As you should be well aware by now, North Dakota's production has finally surpassed the one million per day mark, making the Peace Garden State the second biggest oil producer in the U.S. behind Texas.
Add their historic production numbers to the rest of the United States, and we're getting that much closer to energy independence. But even though the U.S. is now producing more than 8 million barrels of oil per day, this isn't welcome news to everyone...
Among the many countries (mostly OPEC members) keeping a wary eye on U.S. output, Canada has been trying to protect itself should the U.S. become energy independent or even a net exporter of oil in the coming years.
Remember, 30% of Canada's annual GDP comes from exports, and 73% of those exports are shipped directly to the United States. These numbers can get really lopsided, too. According to the EIA, almost 99% of Canada's oil exports go to the United States.
Moreover, the U.S. receives about one-quarter of its foreign oil from Canada, so as production continues growing in plays like the Bakken, Eagle Ford, and Permian Basin, Canadian producers need to have a backup plan when their only client no long needs them.
Below, you'll see that the U.S. was importing roughly 3 million barrels per day from Canada in 2012:
So as you can imagine, losing those exports would be devastating to the Canadian economy.
The good news, however, is that the Canadian approved the Northern Gateway Pipeline which would deliver about 525,000 barrels of oil per day from Alberta's oil sands to the Pacific Coast.
The decision comes as the United States continues to balk on the Keystone XL pipeline. I guess the red-tape in Washington was simply too much for them, with President Obama continually delaying his decision on the controversial project.
It's no secret where this oil would be headed. Countries like China would welcome this new supply with open arms. Yet, there are still some major obstacles for the pipeline's approval...
The government of British Columbia – where the pipeline will end – isn't wholly convinced, and remains skeptical of the environmental issues posed from possible tanker spills along the Pacific Coast.
Let's not count this project out yet, however, and it seems as if the project is destined for construction, especially considering that it would give Canada some much needed diversity on its client list. You see, there's a slight caveat here – the U.S. still consumes a jaw-dropping 19 million barrels of oil everyday... and will continue to do so for the foreseeable future.
That said, Canadian drillers and government officials still have a bit of time to work out the details before the U.S. will be in a position to unfetter itself from Canadian crude.
Until next time,