WASHINGTON: The current crop of US energy and emission policies will bring the country’s net oil imports to near zero by 2040, says the International Energy Agency, gutting demand in Canada’s largest crude market.
Canada oil producers will slowly lose their key market as shale oil production, energy efficiency improvements and fuel switching make the US energy-independent in all but name, says the IEA’s most recent World Energy Outlook, released this week.
In a presentation at Carleton University, one of the outlook’s lead authors said Canadian oil producers can at least look to other markets for demand in the coming decades.
“The good news for Canadian oil producers is that oil demand globally is going to increase,” said Laura Cozzi, deputy head of the IEA’s office of the chief economist. “Even if in the US it’s going to die, there is going to be many other places on the planet that are continue to need Canadian oil. It’s just that the destination may be different.”
A key consideration is “being able to export it to the global markets, to where it’s going to be needed and it’s mostly Asia,” said Cozzi.
The forecast comes from the outlook’s “new policies scenario,” which takes into account existing energy policies and concrete plans as of mid-2016. The IEA also considers two other scenarios in its outlook: one based on structural changes to the energy markets made to achieve the Paris agreement’s targets on greenhouse gas emission reductions, and another called the “current scenario” if recent environmental polices are abandoned.
US President-elect Donald Trump’s stated views on climate change and fossil fuels signal the potential for weaker environmental regulation in the US and an opening for TransCanada Corp.’s Keystone XL pipeline.
A TransCanada spokesperson said last week the company is “fully committed to building Keystone XL” and that they “are evaluating ways to engage the new administration on the benefits, the jobs and the tax revenues this project brings to the table.”
In Ottawa, Prime Minster Justin Trudeau’s government must decide on a response to a Federal Court order blocking Enbridge Inc.’s Northern Gateway pipeline by November 25, and must decide whether to approve Kinder Morgan’s Trans Mountain pipeline expansion by December 19. Both projects would increase the Alberta oilsands’ exports to Asian markets.
While most observers may think rising US tight oil production is the main culprit behind the country’s dwindling imports, the real reason is big advancements in energy efficiency, said Cozzi.
Canada exported 3.76 million barrels of oil a day in 2015, according to the US Energy Information Administration.
The outlook paints a difficult road ahead for achieving the goals of the Paris agreement. Avoiding a two degree Celsius increase in global temperatures compared to per-industrial levels is “very tough,” the outlook says.
Canada announced its intention to pursue an 80 per cent decrease in greenhouse gas emissions from 2005 levels by 2050 on Thursday.
The transformation needed to have a decent shot at avoiding a 1.5 degree Celsius is “stark” and requires going through “uncharted territory,” the IEA’s outlook says. It would mean reaching net-zero emissions at some point between 2040 and 2060, “thus requiring radical near-term reductions in energy sector CO2 emissions, employing every known technological, societal and regulatory decarbonization option.”
“It’s very very premature to say where he’s going to be because we don’t know what kind of energy policy he will want to pursue,” said Cozzi.
However, at news conferences for the release of the outlook this week in Washington, D.C., the press referred to the current scenario as the “Trump scenario,” she said.
