Canada-U.S. Trade War: Natural Gas Leverage Sparks Debate Over Economic Risks

The escalating Canada-U.S. trade war has sparked debate over using natural gas as leverage in negotiations. Alberta Premier Danielle Smith has expressed opposition to this idea, while Ontario's Doug Ford suggests all options should be on the table.

Canada supplies a significant portion of the U.S.'s energy needs, including 99% of its natural gas imports and 85% of its electricity imports. However, these imports make up only a small fraction of overall U.S. consumption, with Dulles Wang, director of Americas gas and LNG at Wood Mackenzie, estimating that Canadian supplies account for as little as 5% of the U.S.'s total natural gas usage.

Despite this, Canada's role in providing energy to the western and Midwest markets is crucial, particularly in regions such as Seattle and Oregon. These areas rely heavily on imported natural gas due to rising data centre construction driven by artificial intelligence growth.

Cutting off U.S.-bound shipments would have severe economic consequences for Canada, according to Wang. A glut of supply trapped in Canada would lead to plummeting prices, with storage facilities reaching maximum capacity and causing a 'severe economic impact to the downside'.