Former Canadian ambassador to the United States Frank McKenna is warning Canada’s failure to diversify its oil export markets may hamper its ability to extract favourable terms in the ongoing renegotiation of NAFTA. In an interview on BNN, McKenna said Canada’s reliance on the U.S. as a destination for all but a fraction of its oil exports has weakened both its negotiating position and ability to get fair market prices for domestically-produced oil.
“We now send 99 per cent of all of our oil and gas to America, number one, so they don’t have to do anything for it anymore because we have given up our leverage,” he said. “Number two, they are turning around and deeply discounting our production, as you would if you had a single customer for your production, in the last six or seven years Canada has lost $117 billion of national wealth by deeply discounting to the United States and not having access to world markets.”
McKenna said Canada’s lack of export diversification paired with the continued import of oil into the East Coast at higher prices simply wouldn’t fly anywhere else.
“We’re buying 700,000 barrels a day for eastern refiners from other places in the world at world prices,” he said. “There’s no other country in the world that would do anything as dumb as this.”
McKenna said the Trump administration’s approval of TransCanada’s proposed Keystone XL pipeline, long thought to be dead in the water, will only serve to deepen Canada’s reliance on the U.S. as an outlet for energy exports.
“We’ve ended up canceling Energy East, which would have given alternate access to markets and improved prices,” he said. “[Trump] approved right away Keystone XL, which is a mammoth pipeline all the way down to United States of America, so he now has almost captured all of our oil production at discounted prices.”
“I don’t know if he’s smart enough to think that far ahead, but the end result is we’ve lost all of our leverage, and we’re sitting there trying to play cards that are not as compelling as the cards we used to have.”