The Importance of Crude Oil

October 2010

Oil is a vital source of energy for the world and will likely remain so for many decades to come, even under the most optimistic assumptions about the growth in alternative energy sources. Most countries are significantly affected by developments in the oil market, either as producers, consumers, or both. In 2008, oil provided about 34% of the world’s energy needs, and in the future, oil is expected to continue to provide a leading component of the world’s energy mix.

The International Energy Agency (IEA) projects that oil will provide 30% of the world’s energy mix in 20304. In the United States and Canada about 2/3 of oil is used for transportation. In most of the rest of the world, oil is more commonly used for space heating and power generation than for transportation5. Oil is a key product for the world’s agriculture industry, which helps feed the world’s population of more than six billion.

Importance of Crude Oil to Canada.

The oil industry is a major driver of Canada’s economy:

  • Oil and gas companies make up 20 to 30% of the value of the Toronto Stock Exchange (TSX), and these companies account for about 5% of Canada’s Gross Domestic Product (GDP). The energy sector (including electricity, coal, and other energy sources) directly accounts for about 7% of Canada’s GDP.6
  • In 2008, the oil and gas extraction industry spent $54 billion in capital expenditures.7
  • In 2008, Canada’s petroleum exports (crude oil and petroleum products, such as gasoline and liquid petroleum gases) accounted for 19% of all our exports.8 Oil exports are a key component of Canada’s merchandise trade surplus with the outside world.
  • Millions of Canadians are affected by the petroleum industry, either through employment or ownership in shares of companies, Registered Retirement Savings Plans (RRSPs) and mutual funds. According to the TSX, the petroleum companies trading at the stock exchange were worth $357 billion9 as of December 31, 2009, with approximately half of these shares owned by Canadians.

Canada’s Position in Global Oil

According to the IEA and the BP Statistical Review, Canada is the world’s 6th largest oil producer (as illustrated in table 1). According to some forecasts, including those of the National Energy Board, with growing oil sands production, Canada could become the world’s 4th largest oil producer as early as 2015.

Table 1
2009 World’s Top Oil Producers
Rank Country Million barrels per day (Mb/D)
1 Russia 10.21
2 United States 8.07
3 Saudi Arabia 7.92
4 Iran 3.74
5 China 3.79
6 Canada 3.22
7 Mexico 2.97
Source: IEA Oil Market Report, April 13, 2010.

Unconventional crude oil is petroleum produced or extracted using techniques other than the traditional conventional oil well methods such as vertical oil wells. In Canada, 97% of our proved oil reserves are unconventional oil sands reserves. Canada’s oil sands are typically extracted using unconventional technology such as bitumen mining and in situ extraction.

Table 2
World’s Top Oil Reserves
Rank Country Reserves (Billion Barrels) OPEC Member
1 Saudi Arabia* 262.4 Yes
2 Canada 174.7 No
3 Iran 137.6 Yes
4 Iraq 115.0 Yes
5 Kuwait* 104.0 Yes
6 Venezuela 99.4 Yes
7 U.A.E. 97.8 Yes
* Included half of the Saudi-Kuwaiti “neutral zone” which has 5 billion barrels of proved reserves. Source: Oil and Gas Journal (December 21, 2009).

As seen in table 2, Canada’s proved oil reserves are the second largest in the world. This represents about 13% of the world’s proved oil reserves. Based on current Canadian rates of production, it would take more than 150 years to extract these reserves. Organization of Petroleum Exporting Countries (OPEC) member countries collectively control 70% of the world’s oil reserves, and produce about 40% of world oil production.

The amount of oil in-place (not all in-place amounts will be economically recoverable) in Canada’s oil sands is estimated at 1.8 to 2.5 trillion barrels. For comparison, the 150 year cumulative total of world oil production-to-date is approximately 1 trillion barrels.

As technology improves, some of Canada’s additional in-place oil sands resources will certainly become economic to produce. Even a fractional increase to the oil sands recovery rate could add large amounts of oil to Canada’s proved oil reserves. New experimental oil sands recovery methods such as Toe-to-Heel-Air-Injection (THAI) could, according to project proponents, increase the oil sands recovery rates to a much higher percentage than traditional methods.


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