As Canada moves to diversify markets for its vast oil and gas resources, experts say one reality remains: the United States will continue to be its largest energy customer.

Maintaining and strengthening that relationship is critical to North American energy security amid global instability and shifting U.S. policies.

“Market diversification for the oil and natural gas industry is not about ‘replacement.’ Diversification means growing our customer base, growing production, growing exports, and growing the Canadian economy,” said Lisa Baiton, CEO of the Canadian Association of Petroleum Producers. 

“We should work to forge a renewed continental energy alliance that is attuned to new global realities.”

An integrated energy machine

A recent analysis by the Montreal Economic Institute (IEDM) outlines the scale of current Canada-U.S. energy relationship. 

In 2024, Canada exported $169.8 billion worth of hydrocarbons — including crude oil, natural gas, natural gas liquids and refined petroleum products — to the United States. 

Led by crude oil, that accounts for 22 per cent of all Canadian goods exports and the bulk of the U.S.’s imported energy supply.

The trade flows in both directions, with Ontario, Quebec and the Atlantic region driving $33.4 billion of U.S. oil and gas imports in the same year. 

“In many ways, the border is an afterthought for this integrated North American energy machine, which has kept churning for a century, regardless of political winds,” wrote IEDM researchers Taylor MacPherson and Gabriel Giguère.

“But we can’t take it for granted; we must be steadfast in protecting this unique, mutually beneficial relationship.”

Growing pressures from global instability

The long-standing North American partnership is being tested by geopolitical uncertainty. 

Wars involving Ukraine and Iran have driven volatility in global energy markets. At the same time, the U.S. has introduced tariffs and incentives aimed at strengthening domestic energy supply chains.

While the U.S. often describes its strategy as one of “energy dominance,” that does not necessarily mean independence from Canada. 

As production of light oil from the Permian Basin has grown, so too have imports of heavier Canadian crude, primarily from Alberta’s oil sands.

Many U.S. refineries are built for heavy oil, particularly in the Midwest and Gulf Coast — but the U.S. doesn’t produce much of it, RBN Energy analyst Jason Lindquist noted recently.

“[This] makes heavy crude from nearby Canada and Latin America essential,” he wrote in a March research note. 

Canadian oil and gas underpins U.S. energy exports

Since the United States lifted its oil export ban in 2015, its light crude exports have surged, averaging about 4 million barrels per day last year, according to the U.S. Energy Information Administration (EIA).

That’s roughly equal to the volume of Canadian oil – primarily heavy oil – that the U.S. imported over the same period.

America depends on Canada to complement its natural gas supply as well. 

The U.S. is now the world’s largest liquefied natural gas (LNG) exporter, yet its natural gas imports have remained steady since LNG exports began in 2016. 

In 2025, 99.7 per cent of those imports came from Canada, according to the EIA.

Strengthening the Canada-U.S. energy relationship

While diversification work continues, observers say Canada must also keep strengthening the partnerships that bind its energy system to that of the United States.

The Washington D.C.-based Atlantic Council has advocated for a North American-wide approach. 

It urges Canada, the U.S. and Mexico to pursue a continental energy security strategy that aligns emissions reduction policies, regulatory systems and infrastructure development plans to give all three countries a global advantage.

The former CEO of the Canada Energy Regulator says Canada’s importance as a reliable energy supplier is increasing as energy prices spike amid conflict in the Middle East and a review of the Canada-United States-Mexico (CUSMA) trade agreement.

“The volatility of the current situation will make Canada more attractive as an investment location because we are seen as stable,” Gitane De Silva said in a recent interview. 

The IEDM argues that Canada needs to adopt clear “energy diplomacy” objectives to advance commercial deals with key international customers.

“As North America’s share of global oil and gas trade grows, every extra barrel or cubic foot we move strengthens our allies, thins our adversaries’ leverage, and maximizes value for the benefit of all Canadians,” MacPherson and Giguère concluded.

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Canada’s energy landscape changed significantly in 2025, with mounting U.S. economic pressures reinforcing the central role oil and gas can play in safeguarding the country’s independence.

Here are the Canadian Energy Centre’s top five most-viewed stories of the year.

5. Alberta’s massive oil and gas reserves keep growing – here’s why

The Northern Lights, aurora borealis, make an appearance over pumpjacks near Cremona, Alta., Thursday, Oct. 10, 2024. CP Images photo

Analysis commissioned this spring by the Alberta Energy Regulator increased the province’s natural gas reserves by more than 400 per cent, bumping Canada into the global top 10.

Even with record production, Alberta’s oil reserves – already fourth in the world – also increased by seven billion barrels.

According to McDaniel & Associates, which conducted the report, these reserves are likely to become increasingly important as global demand continues to rise and there is limited production growth from other sources, including the United States.

4. Canada’s pipeline builders ready to get to work

Photo courtesy Coastal GasLink

Canada could be on the cusp of a “golden age” for building major energy projects, said Kevin O’Donnell, executive director of the Mississauga, Ont.-based Pipe Line Contractors Association of Canada.

That eagerness is shared by the Edmonton-based Progressive Contractors Association of Canada (PCA), which launched a “Let’s Get Building” advocacy campaign urging all Canadian politicians to focus on getting major projects built.

“The sooner these nation-building projects get underway, the sooner Canadians reap the rewards through new trading partnerships, good jobs and a more stable economy,” said PCA chief executive Paul de Jong. 

3. New Canadian oil and gas pipelines a $38 billion missed opportunity, says Montreal Economic Institute

Steel pipe in storage for the Trans Mountain Pipeline expansion in 2022. Photo courtesy Trans Mountain Corporation

In March, a report by the Montreal Economic Institute (MEI) underscored the economic opportunity of Canada building new pipeline export capacity.

MEI found that if the proposed Energy East and Gazoduq/GNL Quebec projects had been built, Canada would have been able to export $38 billion worth of oil and gas to non-U.S. destinations in 2024.

“We would be able to have more prosperity for Canada, more revenue for governments because they collect royalties that go to government programs,” said MEI senior policy analyst Gabriel Giguère. 

“I believe everybody’s winning with these kinds of infrastructure projects.”

2. Keyera ‘Canadianizes’ natural gas liquids with $5.15 billion acquisition

Keyera Corp.’s natural gas liquids facilities in Fort Saskatchewan, Alta. Photo courtesy Keyera Corp.

In June, Keyera Corp. announced a $5.15 billion deal to acquire the majority of Plains American Pipelines LLP’s Canadian natural gas liquids (NGL) business, creating a cross-Canada NGL corridor that includes a storage hub in Sarnia, Ontario. 

The acquisition will connect NGLs from the growing Montney and Duvernay plays in Alberta and B.C. to markets in central Canada and the eastern U.S. seaboard.

“Having a Canadian source for natural gas would be our preference,” said Sarnia mayor Mike Bradley. 

“We see Keyera’s acquisition as strengthening our region as an energy hub.” 

1. Explained: Why Canadian oil is so important to the United States

Enbridge’s Cheecham Terminal near Fort McMurray, Alberta is a key oil storage hub that moves light and heavy crude along the Enbridge network. Photo courtesy Enbridge

The United States has become the world’s largest oil producer, but its reliance on oil imports from Canada has never been higher.

Many refineries in the United States are specifically designed to process heavy oil, primarily in the U.S. Midwest and U.S. Gulf Coast.

According to the Alberta Petroleum Marketing Commission, the top five U.S. refineries running the most Alberta crude are:

• Marathon Petroleum, Robinson, Illinois (100% Alberta crude)
• Exxon Mobil, Joliet, Illinois (96% Alberta crude)
• CHS Inc., Laurel, Montana (95% Alberta crude)
• Phillips 66, Billings, Montana (92% Alberta crude)
• Citgo, Lemont, Illinois (78% Alberta crude)

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Investor interest in Canadian oil producers, primarily in the Alberta oil sands, has picked up, and not only because of expanded export capacity from the Trans Mountain pipeline.

