Earlier this year, the expansion of the Trans Mountain pipeline (TMX) brought new possibilities for Canada’s oil exports, with some media speculating that U.S. refiners might face supply challenges as Canada could now reach overseas markets. However, with a pro-oil administration in the U.S. now in place, Alberta is shifting its focus back south and looking to further strengthen its energy trade with the United States.
In a recent interview with Bloomberg, Alberta Premier Danielle Smith confirmed that the provincial government is in discussions with energy infrastructure companies to build more pipelines to the U.S. “I know the Americans have increased production significantly over the last decade, but that may not always be the case,” Smith said. She emphasized that the U.S. should look to Canada for additional oil supply, rather than seeking alternatives from countries like Iran or Venezuela.
Canada remains a key supplier of heavy crude oil to U.S. refiners, who blend it with domestic light crude to produce fuels. U.S. crude is primarily light and sweet, but refiners struggle to process it on its own, especially as the quality of domestic oil continues to improve. This presents a growing challenge, which could be solved with more Canadian heavy crude.
In 2022, Canada’s energy exports to the U.S. were valued at nearly $160 billion, with the majority coming from crude oil, refined products, and natural gas. Crude oil exports alone reached a record-breaking 4 million barrels per day, with 97% of those shipments going to the U.S., according to the Canada Energy Regulator. In July 2023, Canadian crude exports hit a new high of 4.3 million barrels per day, surpassing the previous year’s record. U.S. West Coast refineries have been key buyers of this increased volume, according to the U.S. Energy Information Administration (EIA). The EIA reported that between June and September 2023, more than half of Canada’s maritime crude exports went to U.S. West Coast refiners, with the rest directed to Asia.
Despite the Trans Mountain pipeline’s expanded capacity, the U.S. remains the primary destination for Alberta’s heavy crude, given its proximity and the difficulty of finding alternative suppliers. This situation has prompted Alberta’s government to push for more pipelines to the U.S.
However, potential trade barriers loom on the horizon. Former President Donald Trump has floated the idea of imposing a tariff on all imports, including crude oil, potentially raising costs for U.S. consumers. “The big uncertainty is Trump’s proposed tax on imports,” said Al Salazar, head of macro oil and gas research at Enverus. “A tariff would push up gasoline prices and be inflationary, which doesn’t make sense, but it’s a real concern for the supply chain.”
Despite these concerns, many in the Canadian oil industry are not overly worried about potential tariffs. Canada’s status as the largest supplier of heavy crude to the U.S. means that any tariff would be difficult to replace with other sources. “If tariffs were imposed on Canadian oil, there’s no easy alternative,” said Jeremy McCrea, an analyst at BMP Capital Markets.
While tariffs may not be a significant concern, Trump’s stance on the Keystone XL pipeline could present another opportunity for Canada’s oil industry. The pipeline, which President Joe Biden halted upon taking office in 2020, could be revived under a new Republican administration. If completed, Keystone XL could dramatically increase the flow of Canadian crude to the U.S.
“I think Keystone XL might be back on the table,” said Bob Geddes, president of Ensign Energy Services. “It’s all about providing cost-effective energy. I don’t think Trump will want to impose tariffs on Canadian oil—he won’t want to increase energy costs for U.S. consumers.”
With an industry-friendly administration in place in the U.S. and Alberta eager to boost its oil exports, it seems that further collaboration between Canada and the U.S. is on the horizon. However, Alberta’s oil industry faces another major hurdle: how to meet the Trudeau government’s newly announced mandate to cut emissions by 35% by 2030. How the province navigates this challenge will be crucial for its future in the global oil market.
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