Crude Questions? A Look at Canada’s Oil Economy

If you’ve been trying to make sense of what the future holds for oil, you’re not alone. EVs were expected to slow demand for crude, but now many automakers are refocusing on gas-powered vehicles. Oil stockpiles were healthy, but now there seems to be a race to secure more production, highlighted by the U.S. arrest of Venezuelan President Nicolás Maduro and America’s intentions to exert influence over the country’s oil industry.

If the flow of that oil shifts toward the U.S., many might be asking: what does that mean for Canadian crude, much of which is destined for those same U.S. refineries? The answer is a bit complicated, but an understanding of the sector can help. Here’s what to know about Canada’s oil industry.

How much oil does Canada really have?
Given how important Canada’s oil industry is to our economy (the sector accounted for about 3 per cent of the country’s overall gross domestic product in 2024)¹, it’s not surprising that we are sitting on a huge amount of oil. About 171 billion barrels of proven reserves, in fact. Almost all of that (around 166 billion barrels) is in Alberta’s oil sands, according to Natural Resources Canada’s estimate.²

That might sound like a massive number, but Canada actually isn’t the most oil-rich country in the world. That title goes to Venezuela, which produces crude that’s similar to ours. The South American country has an estimated 303 billion barrels of proven reserves, even though it currently only produces about 1 million barrels per day (bpd) to Canada’s 6 million bdp output.³ Saudi Arabia and Iran are also top oil producers, with roughly 267 billion and 209 billion respectively, in proven reserves.⁴

The main type of oil coming out of Canada is heavy crude. It’s thick, sticky and sour (meaning it contains high sulphur content). To make it usable, this type of oil requires extra processing and special equipment to refine it into products like gasoline and diesel. Because of these complexities, among others, Western Canada Select (WCS), which is Canada’s heavy crude benchmark, typically sells at a discount to light oil like North American benchmark West Texas Intermediate (WTI).⁵

Who are Canada’s biggest customers?
Canada exported over 4 million bpd of oil last year, and the vast majority of that went to the U.S. It also exports small amounts to Europe, Asia and the Caribbean.⁶ Lately though, Canada has its eye on Asia as a way to broaden its customer base. The federal government and province of Alberta struck the Canada-Alberta Memorandum of Understanding (MoU) late last year, which proposed a one million bpd pipeline, plus 300,000 to 400,000 bpd from Trans Mountain to create more export capacity to Asia.⁷

How does Canada’s oil supply chain work?
Extracting crude and turning it into a finished, usable product is a complex cross-border process. Due to geography and pipeline constraints, it’s hard for us to transport the refined product to some domestic markets, so we still rely on imports in certain regions. “The pipelines that carry Canadian crude oil to refineries in Ontario actually traverse through the U.S,” says Jesse Coote, Associate Portfolio Manager, North American Equities.

Heavy crude can either be mined from shallow deposits or extracted from deeper deposits by injecting steam into the reservoir in order to mobilize the oil so it can be pumped out of the ground. Once the oil is at the surface, it’s then transported to a refinery, usually through a pipeline to the U.S.⁸ There are three main subsectors that make up this supply chain: upstream, midstream and downstream. Here’s a breakdown of what they mean:

• Upstream refers to exploration and production. This is where companies search for oil, drill wells, and extract the oil from the ground.
• Midstream involves transportation, storage and processing. Midstream operations include pipelines, terminals, storage tanks, rail transport and export facilities.
• Downstream encompasses refining, marketing and selling final products. This is where crude oil is turned into usable fuels and products like gasoline, diesel, jet fuel and heating oil.⁹

How is oil priced and do recent events in Venezuela affect costs?
Like pretty much everything with oil, the answer is it’s complicated. Crude has been trading at relatively depressed prices due to oversupply in the market, which is partly why news of the U.S.’s plan to control Venezuela’s oil did little to global prices. North American benchmark WTI has recently been trading between US$50 and US$60 per barrel.¹⁰

You might think that because there is an oversupply of oil globally, the possibility of more Venezuelan crude hitting the market would cause oil prices to drop even lower. That might be true, but it will likely be some time before more crude from Venezuela can be produced. As Coote explains, a lot needs to happen – from fixing aging infrastructure to finding workers and sourcing technical expertise – before Venezuela can ramp up production in a meaningful way. And that could take years, if it happens at all.

Coote adds that a lot of the current oil oversupply seems to have been absorbed by China, which has been buying up barrels and putting them into storage. There was also incremental supply coming onto the market from places Brazil, Guyana and from here at home in 2025. “There's so much supply in the market right now, it doesn't seem like geopolitical events like Venezuela are going to have an effect,” Coote said. “The biggest risk for oil prices is if this incremental supply stops being absorbed.”

What is OPEC and what’s their role in pricing?
The Organization of Petroleum Export Countries (OPEC) consists of 12 member countries, of which Venezuela is a founding member. Collectively, the member countries produced about 35% of the world's crude oil last year, with the group’s exports accounting for about half of all the oil traded internationally. By working together, OPEC members can ramp up or slow production as needed to influence supply, which gives the organization a lot of influence on global oil prices. When OPEC cuts its production targets, oil prices usually increase.¹¹

In 2016, OPEC added 10 additional oil-producing countries to form OPEC+. The group, which includes Saudi Arabia and Russia, had been curtailing supply, but in 2025 they pledged to put 2.2 million barrels per day back into the market.¹² By the end of December, they’d added 548,000 bdp back into the market, but in January, they announced that they are pausing further increases for now.¹³

What does the future of Canada’s oil sector look like?
Canada has been trying to become more competitive by making it easier for more oil to get to market. Coote notes that when the Transmountain Pipeline Expansion (TMX) became active in 2024, it expanded Canada’s ability to export crude oil off the west coast to 890,000 barrels a day, up from about 300,000 barrels.¹⁴ “We are sending significantly more crude oil off the west coast than we previously did, and those are different customers than the U.S. Now it's going to Asia,” he says. “Looking forward, we will continue to grow, because there are still opportunities to expand egress."

What should investors keep in mind?
It’s important for investors to remember that even if more Venezuelan oil flows to the U.S., that change will not happen overnight. “In the short term the impact is likely small,” Coote says. “On a long-term basis, it’s really hard to evaluate how this all plays out.” Even if global oil prices fall further, these firms are well-positioned to thrive, Coote says. He explains that their dividends are sustainable, they have an enormous amount of free cash flow and their balance sheets are clean.

Coote also sees opportunity in oilfield services companies, which provide essential products and services to oil producing companies. If commodity prices rise, you could see stocks in this space start to move higher, he explains. “We are already starting to see that in some of the U.S. oilfield services stocks that serve international customers, because, generally, investors try to anticipate a move in the stock before you see a move” he explains.