Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

A worker opens a gauge near crude oil tanks on Bunyu island, Indonesia's East Kalimantan province in this February 8, 2011 file photograph.


The United States is on track to become the world's biggest oil producer by the end of the decade, a stunning turn of fortune that threatens to stifle the growth prospects of Canada's oil exporters.

America's rising oil output is "nothing short of spectacular" and will exceed that of Saudi Arabia or Russia by 2020, the International Energy Agency said in a report that starkly illustrates why the Canadian industry - and the federal and Alberta governments - are determined to build pipelines that would serve Asian markets.

The U.S. currently imports about 10 million barrels per day of crude, and Canada accounts for nearly 30 per cent of that total. But oil companies are using new technologies to extract vast amounts of crude from the U.S. Midwest. The IEA forecasts the Americans will be producing 11.1 million barrels per day by 2020, up from 8.1 million last year.

Story continues below advertisement

At the same time, the IEA expects American demand for petroleum products to decline significantly. The double-edged forecast has the potential to cause upheaval in the oil patch in Western Canada, which drew $40-billion in investment last year and is a major driver of economic growth and jobs in the country.

Nearly all Canadian oil is exported to the U.S., and Natural Resources Minister Joe Oliver said the IEA report "dramatically emphasizes" the need for Canada to find new markets.

"They're simply not going to need to buy as much from us and so we can't rely as much on the U.S. market," Mr. Oliver said in telephone interview.

"If we don't find new markets, the resources will be left in the ground and the legacy will be lost. So it is crucial."

Todd Hirsch, a senior economist at ATB Financial in Alberta, sees the rise of U.S. output as among the chief threats to the Canadian oil business - partly because it may push down oil prices to the point where many projects no longer make sense economically.

"It is distinctly one of the biggest risks - supply coming out of the U.S. pushing price down to the point where they don't need Canadian oil, or the price is too low" for Alberta producers to press ahead. With oil sands projects, "almost none of them work at $50 [U.S. per barrel] oil. And if all that Bakken oil does come on stream, that's the scenario we could be looking at."

The Bakken is a prolific oil formation underneath North Dakota and Saskatchewan.

Story continues below advertisement

Still, the Paris-based IEA remains bullish on Canada's oil sands. But it offers two critical caveats: growth in the oil sands depends on the industry's ability to address the environment impacts as well as its success diversifying sales to Asia.

It expects Canadian oil sands production to nearly double between 2011 and 2025 to 3.4 million barrels per day, and grow to 4.3 million by 2035. While that growth rate is substantial, it is also well below industry forecasts. The Canadian Association of Petroleum Producers sees oil sands production growing to 5 million barrels per day by 2030.

Whether the forecast comes from the IEA or the CAPP, it's clear Canada can no longer rely on the United States as its sole export market for oil or natural gas, given the boom in production from previously uneconomic reserves brought about by new drilling methods and the controversial practice of hydraulic fracturing, which uses chemically laced water under high pressure to extract oil and gas.

While industry critics would welcome slower growth in the oil sands, Bank of Nova Scotia economist Patricia Mohr said the Canadian economy is increasingly dependent on the resource development to sustain economic activity among Alberta producers and their suppliers across the country.

"If we don't expand our export capability to growing markets that are growing in Asia-Pacific area, we're going to stunt the development of our oil industry in Western Canada," Ms. Mohr said. "And it is very risky for the country to be assuming that if you stunt the growth of our biggest non-service industry in Canada, that you'll find an offset to that. The Canadian economy is very oil-dominant now."

A number of proposals have been made to build new or expanded pipelines to ship oil and gas to the B.C. coast, including Enbridge Inc.'s Northern Gateway project. But the projects face considerable political hurdles.

Story continues below advertisement

Crude oil is Canada's largest export, but producers have been losing millions of dollars a day in revenue as a result of price discounts they must accept in order to sell their oil in an increasingly saturated U.S. market. Sveinung Svarte, the chief executive of Athabasca Oil Sands Corp., said the Canadian economy is experiencing staggering losses because Canadian crude sells for a discount of as much as $20 (U.S.) a barrel compared to international sources of oil. Over the course of a year, the differential can cost as much as $25-billion.

"That's a direct subsidy to the U.S. by Canada," he said in an earlier interview.

The IEA report suggests that Canada faces a rapidly changing global energy landscape that will roil the global marketplace.

"North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world," IEA executive director Maria van der Hoeven said Monday. However, she added that the world may well experience an equally dramatic improvement in energy efficiency that would be "just as important" to crude markets as the supply changes.

The United States is in the vanguard of both trends, as rising oil production and falling consumption threatens to squeeze producers who are dependent to that market. By 2030, the U.S. will have reduced its need for imported crude by 5.5 million barrels per day. Canadian producers hope to gain an increasing share of the smaller import market, but they face competition from Saudi Arabia, Venezuela, Nigeria and Mexico, and what was once a seller's market will clearly shift in favour of the buyer.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies