Canadian Energy Centre
The importance of Canadian crude oil to refineries in the U.S.
From the Canadian Energy Centre
By Ven VenkatachalamOil from Canada supplies more than 23% of U.S. refinery feedstock, helping bolster North American energy security
Introduction
The refining industry¹ in the United States is one of the world’s largest, with capacity to process 18 million barrels of oil per day. Canada plays a crucial role by supplying more than one-fifth of the crude oil refined in the U.S.
The U.S.–Canada cross-border crude oil trade is essential to North American energy security. Canadian crude oil exports and the U.S. refinery industry are highly integrated. In recent years, Canada’s crude oil sector has been making a growing contribution to the operations of U.S. oil refineries.
U.S. refineries are converting Canadian crude oil, including heavy oil,² into products that North Americans use daily, such as transportation fuels (gasoline and diesel), chemicals, and plastics. Although the U.S. has increased its production of oil in recent years, U.S. refineries still rely on Canadian heavy crude oil to meet their feedstock (i.e., the raw materials and intermediate materials processed at refineries to produce finished petroleum products, otherwise known as refinery inputs) specifications.
In this CEC Fact Sheet, we examine several economic indicators that illustrate the importance of Canadian crude oil, particularly heavy crude, to U.S. refineries. This fact sheet also analyzes the refining industry’s direct and indirect economic impacts on the U.S. economy.
1. NAICS Code 324110 (Petroleum Refineries): This industry comprises
establishments primarily engaged in refining crude petroleum into refined petroleum.
2. A majority of the crude oil imported by the U.S. from Canada is heavy crude (between 15-25 API gravity). API gravity is a commonly used index for measuring the density of crude oil or refined products. Crude oil typically has an API between 15 and 45 degrees. The higher the API, the lighter the crude; the lower the API, the heavier the crude.
Imports of Canadian crude oil to refineries in the United States
The physical characteristics of crude oil determine how it is processed in refineries. Generally, heavy crude oil offers higher yields of low-value products (coke and asphalt) and lower yields of high-value products (gasoline). Heavy crude oil requires more complicated processing than lighter crude if it is to produce high-value products.
Overall, Canadian crude oil imports to U.S. refineries for processing have risen from over 1.3 million barrels per day in 2000 to just under 3.8 million barrels per day in 2022, an increase of 181 per cent (see Figure 1). The per cent of Canadian crude in U.S. refinery feedstock has steadily risen from nearly 9 per cent in 2000 to over 23 per cent by the end of 2022.
Source: U.S. Energy Information Administration (2024a, 2024b, 2024c)
The U.S. refining industry
Since the first U.S. refinery began operating in 1861, the refining industry has been one of the largest manufacturing sectors in the United States. There are currently 129 petroleum refineries across the five U.S. PADDS³ (125 operating refineries and five refineries that are idle but not permanently shut down) (see Table 1).
3. The United States is divided into five Petroleum Administration for Defense Districts (PADDs) for the allocation of fuels derived from petroleum products, including gasoline and diesel fuel. The geographic breakdown of PADDs enables U.S. policymakers to better analyze petroleum supplies in the country
Source: U.S. Energy Information Administration (2023)
Total refining capacity in the United States has risen from 16.2 million barrels of crude processed in 2000 to nearly 17.8 million barrels per day in 2022, an increase of over 8 per cent (see Figure 2). The refining utilization⁴ has also recovered, growing from 79 per cent during COVID-19 to a high of 91 per cent in 2022.
Source: U.S. Energy Information Administration (2024b)
The impact of the U.S. refining industry on the American economy
The estimated direct and indirect economic impacts of the U.S. refining industry in 2024 include 1.6 million direct and indirect jobs, $206 billion in labour income, $577 billion in direct and indirect value-added, and $1.6 trillion in what is known as “outputs,” i.e., the value of goods and services produced by the industry (see Table 2).⁵
4. Capacity measures how much crude oil refineries are able to process. Utilization measures how much is actually being processed (as a percentage of maximum capacity). 5. These projected amounts are in nominal U.S. dollars
Source: Author’s calculations using the IMPLAN modelling system. Details may not add up to totals due to rounding
Projected spending by the U.S. refining industry, 2024-2030
Figure 3 illustrates the industry’s projected annual spending between 2024 and 2030. Industry spending is expected to be US$58 billion in 2024, rising to US$62 billion by 2030. This includes operating expenditures (OPEX) and capital expenditures (CAPEX). Cumulatively, between 2024 and 2030, the industry is projected to spend over US$428 billion.⁶
