U.S. reliance on foreign oil imports: A primer

Mark Milke and Lennie Kaplan, Canadian Energy Centre, March 24, 2021

Imagine you’re in Germany and wonder if it’s a good idea to rely so heavily on natural gas imports from Russia, where the governing regime is accused by your own German politicians of killing journalists and of an attempted murder of the Russian Opposition leader Alexei Navalny. For instance, outgoing German Chancellor Angela Merkel, among others, blamed that latter “incident” on the Kremlin.

In response to the attack on Navalny, you can, as the head of Germany’s parliamentary committee on foreign affairs, Norbert Röttgen, did, urge the cancellation of the Russian natural gas pipeline, Nord Stream 2. But it may be too little, and much too late. In any event, the official German government position is now that the pipeline should go ahead, hoping that the new U.S. administration of Joe Biden and Congress will drop their opposition.

Non-democratic and illiberal governments have never had a problem using energy exports as a weapon in pursuit of their own regime’s power. Examples abound. They range from the 1973 oil embargo to Russia’s natural gas cutoff to Ukraine in mid-winter 2009 to Saudi Arabia’s regular manipulation of oil production levels and thus prices.

In contrast, liberal democratic countries have less ability to weaponize oil and natural gas. That’s in part because—and it’s positive—most energy companies in most democracies are in the private sector. They are not state-owned firms subject to possible political diktats. Thus, quite properly, politicians cannot and should not instruct such energy companies on where their products should end up.    

That noted, what governments in democracies can do is obstruct each other’s energy firms—something two American administrations (Barack Obama and Joe Biden’s) have done vis-à-vis Canadian oil companies, in particular on Keystone XL.

Which brings up this relevant point: It may be helpful for Americans to know how much foreign oil they’ve imported over the past several decades, and from which countries.

Between 1993 and 2020, Americans bought nearly US$4.2 trillion of foreign oil, with $1.8 trillion or 43 per cent of that shipped by Not Free countries, such as Saudi Arabia and others. (In our report on U.S. foreign oil imports, we use freedom categories from the U.S. think tank Freedom House, which ranks countries as Free, Not Free, or Partly Free.) 

Just under $1.2 trillion or 28.4% came from Partly Free countries with just over $1.2 trillion or 28.6% having originated in Free countries.

Canada is an example of a Free country that has exported significant amounts of crude oil to the United States, $956 billion worth between 1993 and 2020. That made Canada the top supplier of foreign crude oil to the United States.

Of note, of the top ten suppliers of foreign crude oil to the United States in those years, Canada was the only Free country on the list. Five countries were ranked as Not Free (Saudi Arabia, Venezuela, Iraq, Angola and Algeria) with four ranked as Partly Free (Mexico, Nigeria, Colombia and Kuwait). 

On the positive side, separate out U.S. foreign oil imports for 2020 and the ratio of Free nations improves dramatically. As of last year, over 61 per cent of foreign oil imports came from Free countries—$47.2 billion, mostly imports from Canada, with minor amounts from others.

Imports from Not Free and partly free constituted just under 39 per cent of all U.S. foreign oil imports, and were worth nearly US$30 billion. 

An important side note for Canada: The increased share of U.S. foreign oil imports does not mean the various attempts to obstruct Canadian crude oil have been unsuccessful.

Whether the Obama administration’s blocking of Keystone XL or the self-harm in Canada where pipelines Northern Gateway and Energy East were killed by a combination of politics and activism (tanker bans on the northern coast of B.C. for the former and federal regulation and anti-oil activism in Quebec on the latter), such killing of alternative markets to the Americans has been costly.

In 2019, the Fraser Institute estimated that from 2013 to 2017, after accounting for quality differences and transportation costs, the depressed price for Canadian heavy crude oil resulted in C$20.7 billion in foregone revenues for the Canadian energy industry. In 2020, IHS Markit estimated the loss of income for Canadian producers at US$14 billion (between 2015 and 2019 inclusive). IHS called that number “conservative.”

Which is to say this: When American politicians and others block Canadian oil, such actions are costly to Canada—precisely the goal from some such actors.

And sure, American importers do of course have other options. But none of them are as friendly and free as Canada.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report U.S. Foreign Oil Imports: $1.8 Trillion from Tyrannies and Autocracies Since 1993.   Image credit: Pixabay.