Americans hear this political talking point every major election from both Republicans and Democrats: “For reasons of national security, we cannot rely on sources of foreign oil”. About 28% of America’s oil was imported in 1970 compared to nearly 60% in 2008. When we think of “foreign oil”, we immediately look to the volatile Persian Gulf region (Saudi Arabia, Iraq, Kuwait, UAE, etc.) that provides the vast majority of America’s black gold needs. However, this could not be further from the truth. Contrary to what most would believe, these Persian Gulf countries account for only 17% of American oil imports, with Saudi Arabia claiming the largest share of those exports (1.076 million barrels per day). Rather, it is the Western Hemisphere that accounts for the vast majority of American oil imports, standing at an impressive 51%.
In fact, Canada by far is the largest exporter of oil to the U.S., accounting for 23.3% of its imports, followed by Mexico with 9.2%. It is also interesting to note that in the Southern Hemisphere, Venezuela, a country lead by anti-American President Hugo Chavez who recently threatened to cut off oil exports to its biggest customer if the U.S. intervened in the border conflict between Venezuela and Columbia, is responsible for 10.7% of American oil imports.
There is no doubt that a country faces a problem whenever its imports exceed its exports (even more so when this product is oil). However, importing the problem is not the solution as it means more American dollars leaving its borders, thus having less to revive the dismal domestic economy. Instead, the real issues are the strategic decisions the United States takes in order to make sure it imports oil from strong allies.
The $7 billion Keystone KL pipeline would funnel oil from Alberta’s fields down through the Midwest and connect with the vast networks of refineries in the Gulf Coast. The project would create thousands of jobs (a hot election topic) and it would break a supply jam due to older methods of transporting the oil and both countries would face benefits. Canada would undoubtedly gain with more oil revenue and Americans would be more comfortable buying oil on the same continent. (That is if we consider buying oil from Canada as being “foreign”). The American-Canadian relationship is quite unique and arguably one of the most successful international relationships in modern history. Both countries share one of the largest borders in the world with 90% of Canadians living within 100 miles of the American border. A staggering 200 million people cross the border annually, and more importantly, both nations have the largest trading relationship in the world with American exports at a staggering $230.3 billion north of the border. The Keystone pipeline deal makes not just political sense, but also economic sense.
Yet, the pipeline has been rejected by the Obama administration over remaining questions about the environmental impact the pipeline route would pose, which needed more “extensive studies” even though the U.S. government previously had four years to do so when TransCanada (pipeline builder) applied for the construction permit in 2008. A pragmatic argument against the environmental lobbyists who are opposed to the project would be that importing oil from Canada would do more to reduce greenhouse gas emissions than would shipping oil on polluting tankers from the Persian Gulf. In which case fierce environmental groups (an important political base for the President), opposed the project and began to publicly question Obama’s dedication to make American energy more renewable. Thus, with the upcoming Presidential elections in November, President Obama saw the Keystone issue as politically sensitive and would be addressed after the election in a quieter manner when TransCanada could “reapply”.
However, the cost to ensure calm political waters by temporarily shelving the project is a major strategic blunder for the United States. Days after the announcement, irked Canadians renewed their interest in constructing a $5.4 billion pipeline from Alberta to its Pacific ports in British Columbia for its oil to be shipped off to Asian markets, notably China. With the high oil prices throughout the world, Canadians will easily disregard the “special relationship” with the United States when they see the number of dollars offered by other nations hungry for oil, such as China. Even if President Obama and many Democrats secretly see the Keystone pipeline as more of a benefit than a negative, the project has fallen prey to the election cycle where it is more important to save a few caribou from their natural habitats than consider the positive economic returns both nations would reap. Buying more oil from Canada is the right step for the United States to wean itself off of oil from conflict-torn countries like Venezuela and eventually become import/export neutral. The rejection of the Keystone XL pipeline, sadly, is a grave strategic step backwards.