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Introduction

This study shows that the continental integration of energy markets in North America features the United States as a major net importer of oil and gas and Canada as the strategic partner on both fuels. Mexico also plays a key role as a net provider of crude oil to the United States, and the country offers a growing market for US oil products and gas surpluses from Texas and the refinery cluster along the Gulf of Mexico. Additionally, Mexico’s recent energy reform, which openly allows private participation in the industry, entails the potential to boost its oil and gas output, including nonconventional fuels. As for electricity, the three countries are interconnected and feature policy coordination in terms of standards convergence and reliability cooperation. This study argues that integrated energy markets in the region might witness a rapid transformation in the foreseeable future, mainly due to the nonconventional hydrocarbons revolution taking place in the United States, which likely will result in a reduction of US oil imports from its North American partners—though the pace of that decline is not clear—and the region’s emergence as a global gas exporter in the span of a few years. The pace of this major transformation will depend on the way the hydrocarbons industry in the three countries reacts and adapts to a mid-term scenario of weak international prices. Market, technological, and geological fundamentals will continue to drive the profile of North America’s cross-border markets, and growing opportunities for policy coordination may emerge, similar to what already happens in electricity interconnections. Such policy cooperation could occur in the areas of infrastructure and security coordination, efficiency standards, and climate change mitigation.

The study is divided in four parts. The first two sections analyze market and integrative trends in the oil and gas industries across the region. Section three reviews how an emerging continental market on electricity has spurred policy coordination at the transboundary level. The final section explores some economic and geopolitical implications that the major transformations witnessed in North America could have on world energy markets.

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