Canada has become the main exporter of oil to the U.S. meeting demand from refineries
Energize Weekly, August 14, 2024
Canada has become the main source of imported oil for U.S. refineries, accounting for 60 percent of crude imports as of January 2024 – almost doubling its share in 10 years, according to the federal Energy Information Administration (EIA).
The Canadian share of imports has grown as both Canada’s oil production and U.S. refinery capacity has increased. In 2023, Canada was producing 4.6 million barrels a day. That was almost three times the country’s domestic refinery capacity.
Canada exported about 3.6 million barrels of crude oil a day to the U.S. in 2023. The second largest exporter was Mexico, with a little under 1 million barrels a day, although it also imported U.S. oil for a net deficit in trade.
Meanwhile, U.S. refinery capacity at the start of 2024 was 2 percent higher than at the beginning of 2023, reaching 18.4 million barrels a day. The three largest refiners – Marathon, Valero, and ExxonMobil – all reported increases in capacity year-over-year.
The capacity increases mainly reflect expansions at existing facilities. Notably, ExxonMobil’s addition of 240,000 barrels a day of capacity – a 65 percent increase – at its Beaumont, Texas, refinery.
Canadian exports grew by an average of 4 percent in every year from 2013 to 2023, with the country’s share of U.S. refinery throughput reaching 24 percent in 2023, up from 17 percent in 2013.
“Many U.S. refineries are designed to handle heavy oils like those produced in Canada’s oil sands, yielding refined products such as transportation fuels (gasoline and diesel), chemicals, and plastics,” the EIA said.
Being a neighbor also allows pipeline transport of oil from Canada’s western provinces, especially the large crude oil production area in Alberta, to U.S. refineries.
“Inland regions of the United States, particularly the Midwest and Rocky Mountains are closely connected to Canada’s oil markets via pipeline and rail networks. Additional takeaway capacity exists for shipments to the Gulf Coast,” the agency said.
Pipeline capacity for Canadian crude has grown in the last four years with the Express Pipeline capacity increasing 8 percent to 310,000 barrels a day in 2020 and the Trans Mountain Expansion Project (TMX) nearly tripling Pacific Coast capacity to 890,000 barrels a day.
The TMX is designed to bolster Canada’s access to global markets, alleviate bottlenecks and drive higher oil production in Canada.
Western Canadian Select crude oil (WCS) typically fetches lower prices than the U.S. benchmark West Texas Intermediate (WTI). Part of the difference is that WCS is a heavier blend, requiring more processing and advanced refinery units with higher operating costs to refine it.
In addition, Canada’s crude oil production has outpaced the growth in pipeline capacity to markets outside of Canada. This also results in WCS prices remaining significantly discounted compared to WTI.
“Canada’s oil producers have used rail transportation—a more expensive mode of oil transport than pipelines—to deliver crude oil to the United States, also requiring a larger price discount for U.S. refiners of WCS crude oil to remain economical,” the EIA said.
