While uncertainty on whether the U.S. tariffs are here to stay grips Canada, the oil and gas sector may not need to worry given the U.S. need for Canadian energy, analysts say.
U.S. President Donald Trump went ahead with imposing blanket 25 percent tariffs on Canada on March 4, with the tariffs lowered to 10 percent for Canadian energy. The next day, he announced a one-month exemption for automakers.
The United States received about 97 percent of Canadian crude oil exports in 2023, and most of that (87 percent) came from Alberta, Canada’s largest oil producer. The remaining 3 percent went to the Netherlands, UK, Germany, Spain, France, Norway, Italy, and Hong Kong.
Richard Masson, executive fellow at the University of Calgary School of Public Policy, said the 10 percent tariff adds roughly $6 to the price of a barrel of oil and won’t change import and export patterns much.
“The oil we send is getting to the U.S. because they want it and they need it,” Masson said in an interview. “The higher price is not going to change that. We don’t have lots of other places to sell it. They don’t have any alternative sources of supply.”
Roughly half of the exports go to refineries on the Gulf Coast. Masson said these refineries are calibrated to take what the oilpatch produces and convert it to diesel.
“These are the big, most complicated units in refineries, typically a billion dollars to put in a coker or more. That capital has already been invested, and so the only way they can make a return on that is to be able to buy heavy oil,” he said.
The price of Western Canadian Select oil, a heavy oil mixed with some blends of bitumen and diluents, was US$73.21 per barrel on April 5, 2024, dropping to US$51.95 on Sept. 10, 2024. The price on March 4, 2025, was US$55.91. Masson said a $6 tariff per barrel is somewhat small in comparison.
“People will carry on, and we probably won’t start to see a difference in investment until capital budgets [are] set next fall, when we have some more certainty on how this is all playing out,” he said.
While Trump has said on various occasions that his country doesn’t need any Canadian products, he has also said that he wants the Keystone XL pipeline revived, raising questions as to what his plans with the tariffs are. Keystone was meant to transport crude oil from Canada into the United States but was cancelled by the Biden administration.
Questions also remain as to how the 10 percent tariff will be applied. One pipeline takes Canadian oil to refineries in Sarnia, Ont., and Montreal, but passes through the United States on the way. Some oil or bitumen that heads to the United States for refinement goes straight to export.
“It’s not clear if this tariff is going to apply to oil that’s transiting through the U.S., or just oil that enters the U.S. I’ve seen some companies think the transiting oil will be exempt, but that remains to be proven,” Masson said.
Kevin Birn, a Calgary-based energy analyst with S&P Global, said Canada’s lack of pipelines to tidewater have already lowered what Canadians get from U.S. buyers.
“People want to know what that [tariff] impact is on a dollar value,“ he told The Epoch Times. ”It really looks like the last decade, where Canada had almost like a self-imposed tariff due to the pipeline egress issues.”
A lack of pipelines to tidewater leaves Canadian producers stuck with a lower price from American buyers. The differential between Western Canadian Select oil and West Texas Intermediate, a light oil, was about US$12.88 per barrel in mid-January, but it had been higher prior to that in recent years.
At the beginning of November 2018, the price differential reached a record high of US$46 a barrel, prompting the Alberta government to limit production. In 2022, the differential went as high as nearly US$30 per barrel in December but averaged around US$18.22 for the year, and in 2023, it ended the year at approximately US$26 per barrel but averaged around US$18.65, according to the Alberta Energy Regulator.
“The oilsands sector is large-scale, and it’s proven to be resilient through these kinds of turmoil,” Birn said, counting the new tariffs as yet one more factor.
Birn expects that light crude producers may feel the negative effects of tariffs more than heavy oil producers from the oilsands because it’s harder for the United States to find other sources for heavy oil.
“Is it the destruction of that industry? No,” he said. “The Canadian producer will bear some cost because of its lack of optionality of our egress situation. The U.S. refiners will likely bear some cost because of the inability to obtain alternative sources of heavy oil.”
Although market impacts are unclear, tariffs could become just another reason for U.S. buyers to offer less for Canadian oil, something that translates into lower royalties for provinces like Alberta.
In 2023–24, Alberta received royalties of over $14.5 billion from bitumen, nearly $3 billion from crude oil, and around $1 billion from natural gas and byproducts. In 2024–25, the province forecasts bitumen royalties to rise to over $16.8 billion with royalties from crude oil and natural gas remaining about the same.
American motorists, and especially investors, may also feel the pain.
“Behind the corporate headquarters being in Canada, there’s still a lot of U.S. money that actually owns the production. So this is a little bit like taxing your left arm and your right arm at the same time,” Birn said.
Like Masson, Birn is wary of how the tariffs could compromise a strong and reliable trade network between the two countries.
“What this is going to do is increase cost and probably sour relations and complicate the future relations between these countries,” he said.
