Donald Trump has repeatedly stated the U.S. doesn’t need anything from Canada. Apparently, they don’t need our oil, lumber, uranium, copper, steel, aluminum, rare minerals, water, etc. He’s also stated numerous times he wants Canada to become the 51^st state. These two statements aren’t congruent – why pressure Canada to merge with the U.S. if we don’t have anything they need? Remember, Mr. Trump is the son of a New York real estate mogul. The Trump real estate empire was started by Donald’s grandparents in the 1920’s. The company began building single family homes in Queens, NY and expanded into apartments during WWII. Donald Trump became president of his father’s real estate business in 1971 and has a long history of dealing with Wall Street. Could he be viewing Canada like a merger and acquisitions banker looks at a company? Bankers judge the merits of acquisitions by whether they are accretive or not. They analyze the amount of shares and debt outstanding, compare each company’s earnings, margins, growth prospects, etc. to determine the company’s value and whether buying company “B” would benefit the shareholders of company “A”. From this perspective, it’s easy to see why Trump wants Canada – acquiring Canada would be hugely accretive to the U.S. by lowering their debt per capita and adding an enormous amount of resource wealth.

The supplied chart shows U.S. oil imports from Canada (red) relative to the rest of the world (grey) - Canadian oil currently represents ~60% of all oil imported into the U.S. While Canada ranks much higher than the U.S. in terms of oil reserves, we produce much less because we’ve failed to develop our export markets and import foreign oil into eastern Canada. The U.S. is currently the third largest oil producer behind Russia and Saudi Arabia. Notice U.S. crude oil imports peaked in the 2000’s – prior to the advent of horizontal multi-stage fracturing which unlocked massive light oil reserves in plays like the Permian. This technological advancement more than doubled U.S. oil production from the late 2000’s to today and reduced (but not eliminated) America’s dependence on foreign oil.

Is Donald Trump wrong when he says the U.S. produces enough oil to be self-sufficient? With U.S. oil production growth over the last ~15 years, they’re close to being self-sufficient, however, the U.S. also exports a lot of oil. Why export and import oil and not simply refine what’s produced in the U.S.? The answer lies in money and the American refinery complex. A large percentage of U.S. refineries were built after U.S. oil production appeared to have peaked in the 1980’s. At that time, America looked at Canada’s vast oil sands reserves and began investing money into their development. Refineries built during this time were designed to process heavy oil from Alberta as that’s where the U.S. believed their future oil supply would originate. Since then, Canada failed miserably to diversify its export markets which allows the U.S. to import Canadian oil at a substantial discount while exporting U.S. oil at a premium. This hurts Canadians while benefiting Americans and we have only ourselves to blame. We would be in an infinitely better position if we had built the required infrastructure to diversify our export markets, not just for oil but for all the commodities we export primarily to the U.S. The question shouldn’t be whether the U.S. needs Canada. The question should be, are we going to continue to sabotage our economy with one foolish policy decision after another or will we start making smart, strategic decisions which further our national interests?