6. These projected amounts are in nominal U.S. dollars and are calculated using the Rystad Energy UCube.
Source: Derived from Rystad Energy (2024), Service Market Solution
Conclusion
American refineries are critical to the country’s strategic interest. U.S. refineries are projected to spend more than $428 billion in the next seven years on operating and capital expenditures. The industries support millions of jobs. Canadian crude is an important part of the equation. It supplies more than 23 per cent of U.S. refinery feedstock.
Not only are Canadian crude oil supplies critical for the U.S. refining industry, but they are key to North American energy security. Limiting access to Canadian crude oil for U.S. refineries would require increased U.S. imports from less-free countries, which in turn would risk North American energy security.
References
Rystad Energy (2024), Service Market Solution <http://tinyurl.com/28fmv6a6>; U.S. Energy Information Administration (Undated), Oil and Petroleum Products Explained: Refining Crude Oil <http://tinyurl.com/3b2uwrxh>; U.S. Energy Information Administration (2023), Refinery Capacity Report <http://tinyurl.com/2s4ybz9z>; U.S. Energy Information Administration (2024a), Petroleum and Other Liquids: PADD District Imports by Country of Origin <http://tinyurl.com/58mzvtts>; U.S. Energy Information Administration (2024b), Petroleum and Other Liquids: Refinery Utilization and Capacity <http://tinyurl.com/3wx957k4>; U.S. Energy Information Administration (2024c), Petroleum and Other Liquids: U.S. Imports by Country of Origin <http://tinyurl.com/bdcsbwhn>; U.S. Environmental Protection Agency (Undated), Appendix A — Overview of Petroleum Refining, Proposed Clean Fuels Refinery DEIS <http://tinyurl.com/dveyzc8k>.
Marathon Petroleum’s Detroit refinery in the U.S. Midwest, the largest processing area for Canadian crude imports. Photo courtesy Marathon Petroleum
From the Canadian Energy Centre
More than 450,000 kilometres of pipelines link Canada and the U.S. – enough to circle the Earth 11 times
As U.S. imports of Canadian oil barrel through another new all-time high, leaders on both sides of the border are warning of the threat to energy security should the incoming Trump administration apply tariffs on Canadian oil and gas.
“We would hope any future tariffs would exclude these critical feedstocks and refined products,” Chet Thompson, CEO of the American Fuel & Petrochemical Manufacturers (AFPM), told Politico’s E&E News.
AFPM’s members manufacture everything from gasoline to plastic, dominating a sector with nearly 500 operating refineries and petrochemical plants across the United States.
“American refiners depend on crude oil from Canada and Mexico to produce the affordable, reliable fuels consumers count on every day,” Thompson said.
The United States is now the world’s largest oil producer, but continues to require substantial imports – to the tune of more than six million barrels per day this January, according to the U.S. Energy Information Administration (EIA).
Nearly 70 per cent of that oil came from Canada.
Many U.S. refineries are set up to process “heavy” crude like what comes from Canada and not “light” crude like what basins in the United States produce.
“New tariffs on [Canadian] crude oil, natural gas, refined products, or critical input materials that cannot be sourced domestically…would directly undermine energy affordability and availability for consumers,” the American Petroleum Institute, the industry’s largest trade association, wrote in a recent letter to the United States Trade Representative.
More than 450,000 kilometres of oil and gas pipelines link Canada and the United States – enough to circle the Earth 11 times.
The scale of this vast, interconnected energy system does not exist anywhere else. It’s “a powerful card to play” in increasingly unstable times, researchers with S&P Global said last year.
Twenty-five years from now, the United States will import virtually exactly the same amount of oil as it does today (7.0 million barrels per day in 2050 compared to 6.98 million barrels per day in 2023), according to the EIA’s latest outlook.
