Donald Trump is celebrating low oil prices, and he’s thanking Saudi Arabia for what he calls a “big Tax Cut for America and the World [sic].”
Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!
— Donald J. Trump (@realDonaldTrump) November 21, 2018
But he might want to take another look at where the U.S. gets most of its imported oil. We Canadians are a polite bunch, not known to speak up. Luckily Bruce Heyman, former U.S. Ambassador to Canada, correctly pointed out it’s actually Canada.
Even with all our increased production, the US still needs imported oil and who is our #1 supplier? Nope It’s not Saudi Arabia! If you guessed Canada our best friend you are right. We really don’t need Saudi oil because Canada can supply all our needs. https://t.co/j9lzpJ3QcM
— Bruce A. Heyman (@BruceAHeyman) November 21, 2018
In fact, Canada provides the U.S. with 4 times as much petroleum as Saudi Arabia. That includes crude oil, hydrocarbon gas liquids, refined petroleum products such as gasoline and diesel fuel, and biofuels including ethanol and biodiesel.
Around 79 per cent of Canadian crude gets sent across the border, the highest percentage in 10 years according to the National Energy Board. The NEB notes production in Canada is growing while domestic demand is falling. But the U.S. can’t seem to get enough. The NEB chalks that up to refineries in the Midwest and Gulf Coast transforming to process heavier Canadian oil.
Clearly, Canada is doing its part by sending cheap oil across the border. Western Canadian Select is hovering around its lowest level in a decade.
Consumers are benefiting at the pumps, but the situation is a drain on Canada’s GDP. Alberta Premier Rachel Notley says the price gap between WCS and WTI is costing the Canadian economy $80 million a day.
Does Trump really need to be besties with Saudi Arabia?
Trump has taken heat for his handling of the murder of Jamal Khashoggi. Critics are urging him to take a tougher stand.
“If we broke with them, I think your oil prices would go through the roof,” Trump told reporters on Tuesday. “I’ve kept them down. They’ve helped me keep them down.”
Reimposed sanctions on Iran make Saudi Arabia an even more powerful player on the world stage when it comes to oil.
“That gives Saudi Arabia room to fill the void,” The Schork Report’s Stephen Schork told Yahoo Finance Canada. “OPEC’s pricing power has been more intensified now.
But that doesn’t mean the Kingdom would drive up prices if relations with the U.S. splintered.
Oil is a huge part of Saudi Arabia’s economy, and Schork says the rise of alternative energy sources is very much on its radar. An elevated price would make oil far less attractive in comparison, bringing demand down.
“There’s no reason Saudi Arabia would want to create a situation where they would want to force oil prices back to that $100 and beyond level.”
Saudi Arabia does have options to boost prices though. But because so much of its oil is landlocked, Canada’s hands are pretty much tied.