- Despite Criticism, Canadian Oil Key to U.S. Demand
Monday, July 25, 2011
Rigzone Staff
by Karen Boman
Despite criticism by environmental groups, U.S. imports of Canadian oil will continue to play a critical role in meeting U.S. energy needs, according to a recent report by the Calgary-based Fraser Institute, In America's National Interest-Canadian Oil.
In recent years, environmental groups have campaigned against the extraction of oil from Canada's tar sands. In advance of planned protests next month near the White House, U.S. actor Danny Glover and Canadian environmentalist David Suzuki are arguing that tar sands development has wrecked large sections of Alberta and disrupted the way of life of indigenous communities in the province.
In 2009, Greenpeace USA launched its "Stop the Tar Sands" campaign, which claimed that northern extraction of oil from Alberta's oil sands has "created a literal hell on earth" because land is visibly scarred by oil sands development, which takes place above ground. Amnesty International also has campaigned against oil sands development, wanting it to end until "no more development without human rights".
Environmental activists attempts to restrict U.S. imports of Canadian oil "ignore the reality of U.S. dependence on foreign oil and could force America to buy oil from repressive governments that restrict civil, political, and economic freedoms," according to the study by the public policy think-tank.
Canada now provides more oil to the U.S. than all the Persian Gulf countries combined, even though America imports 5.5 million more barrels of oil daily than it did in 1973. "Thus, the question is not whether or not the U.S. will import oil, but which country will supply that oil to American consumers, businesses and government," said study author and Fraser Institute director of Alberta policy Mark Milke.
Canada ranks sixth among the world's top oil producers at 3.3 million b/d. Unlike other countries that produce more oil such as Russia, Saudi Arabia, Iran and China, Canada scores well on measurements of civil, political and economic rights, as well as on proxy measures indicating quality of life, such as literacy rates, post-secondary education, and misogynist practices. With the exception of Norway, Canada is the only major oil-exporting country that scores highly on all measurements of civil, political and economic freedom.
Fraser cites the recent forecast by the International Energy Agency (IEA) that oil will remain "the dominant fuel in the primary energy mix to 2035," with global demand for crude oil reaching 99 million barrels daily by that time. IEA also forecasts that unconventional oil, such as oil extracted from Canada's oil sands, will play an increasingly important role in world oil supply through at least 2035, regardless of what government's do to curb demand.
Given that oil will remain a chief component of the global energy mix for the next several decades, America can either continue to embrace oil imports from Canada or resort to importing increasing amounts of oil from governments "that regularly violate human rights as a matter of policy, and in some cases, are state sponsors of terrorism," said Milke.
Milke noted that the perfectionism exhibited by Greenpeace and other environmental groups ignores the reality of actual energy needs and capabilities. "Long-lasting positive reforms are necessarily based upon how human beings actually live, behave, and work, and within the physical limitations they themselves face."
Canadian gas also provides an alternative supply as geo-political events, such as the Iranian Revolution of 1979 and the invasion of Kuwait by Iraq sharply curtailed oil imports on the world market, as well as insurance against disruption in OPEC supply. The study found that claims that oil sands crude does not lower prices because non-conventional oil is more expensive are mistaken, noting that the "final price of oil is determined not only by the initial cost of production but also by demand.
"Reduced supply on the international market from any source creates upward pressure on prices; in reverse, more oil on the market from any source acts to dampen upward pressure on prices. This is straightforward supply and demand."
The study does not recommend that governments restrict oil imports from jurisdictions based upon their relatively poor record for civil, political and economic freedoms. However, just as it is ill-advised for governments to restrict trade for matters unrelated to national security, "it is also ill-advised to allow misleading assertions from lobbyists about Canadian oil to go unchallenged," Milke said.
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