“We are interdependent on energy. Americans cutting off Canadian energy would be like cutting off their own arm,” said Heather Exner-Pirot, a special advisor to the Business Council of Canada.
Trump’s threat to apply a 25 per cent tariff on imports from Canada, including energy, would likely “result in lower production in Canada and higher gasoline and energy costs to American consumers while threatening North American energy security,” Canadian Association of Petroleum Producers CEO Lisa Baiton said in a statement.
“We must do everything in our power to protect and preserve this energy partnership.”
Energy products are Canada’s single largest export to the United States, accounting for about a third of total Canadian exports to the U.S., energy analysts Rory Johnston and Joe Calnan noted in a November report for the Canadian Global Affairs Institute.
The impact of applying tariffs to Canadian oil would likely be spread across Canada and the United States, they wrote: higher pump prices for U.S. consumers, weaker business for U.S. refiners and reduced returns for Canadian producers.
“It is vitally important for Canada to underline that it is not just another trade partner, but rather an indispensable part of the economic and security apparatus of the United States,” Johnston and Calnan wrote.
From the Canadian Energy Centre
Record oil production, more Indigenous ownership and inching closer to LNG
It’s likely 2024 will go down in history as a turning point for Canadian energy, despite challenging headwinds from federal government policy.
Here’s some of the good news.
10. New carbon capture and storage (CCS) projects to proceed
Photo courtesy Shell Canada
In June, Shell announced it will proceed with the Polaris and Atlas CCS projects, expanding emissions reduction at the company’s Scotford energy and chemicals park near Edmonton.
Polaris is designed to capture approximately 650,000 tonnes of CO2 per year, or the equivalent annual emissions of about 150,000 gasoline-powered cars. The CO2 will be transported by a 22-kilometre pipeline to the Atlas underground storage hub.
The projects build on Shell’s experience at the Quest CCS project, also located at the Scotford complex. Since 2015, Quest has stored more than eight million tonnes of CO2. Polaris and Atlas are targeted for startup in 2028.
Meanwhile, Entropy Inc. announced in July it will proceed with its Glacier Phase 2 CCS project. Located at the Glacier gas plant near Grande Prairie, the project is expected onstream in mid-2026 and will capture 160,000 tonnes of emissions per year.
Since 2015, CCS operations in Alberta have safely stored roughly 14 million tonnes of CO2, or the equivalent emissions of more than three million cars.
9. Canada’s U.S. oil exports reach new record
Expanded export capacity at the Trans Mountain Westridge Terminal. Photo courtesy Trans Mountain Corporation
Canada’s exports of oil and petroleum products to the United States averaged a record 4.6 million barrels per day in the first nine months of 2024, according to the U.S. Energy Information Administration.
Demand from Midwest states increased, along with the U.S. Gulf Coast, the world’s largest refining hub. Canadian sales to the U.S. West Coast also increased, enabled by the newly completed Trans Mountain Pipeline Expansion.
8. Alberta’s oil production never higher
A worker at Suncor Energy’s MacKay River oil sands project. CP Images photo
In early December, ATB Economics analyst Rob Roach reported that Alberta’s oil production has never been higher, averaging 3.9 million barrels per day in the first 10 months of the year.
This is about 190,000 barrels per day higher than during the same period in 2023, enabled by the Trans Mountain expansion, Roach noted.
7. Indigenous energy ownership spreads
Communities of Wapiscanis Waseskwan Nipiy Limited Partnership in December 2023. Photo courtesy Alberta Indigenous Opportunities Corporation
In September, the Bigstone Cree Nation became the latest Indigenous community to acquire an ownership stake in an Alberta energy project.
Bigstone joined 12 other First Nations and Métis settlements in the Wapiscanis Waseskwan Nipiy Holding Limited Partnership, which holds 85 per cent ownership of Tamarack Valley Energy’s Clearwater midstream oil and gas assets.
The Alberta Indigenous Opportunities Corporation (AIOC) is backstopping the agreement with a total $195 million loan guarantee.
In its five years of operations, the AIOC has supported more than 60 Indigenous communities taking ownership of energy projects, with loan guarantees valued at more than $725 million.
