Tuesday, October 06, 2020

Why does Canada import oil from Saudi Arabia?

Ever wondered why a major oil producer like Canada imports oil from iffy regimes like Saudi Arabia?

Well, generally speaking, the answer is "globalization", but more specifically it is because it is because it can work out cheaper for Canada to import oil than to use its own. Canada's imports of oil come from USA (54% of total imports), Saudi Arabia (11%), Iraq (8%), Norway (5%), Algeria (5%), Angola (5%), and several others. It's an unfortnate fact of life that most of the world's oil is produced by some of the less palatable political regimes - and yes, I include the USA in that generalization - USA (14%), Saudi Arabia (13%), Russia (12%), China (5%), Canada (5%), UAE, Iran, Iraq, Kuwait (all 4%), Brazil (3%).

So, why does Canada import so much oil when it can produce it itself? We import so much from the USA (and the USA imports from us for the same reason) because Canada is so big that it is often closer to transport crude from America than all the way in the west of the country, saving on transportation costs (although the same cannot be said of Saudi Arabia). But Eastern Canada's largest refinery is on the coast of  New Brunswick, so it can still be more cost-efficient to bring crude in by taker to its deep-water port than bringing it overland by road or rail. Also, most Eastern Canadian refineries are unable to process the heavy crude oil (or bitumen) produced by Alberta's oil sands, or at least not cost-effectively. And finally, even Western Canada also imports lighter oil and natural gas condensates in order to dilute its bitumen and make it easier to transport by pipeline.

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