Canada falls behind US in energy security: Fraser Institute

CALGARY—The nation’s energy security ranking is falling and may continue to do so unless Canada is able to access new energy markets abroad, according to a new Fraser Institute report.

“For Canada, ‘energy security’ equates to free participation in global energy markets, and capturing the economic benefits of increased energy development,” Kenneth P. Green, Fraser Institute senior director of energy and natural resources and co-author of Risks to Canada’s Energy Security, said in a statement.

According to the International Index of Energy Security Risk, Canada ranks eighth in the world for energy security, with a score very close to the Organisation for Economic Co-operation and Development (OECD) average, and comes in one spot below the United States.

Canada’s score is down from 2009, when it ranked seventh overall.

“Today, the greatest risks to Canadian energy security are a by-product of U.S. policy, which has led to vastly higher U.S. production of oil and natural gas and decreasing gasoline consumption, stifling demand for Canadian petroleum products,” Green said.

“The resistance to Keystone XL also poses a challenge for future pipeline projects, which are critical for moving Canadian energy to market.”

The think-tank’s report examines how the notion of “energy security” differs between Canada and its neighbours to the south.

“The development of Canada’s oilsands coupled with U.S. unconventional oil and gas production is shifting the world’s energy center of gravity from the Middle East to North America,” Green said.

“But for Canada to realize the economic benefits of increased energy development, we must be able to access diverse markets. Pipeline projects like Keystone XL and Northern Gateway are a critical piece of that.”

Like Canada, the American energy security ranking tends to track quite closely with that of the OECD average, though the U.S. has comparatively lower energy costs than the OECD, an advantage that is growing over time as the U.S. enjoys massive increases in energy production that are reducing the costs of electricity generation.

“The U.S. strengths are seen in its growing production of oil and natural gas, its vast reserves of coal, as well as ongoing reductions in gasoline consumption due to the use of domestic biofuels,” Green said.

“It is hard to overemphasize the impact the revolution in shale oil and gas is having on U.S. energy security.”

The report argues that the energy security of one country is inextricably linked to energy security abroad.

For example, in the 1990s the growth in oil reserves reported in Iran, Iraq, Saudi Arabia and Venezuela led to sharply rising supply risks.

The large drop in risk reported in 2003 is almost entirely due to the addition of 175 billion barrels of Canadian oil.

“Clearly, Canada’s energy potential is enormous. But we need new infrastructure to transport our energy to diverse markets, bringing immeasurable economic benefits to all Canadians,” Green said.