In the News April 12

Extent of Integration of Canadian Energy Sector Within U.S. Economy

For Your Information

Analyzing Contributions of Canadian Crude Oil Sector to U.S. Petroleum Refineries

The report on the Canadian Energy Centre (CEC) analyzing the contributions of the Canadian crude oil sector to U.S. petroleum refineries points out that U.S. imports of Canadian heavy oil have steadily increased over the last two decades to meet demand. The following extracts are taken directly from the report of the CEC without comment or indication of what has been left out.

For the full report click here.

Over the past two decades, Canada’s crude oil sector has been making a growing contribution to the operations of U.S. petroleum refineries.

U.S. petroleum refineries are converting Canadian crude oil, including heavy oil, into products that people in the United States use daily, including transportation fuels (gasoline and diesel), chemicals, and plastics.

The economic impacts of the U.S. refinery industry to the American economy are substantial, including $350 billion in GDP, $539 billion in gross output, over 40,000 jobs, and nearly $74,000 in mean annual wages earned. The availability of Canadian crude oil feedstock for the U.S. refineries to process is partly responsible for the industry’s economic growth and performance.

Overall, Canadian exports of crude oil to the various Petroleum Administration for Defense Districts, or PADDs, for processing have risen from over 1.3 million barrels per day in 2000 to over 3.8 million barrels per day in 2019, an increase of 183 per cent, at a time when overall U.S. oil imports fell sharply as domestic oil output increased. Canadian crude as a proportion of U.S. refinery feedstock has steadily risen over the past two decades from nearly nine per cent to over 22 per cent overall.

U.S. refineries are growing increasingly reliant on Canadian heavy oil, including oil from the oil sands. The total percentage of heavy crude oil that the U.S. imports from Canada as a share of all of its imports of Canadian oil has risen from 25.1 per cent in 2000 to 55.8 per cent in 2019, an increase of 122 per cent over the past two decades.

Continuing to build pipeline infrastructure such as TMX and Keystone XL is critical to maintaining a strong U.S. refining industry and increasing Canada’s share of the crude oil the industry uses, particularly in Petroleum Administration for Defense District 3 (PADD 3), the U.S. Gulf Coast, and PADD 5, the U.S. West Coast, which are configured to process more Canadian heavy oil.

If the United States is unable to increase its refining capacity because its access to Canadian crude oil supplies fails to grow or is limited, the U.S. will turn to crude oil imports from less-free countries, which in turn will risk North American energy security.

As noted by Oil Sands Magazine (OSM), “despite becoming more energy independent due to rising oil production, U.S. refineries are becoming increasingly more reliant on Canada’s heavy crude, which is required to meet feedstock specifications” (Oil Sands Magazine, 2020).

In this CEC Research Brief, we examine a number of metrics that illustrate the importance of Canadian crude oil, particularly heavy crude, to the operation of U.S. refineries in the five Petroleum Administration for Defense Districts (PADDs). The United States is divided into PADDs for the allocation of fuels derived from petroleum products, including gasoline and diesel fuel.

Key metrics of performance by U.S. refineries include Canadian crude oil exports processed at U.S. refineries, the percentage of Canadian feedstock those U.S. refineries use, and how reliant they are on heavy oil with an American Petroleum Institute (API) gravity index of 25 degrees or less.

There are currently 133 petroleum refineries operating across the 5 U.S. PADDS. That includes:

– 7 in PADD 1 (U.S. East Coast);

– 25 in PADD 2 (U.S. Midwest);

– 56 in the PADD 3 (U.S. Gulf Coast);

– 16 in PADD 4 (U.S. Rocky Mountains);

– and 29 in PADD 5 (U.S. West Coast) (Oil Sands Magazine, 2020).

– According to IBIS World, U.S. petroleum refiners contribute about $350 billion to the American economy, annually (IBIS World, 2020).

– The gross output of the U.S. refinery sector in 2019 was $539 billion. The refinery sector’s gross output has increased by nearly $326 billion or 153 per cent over the past two decades (U.S. Bureau of Economic Analysis, 2021).

– As of May 2019, there were 40,370 people employed in the U.S. petroleum refining industry (U.S. Bureau of Labor Statistics, 2020)

Workers’ Forum, posted April 12, 2022.