December 14th, 2012
07:47 PM ET

Canada in 2013: It’s all about the oil

This is the fifth in a series of entries looking at what we can expect in 2013. Each weekday, a guest analyst will look at the key challenges facing a selected country – and what next year might hold in store.

By Jonathan Kay, Special to CNN

Editor’s note: Jonathan Kay is the Managing Editor for Comment at Canada’s National Post newspaper and a fellow at the Washington, D.C.-based Foundation for Defense of Democracies. Follow him @jonkay. The views expressed are his own.

Canada is in a fortunate position relative to other developed Western nations. Our government is stable. Our budget deficit is small. Our real estate market is healthy (if somewhat overheated). And unemployment is relatively low. Only the occasional flourish of Quebec separatism keeps things lively in the Great White North. The biggest challenge my country will face in 2013 – and for many years after that – will be the problem of plenty. Specifically, how will Canada manage its large and growing oil wealth?

Canada currently produces just over 3 million barrels of oil per day (b/d), making us the world’s 7th largest producer, and the single largest supplier of oil imports to the U.S. market. Thanks to the ongoing expansion of Alberta's oil sands, production is expected to more than double by 2030, to 6.2-million b/d, transforming Canadian into an energy superpower.

But there is a problem: The vast majority of the country’s oil wealth is landlocked in northern Alberta. And the existing pipeline network, which connects the large Canadian hubs at Edmonton and Hardisty, Alberta to the main American terminals in Oklahoma and Illinois, is inadequate. Half of America’s 18 million b/d refining capacity sits on or near the Gulf Coast. But barely any Canadian oil gets there (in part because of America's own oil pipeline bottleneck at Cushing, Oklahoma).

For this reason, in 2013, Canada’s government and oil producers will be making a big push for U.S. President Barack Obama to reconsider the Keystone XL pipeline project, which could bring 830,000 b/d from Hardisty, Alberta to Steele City, Nebraska.

Perhaps more important for Canadian producers, in the long run, is the massive and growing Asian market.

China’s net oil imports are projected to double between now and 2030, from 5.7 million to more than 12 million b/d. India's net imports, likewise, will grow from about 3 million to about 6 million b/d. Yet despite the spider web of pipelines that cover the North American Midwest, there is just a single oil route to the west coast from Alberta – the 300,000 b/d Kinder Morgan Trans Mountain Pipeline, leading to Vancouver and Puget Sound.

And so an important challenge for Canada in 2013 and beyond will be to move forward on pipeline projects that expand our access to Asian markets, including both a possible expansion of the Trans Mountain pipeline (bringing capacity up to 750,000 b/d), and a completely new 36" diameter, 730-mile pipeline called the Enbridge Northern Gateway, which eventually could transport as much as 850,000 b/d of diluted Alberta bitumen to a new marine terminal near Kitimat, British Columbia, for sale to Asian markets.

Construction of the Northern Gateway pipeline would provide a huge boost to the Canadian oil industry. But its chances of going ahead in its currently planned form in 2013 are very slim, for a variety of very all-too Canadian reasons – including bickering involving the federal and Alberta government over revenues, massive opposition from aboriginal bands, and an extremely effective anti-pipeline campaign mounted by British Columbia's powerful environmental lobby. In fact, many analysts believe the pipeline will never get built, leaving Canadian oil producers largely hostage to the American energy market.

Stresses are appearing in Canadian public life not only over the question of what to do with our oil, but also over what to do with the money we earn from it.

Thanks to Canada’s “equalization” policy, billions of dollars are shuttled (indirectly) from the country’s richest provinces to its poorest on an annual basis. In recent years, this has meant that oil-rich Alberta (per capita GDP = about $78,000) generously subsidizes the welfare-state policies of an out-at-the-elbows Quebec (per capita GDP = about $43,000). This has created no small measure of rancor in the country, especially because Quebec's left-wing, environmentalist politicians have made a habit of attacking Alberta’s oil industry for its pollution and contribution to global warming, essentially biting the hand that feeds them.

At one point in 2012, Canada’s leading opposition politician, Thomas Mulcair (who is from Quebec), even declared that the oil sands were giving Canada a case of what economists call “Dutch Disease,” whereby high priced commodity exports cause the Canadian dollar to appreciate, thereby rendering our manufacturing industries uncompetitive in global markets. The remark was front page news for days, and continues to stick in the craw of many Albertans.

All in all, managing the oil file will be Canada's biggest challenge in 2013. Like a family that has won the lottery, we Canadians are delighted by our newfound wealth. But turning it into useful income has become unexpectedly problematic, due to our geography, fractured political landscape, troubled historical relationship with First Nations, and environmental focus. The fight between our squabbling regions and constituencies over the best way to proceed has only just begun.

Post by:
Topics: Canada • Energy • Oil

soundoff (27 Responses)
  1. Karl Dockstader

    Reblogged this on Renew Niagara's Energy and commented:
    Where does Niagara fit in this picture? Where is Ontario, outside of a the "Petrodollar" gaffe from soon to be former Premier?

