How will bringing in Canadian oil benefit the US economy?
Developing Canadian oil sands is a capital intensive endeavor, requiring billions of dollars of investment over the next several decades. This investment will give rise to a long-lived, robust period of increased economic activity in Canada. And due to the deep and rich trading relationship between Canada and the United States, the United States will also get significant economic benefits from this increased activity, according to a Canadian Energy Research Institute (CERI) study. The benefits will manifest themselves in terms of increased economic output, GDP and job creation. By the numbers, full Canadian oil sands development and utilization would result in $775 billion to the U.S. GDP as well as 500,000 new U.S. jobs by 2035.
The Council on Foreign Relations (CFR) has also underlined the value of the United States’ relationship with its friendly neighbor to the North. Since Canada conducts a significant amount of business with the United States, a CFR study notes that “a greater fraction of money used to buy Canadian oil will likely later be spent directly on U.S. goods and services, and hence contribute directly to U.S. growth.”
To better understand the economic benefits of importing Canadian oil, take a look at the above graph, which is based on Census Bureau data. The graph demonstrates that in 2011, for every $1 of goods imported from Canada, the United States received $0.89 back―from goods they imported from America. Conversely, the U.S. received $0.33 cents back for every $1 of goods imported from OPEC countries.
The Keystone XL pipeline would transport up to 830,000 barrels of Canadian oil a day. At $100 a barrel, that equals $83 million a day to Canada. So if the pattern represented in the graph holds, the United States would then expect to receive almost $74 million a day back from exports to Canada. However, if we consider that same 830,000 barrels of oil a day from OPEC, the U.S. would get about $27 million a day. By importing Canadian oil rather than OPEC resources, the United States would make an extra $47 million per day―or an extra $17 billion a year.
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