As Saudi Arabia aggressively severs ties with Canada, the two countries\u2019 trade relationship hangs in the balance. On one hand, Canada will\u00a0lose out\u00a0on Saudi foreign students, military contracts and sales of wheat and grain. On the other, Saudi Arabia will lose the billions of dollars it earns every year by selling oil to Canada.<\/p>\n
For years, it has been an oft-repeated Alberta grievance that these imports exist at all. Despite sitting atop an ocean of proven oil reserves, Canada continues to spend a small fortune every year buying oil from a country that\u00a0executes homosexuals, flogs dissidents\u00a0and has a nasty habit of\u00a0funding Islamic extremism.<\/p>\n
Below, a quick guide to why Canadians are still gassing up their cars with Saudi crude.<\/p>\n
Over the last 10 years, Canada has spent $20.9 billion on Saudi crude<\/strong> Right now, all the Saudi oil is coming through a single New Brunswick refinery<\/strong> Alberta and Saudi oil aren\u2019t necessarily the same thing<\/strong> Even with a pipeline, it\u2019s not a guarantee that refineries would buy Canadian<\/strong> Canada can\u2019t really hurt Saudi Arabia\u2019s bottom line<\/strong> <\/p>\n","protected":false},"excerpt":{"rendered":" Despite sitting on an ocean of oil, Canada still buys $300 million per month of Saudi crude As Saudi Arabia aggressively severs ties with Canada, the two countries\u2019 trade relationship hangs in…<\/p>\n","protected":false},"author":1,"featured_media":1408,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[46,57,90,96,106,107,137,160,174,201,203,206,209,249,256,267,277,279,288],"class_list":["post-1407","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-aramco","tag-baroudi","tag-democracy","tag-doha","tag-electricity","tag-embargo","tag-gas","tag-international-maritime-disputes","tag-lebanon","tag-offshore","tag-oil-and-gas","tag-oilgas","tag-opec","tag-russia","tag-saudi","tag-straddling-hydrocarbons-reserves","tag-total","tag-trump","tag-usa"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/1407","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1407"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/1407\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/1408"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1407"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1407"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1407"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nBetween 2007 and 2017,\u00a0Statistics Canada figures\u00a0show that Canada imported a total of $20.9 billion of Saudi Arabian petroleum oils. For context, this is almost precisely what Canada spends on its military per year. It\u2019s also way more than the expected $15.7 billion cost of the Energy East pipeline. On average, in recent years, Saudi Arabia supplies about 10 per cent of Canada\u2019s oil imports. Canada, in turn, is responsible for buying roughly 1.5 per cent of total Saudi oil exports. What\u2019s more, Saudi Arabia is climbing the leader board of countries that Canada\u2019s relies upon for its foreign oil. As recently as 2010, Saudi Arabia ranked as Canada\u2019s fifth largest supplier of foreign oil (behind Algeria, Norway, the U.K. and Kazakhstan). Now, Saudi Arabia is second only to the United States.<\/p>\n
\nAll of the Saudi oil imported into Canada in 2017 and 2018 came through New Brunswick, which only has one oil import facility: The massive Irving Oil-owned Saint John refinery. Between January and June of this year that refinery has imported $1.8 billion of Saudi oil \u2014 roughly $10 million per day. The amount of U.S. oil entering the refinery, for comparison, is equivalent only to about $3.8 million per day. Unlike most Canadian refineries, Saint John has no access to a pipeline; every barrel of oil it processes either comes by tanker or train. (The oil train that caused the Lac-M\u00e9gantic rail disaster, in fact, was headed to the Saint John refinery). \u201cWe source crude oil from all over the world for our refinery in Saint John, N.B.,\u201d a spokesman for Irving Oil\u00a0told the National Post in 2016. And whenever someone is seeking out the cheapest product from the world market, it\u2019s not unusual that a lot of it is going to come from oil-rich Saudi Arabia. It\u2019s like turning to the world market to buy the cheapest possible t-shirts: Chances are that they\u2019re going to come from Bangladesh.<\/p>\n