    December 14, 2012 at 10:56 pm | Reply
  2. Marine5484

    Hopefully, being self sufficient in oil revenue, Canada will no longer be compelled to follow the dictates of both Washington and London and thus being free to pursue a policy based on peace and justice instead of the sheer will of these countries.

    December 15, 2012 at 10:37 am | Reply
    • Amit-Atlanta-USA

      Good posting, Marine5484. I fully agree about Canada. It should not be subsevient to it's neighbor to the south and hopefully it won't!

      December 15, 2012 at 11:59 pm | Reply
  3. nick wylie

    It is completely UNACCEPTABLE for CNN to replace an important program (the only one you offer) with your wallowing in the CT school shooting.

    This is the kind of decision pandering to prurient inyerests that has you wallowing on abysmally low ratings.

    December 16, 2012 at 10:21 am | Reply
  4. Susan Wayo

    I make it a practice to watch GPS on Sunday mornings – along with Reliable Sources. This morning I was dismayed to find that 100% of CNN's reporting is on the tragedy in Sandy Hook, Connecticut. Now, this is a TERRIBLE event, and I'm happy that CNN is giving it a lot of coverage because I truly hope this tragedy may results in our changing our nation's insane love affair with guns. However, this cannot possibly be the only news worth talking about. Seriously, did CNN really have to preempt GPS and Reliable Sources today?

    December 16, 2012 at 1:19 pm | Reply
  5. j. von hettlingen

    Canada is the envy of the world. It's huge and resource rich, yet under-populated. It has a different set of foreign policies than the US and has – hence – more friends in the international community.

    December 17, 2012 at 3:54 am | Reply
    • Quigley

      Let's just hope that doesn't change, j.von hettlingen.

      December 17, 2012 at 4:19 pm | Reply
    • Aristocles

      If Canada is the envy of the world, why do more Canadians move to the US than Americans move to Canada?

      December 20, 2012 at 3:04 am | Reply
      • Amanda

        Not so anymore

        January 15, 2013 at 2:30 pm |
      • Amanda

        You might want to recheck this. Not many people in Canada have the desire to go to the US. Your government (not the people) are a bunch of idiots. Their only concern is their image and for this reason your country flogs the same old issues over and over. I love the USA but I live in a great country with a wonderful future ahead.

        February 6, 2013 at 12:01 pm |
  6. Maxx44

    The Keystone pipeline should blocked. That pipeline will only benefit Canada and a handful of U.S. refiners that export Canadian oil to Asia. Why should we here in the U.S. host a pipeline for a country where most of the people hate us! If Canada needs a pipeline, they should build it across their country and build their own refineries to handle their heavy tar sand oil. Canada stay out!

    December 17, 2012 at 10:41 pm | Reply
    • macha

      Ok, your the boss, we will stay out.

      December 18, 2012 at 8:53 pm | Reply
    • duece

      Maxx44 what are we do do if they cut us off from the 3 million bbls of oil a day we need . What about the 10 bbcf of natural gas we use we are lucky to have a north neighbour that treats us so fair . check out the arab nations and see how we get treated after fighting for them and buying there oil grown up n

      December 18, 2012 at 9:06 pm | Reply
    • duece

      maxx did you and your little mind even know that 50 percent of our new north dakota oil has to go up to canada because our pipeline system does not exist . then they ship it back here for us on thier lines . you should think before opening your mouth , its guys like you that make us look bad in the eyes of the world

      December 18, 2012 at 9:12 pm | Reply
    • satpin

      the reason there is resistance to the oil pipeline in the US is because of the heavy environmental cost of digging up transporting and finally burning up all that oil – when will we see our world in terms of something that needs to be protected and valued and instead of something to be exploited ??

      December 20, 2012 at 9:33 am | Reply
    • Mark

      Umm since when do Canadians hate us??? Most Canadian love America. Every time i go there i am warmly welcomed and make friends there easier than in the US. I cant count how many times i have been to Canada and i cant think of one time where i got the feeling i was hated. You really need to get out more!

      January 5, 2013 at 1:13 pm | Reply
    • Brutus

      Oh you are such an idiot. Shipping the oil to the US through Keystone so you can refine it in the US means your make the money off the refining, not the Canadians. I would gladly have it refined in Alberta so we can keep the money. Not only keep the money but sell the refined crude to China and India, who would be willing to pay for the pipeline to the west coast. Watch out US, you are not the only market anymore.......

