11.01.202213:20 Forex Analysis & Reviews: Canada increases oil production by 18% and reduces emissions by 40-45%

Canada is the fourth largest oil producer, with revenues accounting for 5% of GDP. Just recently, it made one of the most ambitious climate commitments in the world - to reduce emissions by 40% - 45% by 2030.

However, oil production is expected to grow by around 18% that year, said the Financial Times. That is around 4 million barrels of crude oil per day.

Nevertheless, Prime Minister Justin Trudeau made a formal commitment at the COP26 summit last November, pledging that it would limit emissions in the oil industry.

The CEO of one of Canada's top oil producers, Cenovus, commented that the company is not opposed to imposing a cap on emissions as long as the government realizes it would not happen overnight.

Tar sands mining is the most intense in terms of emissions. The industry came under heavy criticism for its carbon footprint that ultimately pushed it into action, especially as strong demand for oil boosted the bottom line despite the pandemic, freeing up more money to invest in both production and in reducing emissions.

Investments to reduce emissions will also need to grow as the government's plan includes cutting the maximum allowable emissions every five years.

Last December, the Canada Energy Regulator estimated that total oil production could peak at 5.8 million barrels by 2032, slightly higher than the current 5 million barrels per day.

With the launch of new capacities of the pipeline, production is expected to increase even more. Cenovus and Suncor project that output will rise by 4%-5% this year, that is, 800,000 bpd and 770,000 bpd, respectively. And since demand is likely to remain strong, production will ramp up even more over the next few years.

It is difficult to resist the allure of cheap crude oil, most of which goes overseas, generating significant profits. Based on Wilkinson's statements in an interview with the Financial Times, Canada does not intend to resist this, even as its stance on emissions is becoming increasingly aggressive.

Perhaps, Canada could become a good example because of its persistence in both reducing emissions and keeping oil flowing. But that will happen only if the industry and the government join forces in reducing emissions, or if the government sets targets that the industry sees as more realistic. In either case, compromises will be needed.