Canada Wields Significant Energy Leverage Over the United States

Canada's energy sector holds significant leverage over the US economy due to decades of cross-border investment and integration. The country's hydroelectric output, natural gas production, and heavy crude exports are crucial components of major US markets.

In terms of electricity, Canadian hydroelectric output declined in 2022 due to drought conditions in Quebec, British Columbia, and Manitoba, resulting in a 44% drop in exports to the US from 65 terawatt-hours (TWh) to 36 TWh. However, this decline reflects weaker Canadian supply rather than decreased American demand.

The US Energy Information Administration forecasts national electricity demand growth of 1.9% in 2026 and 2.5% in 2027, driven by data centres and industrial electrification. The New England region is particularly important, with ISO New England projecting winter peak demand to reach 57 gigawatts (GW) by 2050, roughly 2.5 times the historical record.

Natural gas also contributes to US dependence on Canada, with pipelines delivering an average of 8.6 billion cubic feet per day (Bcf/d) in 2025. Meanwhile, US liquefied natural gas (LNG) exports are rising rapidly due to new Gulf Coast plants coming online, with the EIA forecasting LNG exports of 18.5 Bcf/d in 2027 and over 30 Bcf/d by 2050.

Canadian oil imports play a significant role as well, supplying roughly 3.5 million barrels per day (bpd) to the US, including 2.75 million bpd to the Midwest and 268,000 bpd to the Rocky Mountain region. Many inland refineries are configured to process Canadian heavy crude and rely on north-south pipelines for supply.

Commercial crude inventories in the Midwest amount to approximately 17 days of refinery throughput, leaving little room for a prolonged disruption. Storage can absorb short interruptions but cannot replace millions of barrels per day if Canadian pipelines stop flowing.