Enverus Intelligence Research says the real draw — and a major factor behind oil sands equities outperforming U.S. peers by about 40 per cent since January 2024 — is the resource Trans Mountain helps unlock.

Alberta’s oil sands contain 167 billion barrels of reserves, nearly four times the volume in the United States.

Today’s oil sands operators hold more than twice the available high-quality resources compared to U.S. shale producers, Enverus reports.

“It’s a huge number — 167 billion barrels — when Alberta only produces about three million barrels a day right now,” said Mike Verney, executive vice-president at McDaniel & Associates, which earlier this year updated the province’s oil and gas reserves on behalf of the Alberta Energy Regulator.

Already fourth in the world, the assessment found Alberta’s oil reserves increased by seven billion barrels.

Verney said the rise in reserves despite record production is in part a result of improved processes and technology.  

“Oil sands companies can produce for decades at the same economic threshold as they do today. That’s a great place to be,” said Michael Berger, a senior analyst with Enverus.

BMO Capital Markets estimates that Alberta’s oil sands reserves could maintain current production rates for more than 140 years. 

The long-term picture looks different south of the border. 

The U.S. Energy Information Administration projects that American production will peak before 2030 and enter a long period of decline. 

Having a lasting stable source of supply is important as world oil demand is expected to remain strong for decades to come.

This is particularly true in Asia, the target market for oil exports off Canada’s West Coast. 

The International Energy Agency (IEA) projects oil demand in the Asia-Pacific region will from 35 million barrels per day in 2024 to 41 million barrels per day in 2050. 

The growing appeal of Alberta oil in Asian markets shows up not only in expanded Trans Mountain shipments, but also in Canadian crude being “re-exported” from U.S. Gulf Coast terminals.

According to RBN Energy, Asian buyers – primarily in China – are now the main non-U.S. buyers from Trans Mountain, while India dominates purchases of re-exports from the U.S. Gulf Coast. .  

BMO said the oil sands offers advantages both in steady supply and lower overall environmental impacts. 

“Not only is the resulting stability ideally suited to backfill anticipated declines in world oil supply, but the long-term physical footprint may also be meaningfully lower given large-scale concentrated emissions, high water recycling rates and low well declines,” BMO analysts said. 

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International shipments of Canadian oil from ports on the U.S. Gulf Coast continue at a steady pace, according to a new report by RBN Energy.

Major buyers in recent months were India and Spain, said analyst Martin King.

These are so-called “re-exports” — oil produced in Western Canada that moves by pipeline or rail through the U.S. to terminals primarily in Port Arthur, Texas.

Citing data compiled by Bloomberg and the U.S. Census Bureau, King said re-exports averaged 117,000 barrels per day in June, the third consecutive month over 100,000 barrels per day.

Re-exports of Canadian oil from the U.S. Gulf Coast have slowed somewhat since the Trans Mountain pipeline expansion came online in May 2024, King said, as China shifts to using closer access via the West Coast.

In addition to export terminals, the U.S. Gulf Coast has the world’s largest cluster of refineries designed to process “heavy” oil, Canada’s main export to the region.

Total U.S. Gulf Coast imports of Canadian oil so far this year have averaged about 400,000 barrels per day, according to the U.S. Energy Information Administration.

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Sarnia, Ont., which sits on the southern tip of Lake Huron and peers across the St. Clair River to Michigan, is a crucial energy hub for much of the eastern half of Canada and parts of the United States.

With more than 60 industrial facilities including refineries and chemical plants that produce everything from petroleum, resins, synthetic rubber, plastics, lubricants, paint, cosmetics and food additives in the southwestern Ontario city, Mayor Mike Bradley admits the ongoing dialogue about tariffs with Canada’s southern neighbour hits close to home.

