Canada Warns of Potential Energy Retaliation Against US Tariffs #

Ontario Premier Threatens to Cut Power Exports #

Canada could retaliate against threatened tariffs by shutting down energy flows to the United States. The Premier of Ontario warned that Canada must use every tool in its toolbox if a 25% tariff on Canadian imports is imposed.

The threat specifically applied to electricity the United States imports from Canada. “Canadians get hurt, but I can assure you one thing: The Americans are going to feel the pain as well, and isn’t that unfortunate,” the Premier stated.

The proposed tariffs could plunge the Canadian economy into a painful recession. Some in Canada are pushing for a forceful response that could temporarily disrupt power and fuel to some Americans.

A full-blown trade war between the United States and Canada could ultimately damage both economies, hurting consumers and businesses on either side of the border.

US-Canada Energy Relationship #

The United States regularly imports hydropower from Ontario, Quebec and British Columbia. Canada is the leading source of imported electricity into the United States, although it represents a relatively small piece of the pie of total consumption.

Last year, the United States imported 38.9 million megawatt hours of electricity, with 33.2 million megawatt hours coming from Canada. However, this represents less than 1% of annual US electricity consumption.

The United States and Canada have long relied on each other to meet demands for power during periods of peak demand or weak supply. Canada imports US electricity when hydropower generation is low, such as during droughts.

Power transmission lines linking the United States and Canada are part of a complex and highly interconnected power system, with connections spanning New England to the Pacific Northwest.

Potential Impact and Vulnerabilities #

A sudden change in the close energy relationship could create headaches for US states along the border with Canada that at times rely on electricity imports. However, these problems would likely only be temporary.

The United States has abundant electricity resources and the option to shift power to regions that need it. Even in an extended outage, the US has the ability to add more generation capacity in a relatively short period of time.

Canada could potentially have more leverage over America in areas that are harder for US officials to make up for, including aluminum and nickel.

Oil Imports and Potential Disruptions #

Canada is the leading source of America’s foreign oil. Last year, the United States imported 1.4 million barrels of Canadian crude per day, making up more than half of the total 2.4 million barrels of US oil imports.

Some refineries in the Midwest and Great Lakes regions rely on Canadian crude to produce gasoline, diesel and jet fuel. The loss of Canadian oil could increase prices, at least temporarily, and make it difficult for some gas stations to find fuel.

However, analysts are skeptical that Canada would block oil exports to the United States, as it would severely impact its own economy. The opening of the Trans Mountain Pipeline does leave open the possibility that Canada could eventually start to sell significant amounts of oil to Asian nations.

US oil production has increased dramatically over the past two decades due to the shale revolution, potentially mitigating the impact of a loss of Canadian oil imports.

Provincial Perspectives #

While Ontario’s premier has suggested cutting off electricity exports to America, it’s unclear whether major oil-producing provinces would consider similar actions.

The premier of Alberta made it clear there’s little appetite for such a move, stating, “Under no circumstances will Alberta agree to cut off oil and gas exports.” She expressed a preference for a diplomatic approach to addressing trade concerns.