The flip side of oil uncertainty

Oil pipeline politics in Canada is, in the short term, muted so that Team Canada can project national unity amid the trade dispute with the U.S. On August 22, the U.S. imposed new 50 percent tariffs on about $28 billion, or 5 percent, of Canadian exports. 

Since the trade war began in February 2025 Alberta Premier Danielle Smith has been vehemently opposed to using Alberta crude as a bargaining chip in the negotiations. But she continues to push for diversification of Canada’s trade partners and is calling for fast-tracked pipelines that will ship Alberta’s crude to Asia.

On July 2, the governments of Canada and Alberta officially advanced a proposal for a new West Coast oil pipeline, running from Bruderheim, Alta., to the Roberts Bank marine terminal in Delta, B.C., with a capacity exceeding one million barrels per day. It would largely follow the route of the Trans Mountain Pipeline, which transports oil at a rate of 890,000 barrels per day.

Tako Koning is a Calgary-based petroleum geologist who has exploration experience in Angola and Indonesia. Koning told Christian Courier that if Alberta crude is given a surcharge in response to U.S. tariffs or if volumes exported to the U.S. are cut back, American buyers will simply turn to overseas oil sources. 

“It’s a time to be very very cautious,” said Koning, who is monitoring the Alberta market. “Using oil to retaliate against the U.S. could be disastrous for Alberta’s highly oil-based economy since over time the U.S. could replace the Canadian crude with oil imported from Venezuela, Saudi Arabia and Nigeria.”

Trade diversification 

The proposed West Coast pipeline and the existing Trans Mountain Pipeline are meant to provide diversification away from the U.S. toward the Asia-Pacific markets. There is much competition. In particular, a shifting eastwards of the oil axis – new alliances are forming between the Persian Gulf states and India and China. Refining was traditionally the domain of private enterprise in the West. But now around half of the top-tier companies are national oil refining companies, with the first, second and fourth positions being held by Saudi Arabia and China.

Alberta’s clamour for a pipeline to Asia is a distraction from the real issue. Energy diversification is not simply a matter of transporting oil to the Asia-Pacific, but rather a deeper need to explore new energy options. Even with a new pipeline, the province will continue to put all its economic eggs in the fossil-fuel basket, leaving it vulnerable to the whims of its largest trading partner, the U.S., and shifting global demand. 

Other options

In a recent Calgary Herald op-ed article entitled “Is the energy transition Canada’s Kodak moment?” Kam Mofid and Jatin Nathwani of the Centre for Clean Energy and Electrification in Waterloo, Ont., make a case for an interconnected national electricity grid.

“The risk is that pipeline assets are stranded as use of oil globally decreases in homes, buildings, heavy industry and transportation, due to the ever-growing generation of clean electricity accelerating broad-based electrification,” wrote Mofid and Nathwani.

Chris Severson-Baker, executive director of the Pembina Institute in Calgary, is also critical of the federal government and Alberta’s pipeline proposal. 

“There is no business case for a new West Coast pipeline in Canada,” he wrote in response to the Government of Alberta’s pipeline announcement on July 2. “If this were a smart economic venture, if there were any kind of reasonable return on investment to be made, a private company or companies would have put up the cash. Instead, Albertan and Canadian taxpayers will now shoulder the cost of 90 percent of this project.” 

The equalization issue

It’s true that Alberta is Canada’s paymaster. Thanks to high employment rates, higher average incomes and a young population, the province produces more tax revenue than any other province and has received no equalization payments since the fiscal year 1964-1965. 

Alberta contributes billions to other provinces’ budgets. The Fraser Institute reports that over the past 20 years, Albertans’ net contribution to Confederation is projected at $321.9 billion. This is nearly four times more than the $87.8 billion contributed by British Columbians and more than five times Ontarians’ net contribution of $59.6 billion. The other seven provinces are net recipients. In effect, Albertan taxpayers save other Canadians an average of $1000 in taxes per year. 

Yet the wealth brought by fossil fuels is not infinite. It would be short-sighted for Alberta to focus on their current one-staple economy and ignore the development of renewable fuels.  

“Canada does not have an interconnected electricity grid,” explain Mofid and Nathwani. “When drought hit western reservoirs, Canadian electricity exports fell in 2023, while imports climbed – the third-largest hydroelectric producer on earth, buying power from the United States. A dry year in B.C. cannot be covered by wind on the Prairies, because the wires do not exist.”

Mofid and Nathwani argue that the federal Major Projects Office should develop an interprovincial transmission line on an accelerated timetable and give it the same Crown balance sheet that the West Coast pipeline proposal received. “Let the two projects compete for the same public dollar on the same terms. If Ottawa can move a $40-billion pipeline in 18 months, it can move wires,” wrote Mofid and Nathwani.

The longer the tariff crisis with the U.S. lasts, the more vulnerable oil heading south will become, and by the time a new West Coast pipeline is built, global markets may have moved on. Security of supply is fast becoming insecurity of supply. But the uncertain future of Alberta crude has a positive byproduct: renewable energy options are becoming more appealing.