We often take our oil supply for granted — especially when it comes to our “safe” imports…
Nobody’s really to blame, especially given the geopolitical mess shrouding the Middle East. With the unsettling stories from this region dominating headlines, it’s all too easy to forget that our largest supplier of oil isn’t across the Atlantic, but rather a short hop over our northern border.
Lucky for us, Canada is a veritable treasure chest of natural resources. Years ago, I would’ve told you that this energy trove was a well-kept secret.
That all changed in January of 2011, when the United States broke a critical psychological benchmark and imports of crude oil and petroleum products from Canada surpassed three million barrels per day for the first time in history. The amount grew an additional 400,000 barrels per day just two years later.
However, the alarming fact — one that’s not making headlines — is that this future oil security is in jeopardy.
What’s more, there’s absolutely no chance whatsoever of weaning ourselves off of OPEC oil without it, even despite the feverish pace at which we’re developing our tight oil resources.
You should know this is a fairly new development. Only in the last year or so did the U.S. start to realize how close it is to losing these Canadian imports — and how dirty we’re willing to fight to keep those barrels of Canadian crude flowing south…
Step by Step
We really don’t have a choice.
And with Mexico’s oil industry being driven into the ground, there’s simply no other place left to go for an easy, virtually risk-free source of oil.
But that isn’t exactly the sentiment expressed by the U.S. government. The best example of this I can point to is the multi-year delay in approving the Keystone XL Pipeline.
Thanks to that slap in the face, Canada is now courting a new customer base, starting with China…
A report released last week by Woods Mackenzie provided a dose of reality to the U.S. In just seven years, China is expected to spend a staggering $500 billion per day on oil, with daily imports climbing to more than nine million barrels.
The country is so desperate for future oil supplies, it’s willing to invest in the most volatile regions on earth. This much became evident after Sinopec dished out $3.1 billion for Apache Corp.’s oil and gas assets in Egypt.
As Canada grows hungry for a better energy clientele list, it seems like the two countries are a match made in heaven.
It’s only a matter of time before we start seeing the necessary infrastructure put into place…
It may start with Kinder Morgan filing a formal application for the $5.2 billion expansion project for its Trans Mountain Pipeline, which will ship crude to the British Columbia coast, or perhaps a more insidious story buried under glowing production data.
Actually, some of you might remember one such story from earlier this year…
Jealousy Rears Its Ugly Head
Although the U.S. government has no direct control over the approval of Kinder Morgan’s Trans Mountain Pipeline expansion, we know how far it’ll go for a little extra oil security.
You see, in order to ensure that Canada remains our largest oil supplier, the U.S. will target the tankers themselves — because tanker traffic heading out of B.C. is expected to surge by more than 300%, prompting a rash of concerns over a potential spill.
(And really, who can blame them after BP’s disastrous gift to fishermen in the Gulf of Mexico?)
Giving the U.S. Coast Guard the ability to set regulations for oil tankers heading in and out of British Columbia ports might be just the kind of control the U.S. government is looking for.
But this still won’t hinder the Chinese from getting a piece of Canada’s resource wealth…
You see, long before Canadian tankers set course for the Far East, there’s another catalyst at work here, one that will strengthen this burgeoning business relationship and help pave the way for future oil exports.
I’m referring to another set of Canadian energy exports: liquefied natural gas.
These LNG exports are the first step in leading to Canada’s oil industry tapping into China’s growing addiction to oil imports.
Fortunately, all isn’t lost for individual investors like us.
Rather than grow embittered, like some politicians on Capitol Hill, I prefer to take advantage of the situation. In this case, it’s the highly lucrative energy prices China is willing to pay for future energy security.
Make no mistake in what’s coming: Canada will win the export race to Asia.
Until next time,
Keith Kohl
Check us out on YouTube!A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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