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Meet the world’s largest net oil importer: China—Erica Alini

Canada will supply the new #1

As of October of this year, the U.S. will cease to be the world’s largest net oil importer, a title it’s held, somewhat reluctantly, since the 1970s, the U.S. Energy Information Administration predicts. Taking over as the new champion foreign-oil guzzler will be, of course, China.

None of this is unexpected — analysts have been awaiting this moment for years — but it’s happening a little faster than foreseen. Only a few months ago the EIA had predicted the historical takeover wouldn’t take place until 2014. An analysis published earlier this year by the Organization of Petroleum Exporting Countries had given roughly the same time frame. Instead, it seems, the People’s Republic might soar ahead of the U.S. as early as this fall.

The shift, an EIA report released on Friday noted, reflects both a steadily growing Chinese demand and flat-lining U.S. oil imports as a result of America’s shale oil boom.

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Big oil exporters have understandably been following the Great Shift with some apprehension. In February, OPEC anticipated demand for its members’ oil in 2013 would dip by about 100,000 barrels per day compared to previous forecasts, mainly because of increased production in North America. Nigeria, possibly the hardest hit among U.S. suppliers, has seen its exports to America plummet to the lowest level in years.

Canada, as Canadian Business readers know well, has had its share of headaches as well. The shale revolution weakened a strong and intuitive argument in favour of the Keystone, namely that the pipeline would serve to transport much needed fuel to be used domestically in the U.S. And Prime Minister Stephen Harper’s pledge to turn to China after Washington’s temporary rejection of the Keystone in early 2012, hasn’t amounted to much so far. Did we miss both boats?

Hardly. Among oil-exporting countries, Canada remains enviably positioned. The economic case for building Keystone, for one, still stands. The U.S. can produce as much shale oil as it wants, but its Gulf Coast refineries are geared toward heavier kinds of crude that can easily process oil sand bitumen but aren’t geared toward the lighter crude coming out of, say North Dakota’s Bakken play. Of course, those refineries could be re-tooled, but that wouldn’t make much economic sense.


Second, despite much talk of “energy independence” down south, the truth is, though, that Uncle Sam’s domestic production won’t insulate America from oil-price swings. As U.S. domestic oil production grows, fields in other parts of the world — in Mexico, for example, and many parts of China — are approaching maturity. The concept of “North American energy security,” on the other hand, has more credibility. The idea is that the U.S. and Canada, operating as a closely integrated energy market, would be able to better cope with supply-side shocks originating elsewhere in the world.

As far as China is concerned, Canada is a very attractive supplier for Beijing. The Chinese leadership, and particularly the military, is very concerned about oil import dependency and has made a concerted effort to keep its foreign oil sources as diversified as possible. Still, though China has managed not to rely on any single country for more than a small percentage of its oil needs, its imports are still quite concentrated in terms of geographical region and in unstable regions at that, namely the Middle East and Africa. Canada — reliable, stable Canada — is a country Beijing officials would love to see more of in their oil-imports pie chart. Whether it is through the Keystone XL, an all-Canadian west-to-east pipeline, or rail, there is no question that an increasing share of Canada’s oil will be heading to China once its get to our shores.

In short, Canada is perfectly positioned to serve the interests of both the world’s number one and the number two oil importer — even if they trade places. Lucky us.

Erica Alini is a California-based reporter and a regular contributor to, where she covers the U.S. economy.