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Rising Oil Prices and Dependence on Hostile Regimes: The Urgent Case for Canadian Oil

March 31, 2011

RISING OIL PRICES AND DEPENDENCE ON HOSTILE REGIMES:
THE URGENT CASE FOR CANADIAN OIL

HEARING BEFORE THE SUBCOMMITTEE ON THE WESTERN HEMISPHERE, COMMITTEE ON FOREIGN AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
MARCH 31, 2011

Council of the Americas (“Council”) appreciates the opportunity to provide a statement for the record concerning Canadian oil. The Council is a business organization representing some 190 member companies invested in and doing business throughout the Western Hemisphere. Since our founding in 1965, the Council has been dedicated to the promotion of open markets, social and economic development, democracy, and the rule of law, and we are widely recognized for our policy and commercial leadership throughout the Americas.

Canada is a neighbor, long-time ally, and stable supplier of oil to the United States. The Council strongly supports U.S. imports of Canadian oil as well as the construction of the appropriate infrastructure to facilitate the U.S.-Canada oil trade, which will ensure even more stable access to Canadian oil for the United States.

The Council believes that a key to U.S. energy security is diversification, of both sources of energy and of suppliers, domestic and international. In partnership with others, we need to reduce our greenhouse gas emissions, and we must continue to pursue the technologies that will allow us to transition to cleaner sources of energy, both by adopting greater use of renewables and by decreasing the environmental footprint of traditional fossil fuels. But cutting emissions from energy production and use is a process, not something that will happen overnight. According to U.S. Energy Information Administration projections, U.S. oil demand will remain fairly stable as a portion of overall energy use through 2035. At about one-third of overall energy use, the United States will be dependent on oil for a large part of its energy consumption for the foreseeable future.

Currently, the United States requires more oil than we produce ourselves and relies on imports to meet about half of our supply needs. Canada, second only to Saudi Arabia in global oil reserves, is the number one supplier of oil to the United States. As the unrest and uncertainty in the Middle East show, global oil markets are unpredictable and any disruption in supply, even the threat of disruption in supply, impacts prices. This only underscores the importance to the United States of stable sources of oil imports.

U.S.-Canada Relations

Canada and the United States are long-time allies, not only in energy, but also in economic, security, and environmental issues, among others. For example, Canada is the United States’ largest export market, and two-way trade in 2010 alone was over $645 billion. In addition, Canada has been a partner in the fight against terrorism, as a crucial ally in Afghanistan as well as in protecting the 5,500 mile U.S.-Canadian border. Canada works with the United States in the Energy and Climate Partnership of the Americas, and the United States and Canada are collaborating in a Clean Energy Dialogue to help speed the transition to greater use of clean energy sources in both countries.

Canada is not only the number one supplier of oil to the United States, but the number one supplier of all types of energy to the United States. In fact, the U.S.-Canada energy relationship is a relationship of interdependence. Natural gas pipelines crisscross the U.S.-Canada border, sending natural gas back and forth between the two countries. The United States sends coal to Canada, and electricity goes from Canada to the United States and back.

Environmental Issues

According to Cambridge Energy Research Associates, oil sands generate about 5 to 15 percent more carbon emissions per barrel than the average mix of oil used in the United States. This means that oil sands are higher in carbon intensity than many, but not all, of the types of oil the United States uses.

These emissions figures are based on a “well-to-wheels” analysis, which factors in the entire life cycle of oil, from extraction all the way to the use of refined fuels. In fact, only 20 to 30 percent of carbon from oil is released before the fuel arrives at the gas station. Driving results in the emission of the remaining 70 to 80 percent of carbon from oil, and carbon emissions from driving are the same regardless of the source of the oil. Additionally, if Americans don’t use Canadian oil, others, such as China, which has less stringent environmental regulations than the United States, will.

Benefits to the U.S. Economy

The emissions profile of the Canadian oil sands should not be overlooked but considered in a larger context. Because the economies of Canada and the United States are so closely linked, Canadian oil production supports jobs not only in Canada but also in the United States. According to the Canadian Association of Petroleum Producers, more than 900 companies in 48 U.S. states supply goods and services to the oils sands industry in Canada.

Bottom Line: The United States Benefits from Canadian Oil

Canada is the number one single provider of oil to the United States, and, perhaps more important, a stable and reliable supplier. The bottom line is that the United States benefits from Canadian oil. For the Council, the choice is clear: advance the U.S.-Canada oil relationship by supporting U.S. imports of Canadian oil and the construction of the appropriate infrastructure to facilitate the U.S.-Canada oil trade.