• 4 minutes England Running Out of Water?
  • 7 minutes Trump to Make Allies Pay More to Host US Bases
  • 10 minutes U.S. Shale Output may Start Dropping Next Year
  • 14 minutes Washington Eyes Crackdown On OPEC
  • 1 hour One Last Warning For The U.S. Shale Patch
  • 8 hours Russian Effect: U.S. May Soon Pause Preparations For Delivering F-35s To Turkey
  • 5 hours Chile Tests Floating Solar Farm
  • 3 mins China's Expansion: Italy Leads Europe Into China’s Embrace
  • 15 hours Poll: Will Renewables Save the World?
  • 15 hours New Rebate For EVs in Canada
  • 7 hours Trump Tariffs On China Working
  • 9 hours Trump sells out his base to please Wallstreet and Oil industry
  • 6 hours Biomass, Ethanol No Longer Green
  • 24 hours Boeing Faces Safety Questions After Second 737 Crash In Five Months
  • 1 day Oil-sands recovery by solvents has started on a trial basis; first loads now shipped.
  • 9 hours Read: OPEC THREATENED TO KILL US SHALE
  • 13 hours 3 Pipes: EPIC 900K, CACTUS II 670K, GREY OAKS 800K
  • 18 hours The Political Debacle: Brexit delayed
Alt Text

World’s Top Commodity Trader Sees Peak Oil Demand Looming

Vitol, the world’s largest independent…

Alt Text

Oil Slips As Alberta Relaxes Oil Production Cuts

The Canadian province of Alberta…

Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

More Info

Trending Discussions

Will Trump Send Electricity Bills Soaring?

After the election of Donald Trump as President, one of the cornerstones of the modern global economic system is being questioned. Trump built his campaign on questioning the status quo, and in economics that has largely meant deriding free trade. This could impact an under-the-radar area of trade between the U.S. and Canada – wholesale electricity.

Electricity trading is a new area of opportunity for trade among the NAFTA members, and it’s an area that has been growing rapidly. For instance, in resource and waterway rich Canada, hydroelectric power is abundant and cheap. Electricity harnessed from dams and reservoirs in Quebec, Manitoba, and British Columbia accounted for 63 percent of Canada’s overall electric supply in 2015.

While the U.S. and Canada have been trading electricity for more than a century - since well before NAFTA – free trade between the countries has contributed to greater levels of trade. In 2014 for instance, Canada exported 45.6 Terawatt hours of electricity to the U.S. In 2015 that number rose to 59.7 Terwatt hours.

That electricity was worth roughly $2.1 billion.

Those electricity imports helped to stave off potential blackouts as electricity production in the Pacific Norwest suffered due to a drought reducing output from hydropower in Washington, Oregon, and California.

Related: Asian Crude Markets On Edge As OPEC Meets

In New England, where power prices are extremely high compared to national averages, Canadian exports would help cut costs for consumers. Canadian exporters are attempting to tap this market through six new transmission line projects that are in various stages of planning and construction.

It’s unclear if all of the projects will go through because of local opposition to power lines and a preference by some area residents for other sources of power. Still, with retail rates in some areas of New England as high as $0.26 per kwh, it is clear this is an opportunity.

Energy exports from Canada could be either clean exports like hydropower or conventional like shale oil.

Both types have value in different areas, just as U.S. exports to Canada do.

Indeed, because of the difficulty of transmitting electricity or moving oil, it’s entirely possible that Canada could export to the U.S. while the U.S. exports the exact same good to Canada as well. U.S. oil and natural gas production from Pennsylvania could help power Ontario and Quebec for instance, even as Canadian shale flowed through pipelines from Alberta to the U.S. Infrastructure matters a lot in these settings, especially given the difficulties most companies are facing in building new pipelines (Exhibit A: see the Dakota Access Pipeline).

Related: This Oil Major Just Circumvented Sanctions On Iran

Only time will tell how changes in free trade impact the U.S.-Canada energy markets or the nascent market for Mexican oil. Still, it is clear that companies looking to capitalize on trade probably face an uphill political battle compared to the environment a year ago.

The irony of President Trump’s position is that economists from both sides of the aisle almost universally agree that free trade is good.

There are actually more Republican economists than Democratic economists according to industry surveys, yet President Trump is ignoring that wing of the party.

Despite the economic reality that free trade is an overall positive for the country as a whole, there are several weaknesses which make it vulnerable as a political point.

First, trade is not positive for every single individual in a country, and second, trade may have short term negative consequences. These points are what has undermined the free trade argument for many Americans and are what is jeopardizing U.S.-Canadian electricity trading.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment
  • Oilracle on November 30 2016 said:
    --"Only time will tell how changes in free trade...."--

    What is "free trade?" As of today it means America looses and lives from swelling National Debt.

    Try to buy all these imports without borrowed and printed money...
  • Joe on November 30 2016 said:
    Although President Trump feels that America needs to revamp trade relationships with its trading partners, I think this pertains mostly to countries that have ultra low wage structures that are sapping American jobs. Canada on the other hand, has a wage structure that is quite similar to the USA. There is no significant risk of losing jobs to Canada. Canada has always been a good trade partner, supplying oil, natural gas and electrical power when America needs it. Canada can be relied upon to displace the entirety of Saudi Oil imports if President Trump wishes. Another thing. When America was fighting terrorism in Afghanistan, Canadian soldiers were fighting side by side with American solders.
    Who would want to damage a relationship like that?

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News