6. Oil sands emissions intensity goes down
Oil sands steam generators. Photo courtesy Cenovus Energy
A November report from S&P Global Commodity said that oil sands production growth is beginning to rise faster than emissions growth.
While oil sands production in 2023 was nine per cent higher than in 2019, total emissions rose by just three per cent.
“This is a notable, significant change in oil sands emissions,” said Kevin Birn, head of S&P Global’s Centre for Emissions Excellence.
Average oil sands emissions per barrel, or so-called “emissions intensity” is now 28 per cent lower than it was in 2009.
5. Oil and gas producers beat methane target, again
Photo courtesy Tourmaline
Data released by the Alberta Energy Regulator in November 2024 confirmed that methane emissions from conventional oil and gas production in the province continue to go down, exceeding government targets.
In 2022, producers reached the province’s target to reduce methane emissions by 45 per cent compared to 2014 levels by 2025 three years early.
The new data shows that as of 2023, methane emissions have been reduced by 52 per cent.
4. Cedar LNG gets the green light to proceed
Haisla Nation Chief Councillor Crystal Smith and Pembina Pipeline Corporation CEO Scott Burrows announce the Cedar LNG positive final investment decision on June 25, 2024. Photo courtesy Cedar LNG
The world’s first Indigenous majority-owned liquefied natural gas (LNG) project is now under construction on the coast of Kitimat, B.C., following a positive final investment decision in June.
Cedar LNG is a floating natural gas export terminal owned by the Haisla Nation and Pembina Pipeline Corporation. It will have capacity to produce 3.3 million tonnes of LNG per year for export overseas, primarily to meet growing demand in Asia.
The $5.5-billion project will receive natural gas through the Coastal GasLink pipeline. Peak construction is expected in 2026, followed by startup in late 2028.
3. Coastal GasLink Pipeline goes into service
Workers celebrate completion of the Coastal GasLink Pipeline. Photo courtesy Coastal GasLink
The countdown is on to Canada’s first large-scale LNG exports, with the official startup of the $14.5-billion Coastal GasLink Pipeline in November.
The 670-kilometre pipeline transports natural gas from near Dawson Creek, B.C. to the LNG Canada project at Kitimat, where it will be supercooled and transformed into LNG.
LNG Canada will have capacity to export 14 million tonnes of LNG per year to overseas markets, primarily in Asia, where it is expected to help reduce emissions by displacing coal-fired power.
The terminal’s owners – Shell, Petronas, PetroChina, Mitsubishi and Korea Gas Corporation – are ramping up natural gas production to record rates, according to RBN Energy.
RBN analyst Martin King expects the first shipments to leave LNG Canada by early next year, setting up for commercial operations in mid-2025.
2. Construction starts on $8.9 billion net zero petrochemical plant
Dow’s manufacturing site in Fort Saskatchewan, Alberta. Photo courtesy Dow
In April, construction commenced near Edmonton on the world’s first plant designed to produce polyethylene — a widely used, recyclable plastic — with net zero scope 1 and 2 emissions.
Dow Chemicals’ $8.9 billion Path2Zero project is an expansion of the company’s manufacturing site in Fort Saskatchewan. Using natural gas as a feedstock, it will incorporate CCS to reduce emissions.
According to business development agency Edmonton Global, the project is spurring a boom in the region, with nearly 200 industrial projects worth about $96 billion now underway or nearing construction.
Dow’s plant is scheduled for startup in 2027.
1. Trans Mountain Pipeline Expansion completed
The “Golden Weld” marked mechanical completion of construction for the Trans Mountain Expansion Project on April 11, 2024. Photo courtesy Trans Mountain Corporation
The long-awaited $34-billion Trans Mountain Pipeline Expansion officially went into service in May, in a game-changer for Canadian energy with ripple effects around the world.
The 590,000 barrel-per-day expansion for the first time gives customers outside the United States access to large volumes of Canadian oil, with the benefits flowing to Canada’s economy.
According to the Canada Energy Regulator, exports to non-U.S. locations more than doubled following the expansion startup, averaging 420,000 barrels per day compared to about 130,000 barrels per day in 2023.
The value of Canadian oil exports to Asia has soared from effectively zero to a monthly average of $515 million between June and October, according to ATB Economics.
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