Let's think about energy dominance for North America — not just the US
Over the past decade, America has achieved the long-sought goal of becoming energy independent, mainly because of the shale revolution that has made us the world’s number one producer of oil and natural gas. Whereas a decade ago we were importing huge volumes of oil and building terminals to import liquefied natural gas (LNG), today we’re exporting 25 percent of our oil output and a growing percentage of our natural gas. Indeed, the International Energy Agency sees the U.S. passing Russia, Qatar and Australia to become the world’s leading exporter of LNG within five years.
Especially for North America, the realization of U.S. energy dominance could be considerable, or even transformative. One can imagine oil and gas technology and greater investment spreading across the continent as the industry becomes more economically integrated.
Canada has boosted oil production by 50 percent since 2005, mainly from the “oil sands” in Alberta that are estimated to hold the third largest reserves in the world. Though recent growth has been muted, primarily because of pipeline constraints, Canada’s Oil and Natural Gas Producers (CAPP) projects oil output to increase by about 1.5 percent annually for the next 20 years.
As a result of mismanagement and a lack of new investment, oil production in Mexico has fallen by a third over the past decade, though it has rebounded somewhat in recent months. In 2013, the country passed historic legislation ending the PEMEX state oil monopoly in hopes of attracting new investment. At first, this was the case. But under Mexico’s current leftist president, Andrés Manuel López Obrador, who has “paused” the energy reforms, outside investment has essentially come to a halt.
Despite the uncertain outlook for Mexico’s oil industry, political leaders in all three countries should start thinking about energy from a continental perspective. North America possesses five times more fossil fuel reserves than OPEC, providing the potential for our continent to become a global energy colossus. Linking the energy sectors of the three partners under the new United States-Mexico-Canada Agreement (USMCA) that will supersede NAFTA can also help facilitate the overall economic integration of North America.
In some ways, the energy markets in North America are already connected. About half of U.S. natural gas exports go to Mexico. With several new pipelines recently completed or under construction, gas exports should double over the next few years. Mexico now generates more than 25 percent of its electricity with U.S. gas, and that percentage will increase as Mexico continues to substitute gas for oil in power generation.
Large volumes of oil and natural gas move in both directions between Canada and the U.S. via pipeline, while significant amounts of crude oil from Alberta are shipped to U.S. refineries via rail tanker car. Once the much-delayed Keystone XL pipeline is completed, oil shipments from Canada to the U.S. will jump substantially.
Integrating the energy markets across the continent can increase industry efficiency, decrease costs and guarantee an abundant and affordable energy supply for the long term. Because every business and household across North America consumes and relies upon energy in some capacity, these economic efficiencies will lower costs for businesses and households alike.
By producing, consuming and exporting North American oil and gas, the entire continent will benefit in terms of energy security and an improved balance of international payments. This will mean greater employment in the North American energy sector along with enhanced income and tax revenue for all three countries. Such a dramatic shift will also de-tether the continent from the instability of the Middle East while strengthening commercial relationships with Europe and Asia.
President Donald Trump loves to brag about U.S. energy dominance. Let’s modify the conversation and start talking about North American energy dominance.
Bernard L. Weinstein
Bernard L. Weinstein is associate director of the Maguire Energy Institute and adjunct professor of business economics in the Cox School of Business at Southern Methodist University. The Op-Ed first appeared in The Hill.
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