So Bradley welcomed the announcement that Calgary-based Keyera Corp. will acquire the majority of Plains American Pipelines LLP’s Canadian natural gas liquids (NGL) business, creating a cross-Canada NGL corridor that includes a storage hub in Sarnia. 

“As a border city, we’ve been on the frontline of the tariff wars, so we support anything that helps enhance Canadian sovereignty and jobs,” says the long-time mayor, who was first elected in 1988.

The assets in Sarnia are a key piece of the $5.15 billion transaction, which will connect natural gas liquids from the growing Montney and Duvernay plays in B.C. and Alberta to markets in central Canada and the eastern U.S. seaboard.

Map courtesy Keyera Corp.

NGLs are hydrocarbons found within natural gas streams including ethane, propane and pentanes. They are important energy sources and used to produce a wide range of everyday items, from plastics and clothing to fuels.

Keyera CEO Dean Setoguchi cast the proposed acquisition as an act of repatriation.

“This transaction brings key NGL infrastructure under Canadian ownership, enhancing domestic energy capabilities and reinforcing Canada’s economic resilience by keeping value and decision-making closer to home,” Setoguchi told analysts in a June 17 call. 

“Plains’ portfolio forms a fully integrated cross Canada NGL system connecting Western Canada supply to key demand centres across the Prairie provinces, Ontario and eastern U.S.,” he said. 

“The system includes strategic hubs like Empress, Fort Saskatchewan and Sarnia – which provide a reliable source of Canadian NGL supply to extensive fractionation, storage, pipeline and logistics infrastructure.”

Martin King, RBN Energy’s managing director of North America Energy Market Analysis, sees Keyera’s ability to “Canadianize” its NGL infrastructure as improving the company’s growth prospects.

“It allows them to tap into the Duvernay and Montney, which are the fastest growing NGL plays in North America and gives them some key assets throughout the country,” said the Calgary-based analyst. 

“The crown assets are probably the straddle plants in Empress, which help strip out the butane, ethane and other liquids for condensate. It also positions them well to serve the eastern half of the country.”   

And that’s something welcomed in Sarnia.

“Having a Canadian source for natural gas would be our preference so we see Keyera’s acquisition as strengthening our region as an energy hub,” Bradley said. 

“We are optimistic this will be good for our region in the long run.”

The acquisition is expected to close in the first quarter of 2026, pending regulatory approvals.

Meanwhile, the governments of Ontario and Alberta are joining forces to strengthen the economies of both regions, and the country, by advancing major infrastructure projects including pipelines, ports and rail. 

A joint feasibility study is expected this year on how to move major private sector-led investments forward. 

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A lawyer by training, Gary Mar is also a keen student of history. And he recommends Canadians look at what happened when past U.S. administrations imposed tariffs on imports before jumping to add costs to Canadian energy.

“President Richard Nixon imposed a 10 per cent tariff in 1971 and withdrew it after a few months because it caused so much pain for American consumers,” says Mar, CEO of the Canada West Foundation, who served as Alberta’s trade representative in Washington from 2007 to 2011.

“Canadians and their governments need to be patient. Any tariffs on energy will be passed on to consumers in the United States. We shouldn’t let the president off the hook for raising the price to American drivers by putting more duties on energy we export,” he says.

“We want Americans to stand up for our supply, not displace the anger with President Trump for raising prices with anger towards Canadians.”

A major U.S. supplier

The U.S. imports more than four million barrels of oil per day from Canada, or about one out of every five barrels the country consumes. Most Canadian imports are destined for refineries in the U.S. Midwest including Illinois, Indiana, Michigan and Ohio.

About 99 per cent of natural gas imports into the United States also come from Canada. Natural gas imports flow primarily to Idaho, North Dakota, Minnesota and Montana, according to the U.S. Energy Information Administration.

