Canada’s oil export model is exposed to a single market shock, and President Donald Trump’s Venezuela push makes west coast pipeline capacity the clearest lever to add pricing power and resilience.
Trump’s plan to revive Venezuela’s oil flow hinges on US companies returning to spend “billions of dollars” repairing infrastructure, then selling large volumes of oil globally, a direct competitive threat because both Venezuela and Canada produce heavy crude that is harder to refine and has historically leaned on US refineries.
Until 2024, virtually all Canadian oil exports, dominated by Alberta oil sands volumes, went to the US, a concentration that leaves Canada vulnerable to demand-side rebalancing in refining and supply-side disruption from policy shifts.
Since a government-owned pipeline expansion to the Pacific Coast in 2024, Canada has reduced its near-total dependence on the US market. Of roughly 4 million barrels per day of Canadian oil exports, 500,000 to 700,000 barrels per day now go to Asia, with China a key destination, according to analyst Rory Johnston’s estimate.
When US sanctions largely barred Venezuelan imports, US Gulf Coast refineries configured for heavy crude increased runs of Alberta oil sands barrels. If the US resumes importing Venezuelan oil, Johnston warned it could gradually displace Canadian volumes from Gulf Coast demand, pressuring Canadian realized prices in the US.
“Canada’s vulnerable on both the supply and demand side to shocks because of our high rate of dependence on the US market,” Johnston said, adding that a substantial return of Venezuelan shipments to the Gulf Coast would likely translate into lower prices for Canadian barrels.
“It wouldn’t be catastrophic, but it would be unwelcome,” he noted.
Johnston’s core prescription is market optionality: “The only way, in the long term, to increase our competitiveness and increase our optionality is with pipeline capacity that doesn’t just point to the United States.” He separately argued that the “only surefire way” to raise resilience is pipelines to the west coast that “front run around the US market.”
Most Canadian exports, Johnston said, go to Midwest refineries that can handle heavy oils, and US pipeline networks cannot move large Venezuelan crude volumes north without “billions of dollars” of investment, limiting how quickly Venezuelan barrels could compete for the same inland demand.
On the policy front, Prime Minister Mark Carney has emphasized large infrastructure to reduce Canada’s trade dependence on the US, and he and Alberta Premier Danielle Smith signed an agreement last year that conditionally approved a pipeline from Alberta to a new oil tanker port on the British Columbia coast.
Johnston said the prospect of expanded Venezuelan imports “increases the argument for” such a project.
Venezuela’s ramp is not immediate. By some estimates it would take 18 months for Venezuela to reach 1.5 million barrels per day of production, and Johnston also cited limited apparent interest from major oil companies in making large-scale Venezuela investments despite Trump’s stated intent.
Further, it’s not anticipated that China will continue to buy Venezuelan oil from an industry under American control, potentially creating room for Canada to offset Gulf Coast losses.
“It would be kind of ironic if the US intervention in Venezuela elevated China’s interest in Canada,” Johnston said.
Information for this briefing was found via The New York Times and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
