Canada’s oil industry should not panic over the U.S. capture of Venezuelan president Nicolás Maduro, Macdonald-Laurier Institute analyst Heather Exner-Pirot said Jan. 4. She called Washington’s bid to reshape Venezuela’s oil sector a medium-term risk, and said Canada’s answer is to stay competitive and keep opening new markets.
A familiar competitor, not a new one
Heather Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute, said Canada’s oil and gas industry has always competed with other oil-rich countries, and Venezuela is no exception. The South American country holds the world’s largest proven crude reserves, but years of corruption, violence and neglect have left its production far below its potential.
“Just because they have oil in the ground doesn’t mean that they can get it out logistically, so I don’t think anyone in this sector is immediately panicking,” Exner-Pirot said.
She described U.S. President Donald Trump’s claim that his country will “run” oil-rich Venezuela as a medium-term risk to Canada — something to plan for, not a shock that changes the business overnight. Trump has also said he wants American companies to rebuild Venezuela’s battered oil industry.
What Washington actually signalled
Exner-Pirot pointed to comments Sunday by U.S. Secretary of State Marco Rubio, who walked back Trump’s claim and suggested the United States would not take a day-to-day role in governing Venezuela, other than enforcing an existing “oil quarantine” on the country. That, she said, shows Trump’s threats are so far just that — threats.
The U.S. president, she added, first has to get through the extreme and global political unrest his actions have created before he can profit from Venezuelan oil or shake up Canada’s oil sector.
Over the long term, however, she said Venezuela could reshape its oil markets in favour of the United States, and Canadian producers should not be complacent about that possibility.
Why Gulf Coast refineries are the battleground
The competition matters most where the two countries’ products overlap. Both Canada and Venezuela produce heavy crude, and the refineries on the U.S. Gulf Coast — which historically processed large volumes of Venezuelan oil — are among the few configured to handle it in quantity.
Analysts say that if Venezuelan production rises significantly, Gulf Coast refiners gain another source of heavy crude, and the pressure would show up first in the price discount applied to Canadian barrels rather than in lost sales. Canada’s position in the U.S. Midwest, where refineries draw roughly 70 per cent of their crude from Canadian pipelines, is far harder to displace. Every additional dollar of discount on Canadian heavy oil, however, is estimated to cost Canadian producers about $2 billion a year in revenue.
Exner-Pirot herself expects Venezuela to add some incremental production that competes with Canadian heavy oil, especially on the Gulf Coast, widening that differential.
Diversification is the defence
The good news, Exner-Pirot said, is that Prime Minister Mark Carney and Alberta Premier Danielle Smith have been heading in the right direction in recent months. Both have turned their attention to finding ways to get Canadian oil to new markets beyond the United States, diversifying the sector and ensuring Canada remains competitive.
Other analysts add that Canada holds structural advantages Venezuela cannot quickly match: oilsands facilities that are already built and paid for, a stable political environment, and a pipeline network that delivers crude directly to American refineries. Venezuela’s cost of capital and production costs have risen over the past decade, while Canada’s have come down.
The consensus view is that Venezuelan output will grow only gradually, giving Canada time — provided it uses that time to compete.