Trump tariffs

Nixon put tariffs in place in an attempt to weaken the U.S. dollar against foreign currencies and strengthen U.S. exports.

Mar, who served as cabinet minister in the Klein and Stelmach governments from 1993 to 2007, sees Trump’s tariffs as aimed to repatriate manufacturing and jobs to America.

“President Trump made this explicitly clear…if you want to sell manufactured goods in the United States, you need to move your factories here,” says Mar.

“But Canadian oil and natural gas are key inputs that help U.S. manufacturing. We ship the products or partially refined products that support manufacturing of finished products in the United States. Tariffs will raise those costs for U.S. manufacturers and ultimately American consumers.”

A divisive rerun of the National Energy Program?

Mar’s former cabinet colleague Ted Morton agrees Canada needs to exercise patience and caution in any response to U.S. tariffs.

Morton, who served as an Alberta cabinet minister from 2006 to 2012, strongly disagrees with the idea of placing countervailing tariffs on energy exports to the United States. Morton casts it as a divisive rerun of then Prime Minister Pierre Trudeau’s controversial National Energy Program in the early 1980s.

Energy export tariffs “would be an attempt to revive Liberal Party support from disillusioned voters in Ontario and Quebec,” he says.

“The biggest loser in Trump’s new tariff war will be Ontario due to the integration of the auto sector between the U.S. and Canada. It’s simple political arithmetic. Ottawa could collect $4 or $5 billion by taxing energy exports in western Canada and send that money to prop up struggling industries in Ontario and Quebec,” Morton says.

“Ontario and Quebec combined have a total of 199 MPs, more than enough to form a majority government. It’s the ‘screw the West and take the rest’ strategy. It’s how the Liberals won the 1980 federal election, and they could try it again.”

Legal and constitutional precedents

And while imposing export tariffs on Canadian energy could be politically popular in central Canada, Morton suggests the action would not withstand a legal challenge thanks to legal and constitutional precedents set by former Alberta Premier Peter Lougheed.

“Peter Lougheed left future Alberta premiers with some very effective legal weapons. His government successfully challenged the constitutionality of Trudeau’s export tax on natural gas. He then teamed up with the other western premiers to negotiate a new constitutional amendment that affirms provincial jurisdiction over the development and conservation of natural resources,” Morton says.

“Premier Danielle Smith should win any constitutional challenge if the federal government tries to impose an export tariff on oil or natural gas.”

Morton, like Mar, also counselled patience in responding to tariffs because “Trump’s tariffs on Canadian energy will punish American consumers more than Canadians.”

The national interest

David Yager, who has studied and analyzed energy policy for more than 40 years, agrees tariffs on energy have the potential to drive a wedge between Alberta and the rest of the country in the same way the National Energy Program did.

“The dynamic definition of national interest is what I struggle with. Going back several decades, it was in the national interest to get oil and gas across Canada so there was a drive to build pipelines east and west,” says Yager, a consultant who also serves as a special advisor to Premier Smith.

“Today, the national interest has flipped again, and energy exports are now a source of revenue to save the ‘real’ Canada, which is central Canada. It’s the same kind of logic that has seen the emissions cap on oil and gas as well as the carbon tax.”

If Canada wants to retaliate, Yager recommends putting a duty on the 1.7 billion cubic feet of natural gas imported by Ontario and Quebec from the northeastern United States.

“That would be the appropriate tit for tat response,” Yager says.

“You could build a nice pool of capital and clobber U.S. producers without driving a wedge between Alberta and the rest of the country.”

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The United States is now the world’s largest oil producer, but its reliance on oil imports from Canada has never been higher.

Through a vast handshake of pipelines and refineries, Canadian oil and U.S. oil complement each other, strengthening North American energy security.

Here’s why.

Decades in the making

Twenty years ago, the North American energy market looked a lot different than it does today.

