An oil field pumpjack works to produce crude while wind turbines produce green energy near Trochu, Alta., in 2022.Larry MacDougal/The Canadian Press
Joe Calnan is vice-president, energy and Calgary operations, at the Canadian Global Affairs Institute.
In the past year, it has become fashionable to call Canada an energy superpower. While the term is poorly defined, the federal government seems to have embraced the view that Canada’s strengths in energy can be used for leverage as we approach the first formal joint review of the United States-Mexico-Canada Agreement, or USMCA. Energy and Natural Resources Minister Tim Hodgson recently emphasized that those sectors are “Canada’s strongest cards” in the renegotiation.
Ottawa must be exceedingly careful in how we play these cards. Though we are a major energy exporter, a closer look at our infrastructure and mutual energy dependence with the U.S. reveals that we do not have as much leverage as we think. Also, countries that have used energy for leverage in the past have had mixed success at best in achieving their political goals.
Canada should therefore be very careful not to put our globally competitive and economically critical energy sector at risk, especially if energy measures are used to protect relatively small and uncompetitive industries.
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The energy superpower concept is alluring for a middle power like us. This concept emphasizes an area of strength, potentially making up for our relative weakness in economic and military power. But it is worth asking, can Canada actually claim to be an energy superpower?
I believe that for a country to qualify as an energy superpower, it needs to have the following: a large share of the world’s internationally-traded energy; free access to global energy markets; and national control over the production and export of energy. Countries such as Saudi Arabia and Russia can be defined as energy superpowers under these conditions.
Canada does not satisfy these conditions and therefore should not be considered an energy superpower. While our infrastructure is improving, it does not match the international access of Russia and Saudi Arabia. These countries have extensive seaborne energy export infrastructure for unparalleled access to customers around the world. Canada, on the other hand, is restricted to relatively low seaborne volumes and heavy dependence on a single customer.
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Canada’s international energy exports are overwhelmingly reliant on pipelines to the U.S. And bilateral energy trade with Washington is not one-way. Our two countries are better described as mutually dependent. While Canada is the largest supplier of American energy imports, much of Eastern Canada’s oil and natural gas is either sourced from American suppliers or uses infrastructure controlled by the U.S.
Canada also lacks national power over the energy sector, which is taken for granted in Russia and Saudi Arabia. While the federal government may be able to restrict energy exports or impose excise taxes, it cannot compel energy firms to invest in the face of deteriorating trade relations with Canada’s largest customer.
Fortunately, the benefits of being an energy superpower are overrated. Russia spent decades cultivating European dependence on its oil and natural gas, with the hope that it would tie European leaders’ hands in any conflict. Instead, Europe responded to the invasion of Ukraine by rapidly diversifying away from Russian energy with a combination of fuel switching, energy efficiency and import diversification. Russia has likely weakened itself more by losing European customers than it could gain by occupying Ukraine.
Russia’s experience is a cautionary tale for Canadian policy makers. The benefits of investment in Canada’s energy sector are the scale and quality of the resource, a relatively trustworthy investment environment, and proximity to the massive American market. Recklessly waving the energy weapon can disrupt these benefits, undermining the very investment Canada needs to diversify.