The Canadian authority issues a warning about potential energy supply interruptions to the U.S.
The Canadian authority issues a warning about potential energy supply interruptions to the U.S.
"Doug Ford, Ontario's premier and leader of Canada's largest province, made a bold statement on Wednesday evening, warning that they are prepared to disconnect the US's energy supply all the way from Michigan to New York State, and over to Wisconsin, if President Trump decides to impose a 25% tariff on Canadian imports on his inaugural day.
Ford emphasized that Canada must utilize every available resource to respond if Trump carries out this threat. Given Ontario's minimal involvement in crude oil production, it appears that Ford's remarks specifically concern the electricity that the US imports from Canada.
Ford stated, 'Canadians get impacted, but let me tell you this: The Americans will also feel the consequences, and isn't that unfortunate?'
The proposed tariffs from Trump could potentially thrust the Canadian economy into a severe recession. Ford's statement demonstrates a growing call for an assertive reaction in Canada that could briefly disrupt power and fuel supplies for some Americans.
Ford's comments also raise the prospect of additional retaliation from Canada that may disrupt the inflow of oil into the US. However, experts suggest such a move is unlikely at this point.
A full-fledged trade war between the US and Canada could negatively impact both economies, affecting customers and businesses on either side of the border.
Patrick De Haan, head of petroleum analysis at GasBuddy, commented, 'This is a threat that shouldn't be dismissed. Canada doesn't wish to accept this passively.'
Any retaliation from Canada, including from the provinces, would require federal government approval in Ottawa.
The US regularly imports hydropower from Ontario, Quebec, and British Columbia. Canada is the primary source of imported electricity into the US, although it only accounts for a small fraction of the overall energy consumption.
The US imported 38.9 million megawatt-hours of electricity from Canada in 2021, according to the US Energy Information Administration. The majority of that – 33.2 million megawatt-hours – came from Canada.
However, this represents less than 1% of annual US electricity consumption, according to the EIA.
Still, the US and Canada have long relied on each other to fulfill power requirements during times of high demand or weak supply. For instance, Canada imports US electricity during periods of low hydropower generation, such as during droughts.
'The trade is essential for grid balancing – constantly matching electricity consumption to electricity production – and helping to strengthen electricity supply,' the EIA said in a recent report.
The US purchased approximately $3.2 billion of power from Canada in 2021, a 29% decrease from 2022.
'Power transmission lines connecting the US and Canada are part of a complex and highly interconnected power system, with connections stretching from New England to the Pacific Northwest,' the EIA stated.
A sudden change in this close relationship could result in challenges for US states bordering Canada that at times rely on electricity imports.
However, these problems would likely only be temporary, according to RJ Johnston, research director at Columbia University's Center on Global Energy Policy.
'I don't see much vulnerability for the US,' said Johnston.
He pointed to abundant electricity resources in the US and the option to shift power to regions in need.
'Even in an extended outage, the US has the capacity to add more generation capacity in a relatively short period of time,' Johnston said.
Instead of electricity, Johnston suggested that Canada could wield more control over the US in areas where US officials find it more challenging to make up for, such as aluminum and nickel.
The importance of oil
Canada is the primary supplier of America's foreign oil.
Last year, the US imported 1.4 million barrels of Canadian crude per day., representing more than half of the entire 2.4 million barrels of US oil imports.
De Haan, the GasBuddy analyst, cautioned that some Midwest and Great Lakes region refineries depend on Canadian crude to produce gasoline, diesel, and jet fuel. He claimed that the absence of Canadian crude could raise prices, at least temporarily, and make it difficult for certain gas stations to find fuel.
'I'd be more concerned about supplies than prices,' he stated.
Analysts doubt that Canada would employ this tactic in a trade war because its economy is heavily dependent on oil production and US purchases of that crude.
Blocking the flow of oil to its largest customer – the US – would be damaging to Canada's economy.
'Do I think that would ever happen? No, because it would hurt everyone involved,' stated Robert Yawger, vice president of energy futures at Mizuho Securities.
However, the completion of the Trans Mountain Pipeline from Alberta to the Pacific Ocean leaves open the possibility that Canada could ultimately begin supplying significant quantities of oil to countries like Japan, South Korea, China, and others.
'That's why they built that pipeline: To have a Plan B,' said Yawger."
"In no way will Alberta consent to halting its oil and gas shipments," Smith declared.
Ford highlighted the significant role of Ontario's electricity exports to the US, stating, "Given Ontario's minimal involvement in crude oil production, our remarks specifically concern the electricity that the US imports from Canada."
Further emphasizing the economic interdependence between the two nations, the US Energy Information Administration reported that the US imported 38.9 million megawatt-hours of electricity from Canada in 2021, with the majority coming from our northern neighbor.