With serious endeavours to reduce dependence on Russian energy supplies underway, global energy markets are faced with a real challenge: where will the oil come from to fill the emerging supply shortfall?
As part of their efforts to punish Russia for its Ukraine misadventure, Western countries are trying to cut off their dependence on Russian oil and gas as much as possible.
In the meantime, gasoline prices are breaking records.
All this means additional pain for consumers. How boycotting Russian supplies can be sustained remains uncertain.
New steps are being considered to lower the budget pain for the common man.
The United States is considering releasing more oil from its emergency reserves. Some reports say the total could exceed 30 million barrels. Would this impact global gas prices?
Given recent experiences, it seems unlikely.
The Canadian role in the emerging global crude oil equation is also under focus.
Canada, the world’s fourth-largest crude producer, produces about 4.7 million barrels per day (bpd) of oil and exports about four million bpd.
For some time, Canada – and especially energy-rich Alberta – have been pitching that its crude is clean and is a better ethical choice than oil produced in rogue regimes like Venezuela, Saudi Arabia, Iran and Russia. Alberta officials have insisted their crude could offer the additional supply sought elsewhere.
Canada has committed to supplying an additional 300,000 bpd to the markets by the end of the year, Natural Resources Minister Jonathan Wilkinson said Thursday at the end of the International Energy Agency meeting in Paris. Wilkinson said two-thirds of that is oil, and the rest is natural gas.
It won’t be easy. Canada lacks the infrastructure to ship oil or gas to Europe directly. Instead, any additional exports would need to travel through existing pipelines to the United States. Reports claim the United States has agreed to reroute the Canadian crude and its products to the Gulf of Mexico for export to Europe, either before or after it’s refined.
However, a BBC report says that the additional volume committed by Canada is a fraction of the three million barrels a day that the IEA says will be removed from global markets by next month because of sanctions against Russia.
And getting this additional volume from Canada to the markets won’t be easy. Pipelines carrying Canadian crude are nearly full, said Ben Brunnen, vice-president of oil sands, fiscal and economic policy for the Canadian Association of Petroleum Producers (CAPP), which represents the country’s largest oil producers.
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Producing more Canadian oil will be much easier said than done, considering that production levels were already high this winter, CBC reported. Alberta oil production hit a record high in October 2021 and reached a record for the first 10 months of any year. So the industry hasn’t been holding back.
Analysts like Rory Johnston, founder of the Commodity Context newsletter, appear uncertain about how wide Canada could open its taps in the shorter term. Building new oil sands facilities or expanding operations can take several years and billions of dollars. The gestation period is long.
Canada is also looking at reducing the key Russian role in the global nuclear energy sector. The variable nature of solar and wind power means “there is a role for nuclear in many jurisdictions in terms of providing baseload rather than intermittent power,” BBC quoted Wilkinson as saying.
Russia mines and processes a great deal of uranium for power stations. But Canada is “absolutely” prepared to export more uranium, Wilkinson said. “Our uranium producers actually do have excess capacity and certainly could ramp up to help to fill the gap that Russian supplies will provide.”
But the task at hand is ominous.
Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris. For interview requests, click here.
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