Frequently Asked Questions

Is Canadian oil supply in jeopardy?

No. At present Canada's refineries are able to receive all the crude oil they need to meet demand.
Our inventories of both crude oil and refined oil products appear adequate for the coming winter season. They reflect normal levels for this time of year. Canada's supply situation, however, should be viewed in context. Through our membership in the International Energy Agency, we are committed to support the collective energy security of all IEA members, through sharing oil if an emergency should occur.

Is growth in demand in China and India causing all the tight supply?

Demand is growing in most world oil markets but has been increasing at a higher rate in non-OECD Asian countries, particularly China. Between 2003 and 2007 China's oil demand grew at 9 times the U.S. rate. However, projected 2007 demand for China is still only one third of the demand in the U.S. China consumes an average of 2 barrels of oil per capita while the U.S. consumes at the rate of 25 barrels per day.

Why do we send oil and natural gas to the United States?

Canada is both an importer and exporter of crude oil and refined petroleum products. In effect, Canada is a net exporter of crude oil.

We currently produce about 2.5 million barrels of oil per day and consume about 1.85 million barrels per day. Overall, Canada imports about 930,000 barrels per day and exports about 1.63 million barrels per day

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The structure of the Canadian oil market is a dual one. Oil is produced and exported from Western Canada and Newfoundland, while the refining industry in Atlantic Canada, Quebec and part of Ontario relies upon imported crude oil for feedstocks. This is because there is no transportation cost advantage in shipping crude oil from Western Canada to those refineries in Eastern Canada, which have relatively easy access to offshore crudes. Instead, the surplus Canadian crude oil production is exported to U.S. refineries that are relatively closer to the source of production. The east coast Canadian refineries, which rely on imported crude oil, export their surplus production to the United States. This ensures that Canada derives the maximum benefit from the development of its resources in terms of investment, employment and economic growth.

Why should Canadians reduce consumption to send more oil and natural gas to the United States?

Canadian and U.S. markets for petroleum products are fully integrated. Supply problems in the U.S. affect not only American consumers but Canadian consumers as well. Crude oil and petroleum products flow freely between the two countries. Although Canada is a net energy exporter, we import significant quantities of energy from the U.S. and Europe, mainly refined petroleum products and coal.

Canadian contributions to reducing consumption will help dampen world demand and prices. Again, the Office of Energy Efficiency has many useful tips on how to improve the efficiency by which we use energy.

Does Canada have adequate refining capacity?

While there has been no new refinery construction, refiners have invested in de-bottlenecking their operations, and expanding capacity to meet demands. As well, companies have invested significantly in meeting new and more stringent environmental standards.

Canada is already a significant net exporter of petroleum products. Canadian refineries produce 10% more petroleum product than is consumed domestically.

Why does Canada not have a Strategic Petroleum Reserve?

The issue of whether or not Canada should hold strategic oil reserves has been thoroughly examined over the years.

The cost of establishing, maintaining and administering such a reserve, and the logistical difficulties inherent in the transportation of oil outweigh the benefits of creating a national strategic petroleum reserve.

Commercial inventories of both crude oil and refined oil products are adequate for the winter season.

What can be done to ensure the security of our supply?

Canada's security of supply flows from our situation as a major energy supplier, our plans for dealing with oil supply emergencies, and our participation in collective international agreements like the International Energy Program.

If there were a major loss of supplies to the OECD area, Canada's economy would undoubtedly be affected because of the adverse effects on our trading partners and the worldwide price impacts. As members of the International Energy Agency, we participate in collective planning to reduce these adverse effects.

Are the oil companies earning excess profits?

Given the rising price of crude oil in international markets recently, it is to be expected that Canadian oil producers would benefit. The upstream (exploration and production) part of the industry is reporting good returns compared to those they experienced in 1998 and 1999 when crude oil prices were at historically low levels. A large portion of the profits generated over the past year will be reinvested by producers into exploration and development of additional oil supplies which contributes to the growth of the Canadian economy.

For most of the last decade refining margins have been well below sustainable levels. Canadian oil refiners will use their increased returns to help finance the new investment that will be needed over the next few years to meet new fuel specifications and emissions regulations required for environmental purposes. Increased margins have also served as an incentive for industry to invest in new refining capacity.

What is Canada doing to transition our oil-based economy to one based on new and alternative energy sources?

To ensure a smooth transition from an oil-based economy to one based on new and alternative energy sources, the Government of Canada is investing now in research and development to advance technology, and encourages the use of renewable energy sources to meet our energy needs. Natural Resources Canada is a major funder of this research, and is working closely with public-sector and private-industry partners to increase the use of renewable energies, to develop new fuels and technologies, and to encourage the responsible use of conventional energy, which will help secure Canada's long-term energy future.

As demonstrated in the recent ecoENERGY initiative announcement, the Government is also committed to increasing energy efficiency as well as the development of renewable energy sources and technologies. This initiative can reduce our dependence on petroleum while reducing air pollutants and other emissions associated with energy use. For more information on this initiative, we encourage you to visit the ecoENERGY Web site.