There's no question that the United States likes Canadian oil. Our exports south of the border hit a record in 2015 and are poised to do the same for 2016.
At some refineries in the U.S. Midwest, Canadian crude has entirely pushed out competition from Mexico and other countries. Even as the U.S. produces more of its own oil, American refineries bought more than four million barrels a day of (cheaper) crude from Canada in November.
So, yes, they like it. However, it's widely acknowledged by the energy sector and politicians that Canada needs more than one customer for our major export. Especially as political uncertainty begins to hover over our relationship with the U.S.
Canada 'a spoiled market'
"We were such a spoiled oil market when we were developing because we had the biggest buyer in the world just over our border," said Tim Pickering, the chief executive of Auspice Capital. "It was very easy, and human nature being what it is, we got lazy and didn't push for tidewater."
Pickering points out that no other major oil exporter has just one market, and the price received for Western Canada Select — the oilsands blend that makes up a large part of Canada's exports — trades at a discount to Mexican crude, which is sold to the U.S., but also Europe and Asia.
"The Mayan [Mexican] benchmark is very similar to our WCS," said Pickering. "Right now, it trades at a $7 discount to WTI [West Texas Intermediate] versus our $14 discount."
That helps to explain why there is such a push for an export pipeline to an ocean either east or west, and why TransCanada says that it will still go ahead with plans for the Energy East pipeline, no matter what develops with Keystone XL.
But the question of who else will buy Canadian oil isn't as simple as it seems. Most of our production is heavy oil, heavier than the shale oil being produced in the U.S., or the conventional crude that is produced in the Mideast and shipped to Eastern Canada. Refineries in the United States have spent billions configuring themselves to process Alberta's heavy oil.
Pipelines to the coasts
For years, China has been named as the next big market for Canadian oil. China invested heavily in the oilsands for many years, and its demand for oil continues to grow, if less quickly than before. But there are questions about whether Chinese refiners can process our oil.
"With Asia, it's true they do have the capacity for some heavy crudes, but not really very much for the types of crudes we would send," said Jackie Forrest, director of research at ARC Energy Research Institute.
Forrest said the problem is that Asia doesn't have access to Canadian oil, so without the supply, there's little point for its refineries to re-engineer.
"It's a bit of a chicken and egg scenario," she said. "You need to build that pipeline before people are going to spend billions of dollars configuring their refineries to take your crude."
In the other direction, Energy East has India in its sights. India is the world's third largest oil market. The country imports lots of Mexican oil and this past week announced plans to make its oil market more efficient and secure.
Forrest said that she would expect oil shipped via Energy East to make its way to Europe first, but that India is also important.
From an energy security perspective, India would likely want to import some Canadian crude to diversify from its reliance on Mideast oil, she said. India is expected to increase its oil consumption over the coming years, and Canada's oilpatch wants to be a supplier to markets that are growing.
Alberta advantage is cheap oil
Canada's production is expected to grow more slowly in the coming years, while production in the U.S. will probably accelerate in the Trump era. But what will help Canadian oil keep its place in the market is the lower cost. Western Canadian Select traded at a $13 discount to West Texas Intermediate last week. That differential fluctuates, but still makes a difference to countries like China and India that need to import a lot of oil every day.
"Asian refineries are becoming more and more adapted to heavy crudes," said Pickering. "And you can see this through the increasing import of oil from Latin America, from Venezuela and Mexico.
"I think Asian refineries are chomping at the bit for Canadian oil."