\nOn paper, Canada could become energy self-sufficient tomorrow. Every day we produce about 3.9 million barrels of oil per day, and use less than 2 million barrels. A study this year from the Canadian Energy Research Institute even calculated that energy self-sufficiency\u00a0might reduce emissions. But think of oil like whiskey: There are many different types and qualities. A bourbon connoisseur probably isn\u2019t going to be happy with a bottle of Old Crow and a Manhattan isn\u2019t going to taste the same if it\u2019s made out of Scotch. Similarly, Alberta oil is not interchangeable with the stuff coming out of Saudi Arabia. Andrew Leach, an energy economist at the University of Alberta, even said that comparing the two is like comparing apples and oranges. \u201cSaudi crude and WCS (Western Canadian Select) doesn\u2019t overlap much in terms of their markets,\u201d he told the National Post. For one thing, most eastern Canadian refineries cannot process bitumen, the thick tar-like hydrocarbon that comes out of the Athabasca Oil Sands. Almost anybody can process Saudi Arabian crude, but only an elite fraternity of the world\u2019s most complex refineries can turn Alberta bitumen into gasoline. To get to the east coast, Canadian bitumen also has to be shipped overland from more than 4,000 kilometres away, significantly adding to its total costs (Saudi Arabia is 10,000 kilometres away from the Canadian east coast, but tanker shipment is cheap). It\u2019s also why Western Canadian Select, the industry name for most oil sands bitumen, sells at such a steep discount to more conventional oil types coming out of Saudi Arabia. In June, for instance, WCS\u00a0sold\u00a0at an average of USD$52.10 a barrel, compared to USD$67.87 for West Texas Intermediate (WTI), an oil category priced similarly to most Middle Eastern oils. \u201cThe oil Alberta produces is simply of a lower quality than \u2026 WTI, and is located farther away from customers,\u201d\u00a0writes the Alberta government\u00a0in an online briefing note describing the WCS \u201cdiscount.\u201d<\/p>\n
\nThe cancelled Energy East pipeline, of course, would have pumped Saskatchewan and Alberta petroleum into New Brunswick. Politicians touted the pipeline as a way to supplant foreign suppliers such as Saudi Arabia. \u201cWe believe this nation-building project would have benefited all of Canada through new jobs, investment, energy security and the ability to displace oil being imported into Canada from overseas,\u201d Alberta premier Rachel Notley said upon the project\u2019s cancellation. However, refineries are no different than a driver cruising gas stations looking for a fill-up: They seek out whoever has the best price and buy accordingly. If Alberta can\u2019t sell its oil on the Atlantic Coast for a lower price than Saudi Arabia, refineries aren\u2019t going to buy it \u2014 particularly if they can\u2019t process it. \u201cGetting product from Western Canada, while conceptually sounding like a good way to push out Saudi oil, doesn\u2019t fix everything,\u201d said Jason Parent with the Canadian oil industry analyst Kent Group. As of press time, WCS is currently selling at an\u00a0incredible\u00a0$30 discount over more conventional oil types. While this would likely be enough to entice Atlantic buyers, the discount isn\u2019t always so competitive \u2014 particularly if Saudi Arabia is\u00a0actively trying to overproduce\u00a0and drop oil prices in order to kneecap the Canadian and U.S. oil industry. This is part of the reason why Canada never built a pipeline to the east coast in the first place. A west-to-east pipeline was indeed considered soon after the discovery of oil in Alberta in the 1940s, but it was soon scrapped. \u201cEastern provinces did the math and found it cheaper to import foreign oil by tanker, rather than bother with the extra cost of domestic supply,\u201d said Peter Tertzakian, director of the Calgary-based Arc Energy Research Institute. However, even if the business case is a little complicated, Tertzakian still advocates a pipeline as something Canada should do for strategic reasons. \u201cWe could be completely self sufficient if we wanted,\u201d he said. \u201cIt\u2019s just a question of how much we are willing to pay for it.\u201d<\/p>\n
\nThe easiest way for Canada to cut off Saudi Arabia imports would be simply to buy more American oil. It\u2019s about the same price, it doesn\u2019t require specialized facilities and considering that they already buy so much of ours, there\u2019s a certain justice to it. The U.S. also has an excellent human rights record compared to the Saudis. But while such a move might assuage Canada\u2019s moral compass, the practical effect would be almost nil. It\u2019s a seller\u2019s market for oil right now. Production of U.S. shale oil is slowing down, Iran is being hammered by sanctions and petroleum demand continues to tick upwards all over the world. All this means that if Canada could successfully prevent a drop of Saudi oil from ever entering our borders again, it\u2019s unlikely that Riyadh would ever notice. Any oil tanker turned away at Saint John could simply set course for New Jersey. Unlike Canada, Saudi Arabia sells a product that is easy to transport and that can be processed by almost anyone. Said Andrew Leach, \u201cSaudi oil will still sell at the world price.\u201d<\/p>\n