TransCanada Corporation (USA) (TRP), Enbridge Inc (USA) (ENB): U.S. and Canada Energy Fate Lies in Each Other’s Hands

Page 1 of 2

Canada’s oil industry is like Bizarro Superman.

For those of you who aren’t comic book nerds or are not die-hard fans of Seinfeld, Bizarro Superman is the antithesis of Superman. His actions were always the exact opposite of what we would expect from Superman. In the world of energy, Canada is much like Bizarro Superman because of how different its oil industry is to that of the United States. Let’s take a look at this bizarre scenario and what it means for some energy companies.

The North American odd couple

Canada has consistently been a net exporter of oil since 1981. Yet despite exporting more than 3 million barrels per day to the U.S., provinces east of Ontario import more than 60% of their oil needs. There are two primary reasons this happens: (1) Canada doesn’t have adequate infrastructure to economically deliver oil from the Western shale plays to the Eastern refineries, and (2) The majority of Eastern refineries are built to handle lighter, sweeter crudes that came from foreign sources.

TransCanada CorporationNow let’s contrast this with the U.S. Since 1958, we have been a net importer of crude oil, yet today many of our refineries are oversupplied and are sending more than 750,000 barrels of refined products to foreign markets. Also, the massive boom in shale oil has U.S. refineries flooded with light, sweet oils. This type of oil is so abundant that refineries are at a saturation point for this kind of oil and we have exported oil at a rate of about 100,000 barrels per day over the past three months.

What really brings the U.S. and Canada’s energy relationship into Bizarro world is that both countries are trying to increase imports and exports to each other at the same time.

The yin to our yang

The reason we are seeing such a large uptick in both imports and exports to Canada is that both countries have what the other needs: Refineries in the Gulf Coast of the U.S. are built to process heavier, more sour crudes from places like Mexico and Venezuela. Meanwhile, Canada’s Eastern refineries have operated on those lighter oils from places like the Middle East and the North Sea. Luckily for both countries, U.S. shale oils and Canadian oil sands are the perfect fit for the other countries’ refineries.

Despite the obvious fundamental advantages of increased trade of oil between the two countries, there are still some major political hurdles to conquer. On the Canada-to-U.S. side of the argument, TransCanada Corporation (USA) (NYSE:TRP)‘s Keystone XL pipeline has been stuck in litigation for several months. The proposed pipeline has the potential to deliver 830,000 barrels per day of oil to refineries in the Gulf of Mexico, a region that is capable of refining about 2.3 million barrels per day of heavy sour crude. The problem, however, is that the pipeline is receiving stiff opposition from political groups over environmental concerns. Other pipelines such as Enbridge Inc (USA) (NYSE:ENB)‘s Mainline and Energy Transfer Equity, L.P. (NYSE:ETE)‘s Trunkline Reversal project have also met some opposition over similar concerns to Keystone XL, but they certainly have not seen as much media attention.

Refineries in U.S. PADD Districts II and III, also known as the Gulf Coast and mid-continent districts, combined to refine about 640,000 barrels per day of Canadian oil sands, much of that coming from Enbridge Inc (USA) (NYSE:ENB)’s and TransCanada Corporation (USA) (NYSE:TRP)’s existing oil pipelines as well as rail shipments. If refineries ever hope to replace other foreign heavy oils with Canadian oil sands, though, more pipeline capacity will be needed.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!