The American military operation that captured Venezuelan President Nicolás Maduro on January 3 may have significant implications for the Canadian oil industry, and seemed to incentivize Canada to pursue trade relationships beyond the United States. The bold move continued the trend of international involvement by the Trump Administration, with many American companies already asserting control over significant amounts of Venezuelan oil.
In a press conference later that day, US President Donald Trump described the operation as an effort to “bring outlaw dictator, Nicolás Maduro, to justice.” In 2020, the United States charged Maduro with narco-terrorism, corruption, and drug trafficking, among other charges, which he will now face criminal court proceedings for.
Venezuela has the largest proven oil reserves in the world, followed by Saudi Arabia, Iran, and Canada.
However, due to political instability and a lack of infrastructure, Venezuela has not been maximizing its oil production. Venezuela only produces about 0.11% of its proven reserves annually, compared to 9.96% in the United States and 1.34% in Canada. The United States plans to “have our very large United States oil companies…go in, spend billions of dollars, [and] fix the badly broken infrastructure,” said Trump.
In the early 20th century, massive amounts of oil were discovered in Alberta, leading to a modern-day gold rush and a transition from an agriculture based economy to an oil based one. The Alberta oil reserves have continued to increase in production, solidifying Canada’s position as a major oil producer.
Canada sits at number 4 globally by oil reserves, producing nearly 6 million barrels a day. According to the Canadian Energy Regulator, 81% of Canadian oil produced in 2023 was exported, with approximately 97% of it going to the United States. Venezuelan oil is generally comparable in quality to Canada’s, raising concerns that Canadian oil may soon be replaced.
Prime Minister Mark Carney has dismissed these concerns, saying in a news brief on January 6 that Canadian oil will remain competitive because it is “low-risk” and “low cost”. According to TD Economics, it is likely that at least some of the Canadian oil used in the Gulf Coast could be replaced by Venezuelan oil. While not a complete substitution, this would not be insignificant; the Gulf Coast region closest to Venezuela makes up about 10% of Canadian oil shipments.
As of 2023, Canadian oil exports to the United States were valued at $130 billion.
Losing 10% of those exports would have significant economic implications.
Conservative Party leader Pierre Poilievre raised major concerns about the Canadian oil economy, and in a letter posted on social media, urged Carney to solidify new trade relationships. Poilievre requested Carney’s approval on a pipeline from Alberta to British Columbia, which would connect landlocked Alberta to the Indo-Pacific.
While Carney has established a Canada-Alberta Memorandum of Understanding (MOU) that would work to expand oil exports to Asia, Poilievre has criticized the excessive bureaucracy and red tape in place preventing action from being taken. The project has also been criticized by Indigenous populations and environmental activists. In a statement on January 25, Poilievre suggested that “what we need is for the Carney government to get out of the way and approve these privately-funded projects.”
Despite believing that the United States’ involvement in Venezuela will have a limited impact on Canada, Carney has still indicated that Canada is interested in pursuing other partnerships. At the annual World Economic Forum in Davos, Carney emphasized that the era of American hegemony was no longer working, and that “we are in the midst of a rupture, not a transition.”
Carney urged the “middle powers” to work together during this rupture, as they are “the countries that have the most to lose from a world of fortresses and most to gain from genuine cooperation.” In a time of great political change, Canada is seeking new allies and strategies; a path “wide open to any country willing to take it with us.”
While many economists and politicians are concerned about a new source of similar oil in the American market, the presence of Venezuelan oil may be a catalyst for expansion, rather than a crushing loss for the Canadian economy.