In the early 2000s, U.S. oil production had been declining for more than 20 years. By 2005, it dropped to its lowest level since 1949, according to the U.S. Energy Information Administration (EIA).

America’s imports of oil from foreign nations were on the rise.

But then, the first of two powerhouse North American oil plays started ramping up.

In Canada’s oil sands, a drilling technology called SAGD – steam-assisted gravity drainage – unlocked enormous resources that could not be economically produced by the established surface mining processes. And the first new mines in nearly 25 years started coming online.

In about 2010, the second massive play – U.S. light, tight oil – emerged on the scene, thanks to hydraulic fracturing technology.

Oil sands production jumped from about one million barrels per day in 2005 to 2.5 million barrels per day in 2015, reaching an average 3.5 million barrels per day last year, according to the Canada Energy Regulator.

Meanwhile, U.S. oil production skyrocketed from 5.5 million barrels per day in 2005 to 9.4 million barrels per day in 2015 and 13.3 million barrels per day in 2024, according to the EIA.

Together the United States and Canada now produce more oil than anywhere else on earth, according to S&P Global.

As a result, overall U.S. foreign oil imports declined by 35 per cent between 2005 and 2023. But imports from Canada have steadily gone up.

In 2005, Mexico, Saudi Arabia, Venezuela and Nigeria together supplied 52 per cent of U.S. oil imports. Canada was at just 16 per cent.

In 2024, Canada supplied 62 per cent of American oil imports, with Mexico, Saudi Arabia and Venezuela together supplying just 14 per cent, according to the EIA.

“Light” and “heavy” oil

Canadian and U.S. oil production are complementary because they are different from each other in composition.

Canada’s oil exports to the U.S. are primarily “heavy” oil from the oil sands, while U.S. production is primarily “light” oil from the Permian Basin in Texas and New Mexico.

One way to think of it is that heavy oil is thick and does not flow easily, while light oil is thin and flows freely – like orange juice compared to fudge.

The components that make the oil like this require different refinery equipment to generate products including gasoline, jet fuel and base petrochemicals.

Of the oil the U.S. imported from Canada from January to October last year, 75 per cent was heavy, six per cent was light, and the remaining 19 per cent was “medium,” which basically has qualities in between the two.

Tailored for Canadian crude

Many refineries in the United States are specifically designed to process heavy oil, primarily in the U.S. Midwest and U.S. Gulf Coast.

Overall, there are about 130 operable oil refineries in the United States, according to the American Fuel and Petrochemical Manufacturers.

The Alberta Petroleum Marketing Commission (APMC) estimates that 25 consistently use oil from Alberta.

According to APMC, the top five U.S. refineries running the most Alberta crude are:

• Marathon Petroleum, Robinson, Illinois (100% Alberta crude)
• Exxon Mobil, Joliet, Illinois (96% Alberta crude)
• CHS Inc., Laurel, Montana (95% Alberta crude)
• Phillips 66, Billings, Montana (92% Alberta crude)
• Citgo, Lemont, Illinois (78% Alberta crude)

Since 2010, virtually 100 per cent of oil imports to the U.S. Midwest have come from Canada, according to the EIA.

In recent years, new pipeline access and crude-by-rail have allowed more Canadian oil to reach refineries on the U.S. Gulf Coast, rising from about 140,000 barrels per day in 2010 to about 450,000 barrels per day in 2024.

U.S. oil exports

The United States banned oil exports from 1975 to the end of 2015. Since, exports have surged, averaging 4.1 million barrels per day last year, according to the EIA.

That is nearly equivalent to the 4.6 million barrels per day of Canadian oil imported into the U.S. over the same time period, indicating that Canadian crude imports enable sales of U.S. oil to global markets.

Future outlook

Twenty-five years from now, the U.S. will need to import virtually exactly the same amount of oil as it does today (7.0 million barrels per day in 2050 compared to 6.98 million barrels per day in 2023), according to the EIA.

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