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Market Snapshot: Canada’s role in meeting U.S. crude oil and natural gas demand
Release date: 2017-03-22
Energy trade between Canada and the United States (U.S.) grew considerably in the last 40 years. In 1975, Canada supplied only a small fraction of U.S. energy demand, but this share has since increased. Canadian crude oil and natural gas accounted for 23% of U.S. imports in 1976, and this rose to 51% by 2016. Canadian supply accounted for less than 4% of total U.S. consumption in 1976, but grew to almost 12% by 2016.
Before the mid-1980s, North American energy consumption and trade was dominated by supply concerns, and energy trade between Canada and the U.S. was very limited. This trade relationship changed dramatically during the subsequent two decades, spurred by deregulation of oil and gas markets, market restructuring in the U.S., the signing of the Canada-U.S. and North American free trade agreements, and growing U.S. energy markets. These events encouraged companies to develop Canadian oil and gas resources, increase production, and expand Canadian exports to the U.S.
Source and Description
Description: This stacked area chart shows total U.S. consumption of crude oil and natural gas between 1975 and 2016 in petajoules per day (PJ/d)Footnote 1. The chart separates consumption into U.S. produced crude oil and natural gas less exports, crude oil and natural gas imports from Canada, and crude oil and natural gas imports from countries other than Canada.
U.S. consumption of crude oil and natural gas grew from 168 PJ/d in 1975 to a 254 PJ/d in 2016. Total U.S. imports of crude oil grew from 25 PJ/d in 1975 to a peak of 62 PJ/d in 2005, after which they decreased to 48 PJ/d in 2016. Total imports of natural gas increased from 3 PJ/d in 1975 to a peak of about 13 PJ/d in 2005 before declining to just under 9 PJ/d in 2016. Of total natural gas and crude oil imports, Canada supplied 6.5 PJ/d in 1976, growing to 29 PJ/d in 2016. As a share of U.S. imports, Canadian product accounted for 23% in 1976, which increased to 51% in 2016. As a share of U.S. consumption, Canada accounted for less than 4% in 1976, which grew to almost 12% in 2016.
U.S. crude oil production has grown dramatically since 2005 due to the development of tight oil, which was almost entirely light oil. This recently developed domestic supply primarily displaced non-Canadian imports, since the majority of Canadian supply is a heavier oil and cannot be readily substituted with U.S. light oil. Also, western Canadian light oil supply has been competitive with U.S. light supplies in inland U.S. refineries. Consequently, Canada’s share of U.S. crude oil imports increased from around 15% in 2005 to 20% in 2010, and reached 41% in 2016.
U.S. gas production has also grown substantially since 2005 due to the development of shale gas. This has reduced the U.S. need for imports of Canadian natural gas, which have correspondingly decreased nearly 30% between 2005 and 2015. However, Canada remains the primary supplier of U.S. natural gas imports, accounting for 97% of total natural gas imports in 2016.
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