oil and gas from elsewhere, now. But in the long run, the European plan is to shift to new energy sources. For example, Germany aims to get off fossil fuels for power generation by 2035. Germany’s Finance Minister dubbed renewable sources, led by wind and solar, as “the energy of freedom.”
Amid all the challenges and complications, there has to be a sensible middle ground for Canada – one where we neither junk our environmental commitments nor shoot ourselves in the foot by forcing investors to take their money elsewhere.
Russia’s attack on Ukraine has changed the global energy market. Canadian oil and gas has a big role to play in this new world. Perhaps the Trudeau government could start by reminding Mr. Biden of that.
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