Canada: The Changing Shape Of Energy Politics

At the same time, the support that Canada provides to the United States on numerous fronts -- most notably, military support in Afghanistan and exports of natural resources for U.S. manufacturing -- is growing increasingly controversial, and moving to the forefront of Canadian political debate. Though exceedingly unlikely to have been purposely timed to coincide with the climate change debate, the al Qaeda threat that surfaced Feb. 14 will only add to the questions and public dissatisfaction over the U.S. relationship. Taken together, the two events add another layer of complexity to the debate over how freely Canada should send natural resources to its neighbor to the south. This is a debate that is extremely important to the United States, which is looking for ways to reduce its own dependence on energy sources in the Middle East. A new energy plan proposed by President George W. Bush would require not only that Americans become more efficient in their consumption and make greater use of nonoil sources of energy, but also rests on the assumption that Canada would make up for the loss of any oil imports from the Middle East -- as well as for dwindling output from domestic oil sources and Venezuela. The Politics of Energy To fully understand the issue in the wider context, it is important first to examine the role that Canada already plays in the U.S. story and perspectives on the growth of the Canadian energy industry. Currently, Canada supplies more than 21 percent of the United States' crude oil imports, far more than any other country. The 2.1 million barrels per day come primarily from traditional oil fields in the far northern and Rocky Mountain regions. The U.S. Energy Department projects that Canada will increase its total oil production by almost 50 percent in the next four years, and that U.S. imports from Canada will increase in the coming decade. As Washington considers a number of policy options to reduce imports from the Middle East, however, the percentage of U.S. imports from Canada likely will be even higher than the Energy Information Administration estimates. Though that may be perfectly acceptable from the American viewpoint, it is a problem for the Canadians -- many of whom are coming to perceive their country as a well-stocked cupboard of natural resources that is continually being raided by their neighbor to the south. The notion that Canada is continually exporting its raw material riches to the United States is a dominant theme in Canadian political dialogue: The United States is viewed as a bully and an exploiter. At the same time, it is difficult to dismiss the fact that Canada has benefited financially from U.S. "exploitation," and that even closer energy ties with the United States could be good for oil companies and certain energy-rich provinces. For example, in a province like Alberta, which has a sparse population and tremendous natural resources, the idea that energy exports to the United States could be further increased leads to visions of becoming something like a North American version of Kuwait. Alberta, Harper's home province, is an important focal point in Canada's energy debates because it is the province where most of the country's oil sands are located. Canada long has recognized the significance of these oil-rich sands (sometimes referred to as "tar sands"); but until recently, this resource has been viewed as only a potential source of wealth. The process of deriving oil from the sand is expensive: Oil-laden rocks must be collected and then heated to separate the petroleum from the surrounding minerals. Though the technical costs of the process now are falling, the feasibility of developing large-scale oil-sands projects remains questionable, since they would be unprofitable if global oil prices fall below $50 per barrel. The profitability threshold for oil-sands projects could come down a bit more as Canada builds new gas pipelines and other infrastructure, but compared to most of Canada's traditional drilling -- often profitable at $6 per barrel -- oil sands remain a risky venture. http://www.stratfor.com/products/premium/read_article.php?id=265472 [Proofreader's note: this article was edited for spelling and typos on February 19, 2007]

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