      January 5, 2013 at 5:27 pm | Reply
    • Amanda

      To bad you own country didn't know how to KEEP OUT

      January 15, 2013 at 2:32 pm | Reply
  7. wjmccartan

    Max

    We'll be sure to keep those jobs and sell the refined fuel to the American markets. As for Canadians hating Americans where did you get that idea, oh your thinking about George Bush Jr. Well I think quite a few Americans didn't like him either. We are the same people with the same values and interests, to discredit yourself with such drivel is unbecoming and you should perhaps gain a better picture to understand what Joe Canadain thinks. We love life as much as you and deplore horrible actions such as those that have taken place at your schools, movie houses, and shopping malls. We grieve at the loss of life these misguided individuals wreak upon American society. We want the same things in life, food on the table, a roof over our heads, and a better life for or children then we have had. We may disagree with some of your political leaders from time to time, but I read enough American news to know that at times you yourselves look at your leaders with contempt. We may not have a large population in relation to the United States, but we care about each other enough to know that if you don't help your neighbour when they need it, you not stronger, but instead weaker in one of the things we hold dearest and that character, a person of character does not stand idley by while someone suffers, they reach out and help, this is why even as sparsley populated as we are we are a strong and proud nation. America to is a great nation perhaps the greatest of our modern age, and that has to continue so others can aspire to have the ability to speak freely, to walk down a street in America and not be boomed, if you disagree with your government then change comes every four years. America shines a light for the rest of the world to see and that is something the world will need in the coming century as rising autocratic societies try to control where the world is going. Freedom and Justice can never be taken for granted. These basic ideals are what move the world forward. Be proud to be an American but don't ridicule those that aspire to see those things universally accepted.

    Just a thought
    Canadian Eh

    December 18, 2012 at 1:13 am | Reply
  8. DRMoccasin

    First Nation and Canadian People are Protesting across Canada called IDLE NO MORE! There is a movement going on and the WORLD needs to SEE IT the Conservative Government are passing OMNIBUS BILLS WITHOUT PROPER CONSULTATION WITH THE OTHER POLITICAL PARTIES AND ITS PEOPLE!!! NO TRANSPARENCY UNDEMOCRATIC..... ITS TIME FOR CANADIANS TO STAND UP TO THE GOVERNMENT AND HELP PROTECT THE LAKES RIVERS WETLANDS (WATER) AND OUR LAND! CANADIANS ARE PROTESTING AND BLOCKADING AS YOU READ THIS #idlenomore #IDLENOMORE WATER IS LIFE! ONLY 1% OF WATER IS NOW PROTECTED IN CANADA!!! CANADA HAS THE WORLDS MOST FRESH WATER IN THE WORLD! #IDLENOMORE #idlenomore!!!! SAVE MOTHER EARTH! WATER IS SACRED!!! #idlenomore

    December 19, 2012 at 12:22 am | Reply
  9. DRMoccasin

    FOREIGN INVESTORS IN THE OIL INDUSTRY NEED TO BE AWARE OF THESE BLOCKADES AND PROTESTS AGAINST THESE PIPELINES AND OIL SANDS!!! IN OTHER WORDS THEY ARE NOT WELCOME!! THE CANADIAN PEOPLE ARE NOT HAPPY WITH THE CANADIAN GOVERNMENT SELLING ITS NATURAL RESOURCES AND DESTROYING OUR LANDS! #idlenomore

    December 19, 2012 at 12:29 am | Reply
  10. VLaFleur

    We need awareness brought to what's occurring in Canada now... the government does not take the concerns seriously, there are leaders on hunger strikes on parliament hill, ready to die for this cause – to make a change to the way the Canadian government is handling it's current affairs.

    December 17, 2012 – 11:00
    Human Rights / Letter

    "Chief Theresa Spence,
    The Canadian Union of Postal Workers honour Chief Theresa Spence of Attawapiskat for her courageous stand in defense of the land against the moral bankruptcy of the Canadian state.

    We recognize the racist and genocidal history of Canada and that the attempts to assimilate and silence Indigenous voices have been rife with failure and abuse. The ongoing theft of Indigenous lands, the refusal to honour agreements made in the name of the British Crown reveal a sadly dishonest and indefensible relationship. It seems nothing is sacred in the eyes of the greedy..."

    December 19, 2012 at 1:02 am | Reply
  11. empresstrudy

    Hopefully Canada will be the sole energy supplier of Obamerica.

    December 19, 2012 at 12:50 pm | Reply
  12. Rick McDaniel

    The socialists don't WANT the oil. They want to bankrupt the people, by forcing the price of oil to astronomical levels.

    The goal is to destroy America, from within, economically. They ARE succeeding.

    December 20, 2012 at 10:14 am | Reply
  13. Brenda Johnson

    HELLLO!! I don't understand why the media is so biased as to only report what is good for the corporations and politicians to make the big bucks. EVERYONE IS DOWN STREAM! Any and all discussion about fracking, oil well drilling and other things is stripping and destroying the very source of natural water that your children and grandchildren will drink. North America is on it's way to becoming another barren wasteland. Canada is only worried about now, money now, without thinking about the air and water their grandchildren will be breathing and drinking. Aboriginals HAVE to represent the land that these corporations are trying to destroy for the all mighty dollar. I am soo impressed with the aboriginal people who have gathered in support of protecting those lands. THERE ARE alternatives to all of world's energy needs.. But they can't make the big bucks if they do it. SHAME SHAME SHAME... http://www.idlenomore.com learn it.

    December 21, 2012 at 4:50 pm | Reply

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