Pipelines are Canada's only defence as U.S. seeks other sources of oil
Whether we want to admit it or not, Canada cannot assume it will remain the United States’ top oil trade partner indefinitely.
Recent developments in Venezuela suggest the U.S. is once again assessing alternative sources of crude. Canada should take note. Venezuela serves as a reminder that Canada’s energy security depends not just on what we produce, but on how and where we can sell it.
In the short term, Canadian oil is unlikely to be displaced. Most of our production is exported to refineries in the U.S. Midwest, with additional volumes reaching the U.S. West Coast via the Trans Mountain system. Geography continues to work in our favour, and the U.S. does not currently have the infrastructure to easily ship large volumes of oil both north and south from the Gulf Coast.
Still, even incremental changes matter. A future increase in Venezuelan production could affect the roughly 10 per cent of Canadian oil exports that currently move to the U.S. Gulf Coast. Economist Charles St-Arnaud has estimated that a 10 per cent decline in Canada’s oil exports to the U.S. would translate into a $13-billion drop in Alberta’s exports alone. Those are not abstract numbers.
Venezuela will not replace Canadian oil anytime soon. Its oil fields and export infrastructure would require years of reinvestment and rehabilitation. But that is precisely the point: energy infrastructure decisions take time, and waiting for risks to materialize before acting is not a strategy.
As Alberta Premier Danielle Smith has argued, the situation in Venezuela should encourage Canada to expedite the development of pipelines to diversify its oil export markets, including additional capacity to the West Coast to reach buyers in Asia. Diversification is not about chasing growth for its own sake. It is about reducing risk and strengthening Canada’s bargaining position in a volatile global energy system.
Canada is already seeing early returns from diversification. While the U.S. still accounts for more than 90 per cent of Canada’s oil exports, that share has declined from closer to 97 per cent in 2024 following the completion of the Trans Mountain expansion, which has begun providing access to new markets in Asia. Canada is a democratic, politically stable, industrialized G7 country with a well-established regulatory system. For global buyers seeking secure and reliable energy supplies, there are few jurisdictions that offer the same combination of scale, stability and rule of law.
The success of TMX demonstrates that diversification works. But TMX alone is not enough. The pipeline is heavily committed and nearing capacity. It cannot accommodate future production growth or provide meaningful redundancy in the event of disruptions.
Some have suggested that Canada should focus on building domestic refining capacity instead of pipelines. Refining has a role to play, but it does not solve the core problem. Global refining capacity already exists near end markets, and without reliable access to those markets, Canadian producers remain price takers regardless of how much value-added activity occurs at home.
Relying on a single export market, or a single pipeline, creates significant economic risk. It is the equivalent of putting an entire investment portfolio into one stock. No prudent financial advisor would recommend that approach.
If Canada remains overly dependent on the U.S., it risks losing leverage, facing deeper discounts and becoming increasingly vulnerable to geopolitical shifts that are occurring with growing frequency.
A new West Coast pipeline should be understood as a resilience measure, not an expansionary one. Supply shocks, sanctions and political decisions can happen overnight. Infrastructure cannot.
If it takes five to 10 years to permit and build new export capacity, the time to act is now. Canada cannot afford to wait for Venezuela to re-emerge or for the U.S. to find yet another alternative supplier.
Another tidewater pipeline would give Canada options, strengthen price realization and ensure the energy sector is not held hostage by a single market or geopolitical assumption. Venezuela’s instability is simply the latest reminder that trade diversification is no longer optional.
It may not happen next month or next year, but Canada needs to be realistic about the possibility that the U.S. will not always be there to buy our oil. Leaders who want to secure Canada’s economic future should act accordingly.
Gary Mar is president and CEO of the Canada West Foundation