Canada pays a high price for not having enough pipelines

The pipeline debate has overlooked a crucial question: what does the country lose when its oil can’t reach enough buyers?

Canada isn’t short of oil. It’s short of enough customers competing to buy it.

Canada possesses the world’s third-largest proven oil reserves, yet for decades it has often sold much of that oil at prices below what more competitive markets might have paid.

The reason has little to do with geology. It has everything to do with economics.

Any business owner knows the best price rarely comes from negotiating with a single customer. Oil is no different. When producers have few practical buyers, those buyers gain leverage. When several customers can compete for the same product, sellers are far more likely to receive its full value.

That simple market principle explains why Canada has quietly paid an economic penalty for decades.

Immediately before the Trans Mountain expansion entered service in 2024, about 97 per cent of Canada’s crude oil exports were destined for the United States. The relationship has served both countries well, but it also meant Canadian producers had limited alternatives whenever export capacity became constrained. Buyers understood those limitations, and markets responded accordingly.

Western Canadian Select, Canada’s benchmark heavy crude, has traditionally traded below West Texas Intermediate. Some of that discount reflects the heavier quality of the crude and the cost of transporting it to market. But limited pipeline capacity and restricted access to competing buyers have also widened that discount.

Oil trapped inland is worth less than oil competing in world markets.

This is where pipelines enter the discussion.

Pipelines do not create oil, nor do they guarantee prosperity. What they provide is opportunity by connecting producers with additional markets and giving buyers an incentive to compete. In commodity markets, competition creates value.

The Trans Mountain expansion demonstrated what happens when producers gain another route to market. The project increased export capacity from about 300,000 barrels per day to 890,000 barrels per day, giving Canadian producers access to customers beyond North America.

Global oil markets reward producers that offer refiners reliable supply, competitive pricing and choice. Refiners invest billions of dollars in facilities designed to process specific grades of crude, making dependable long-term suppliers especially valuable. Asian refiners, including buyers in China, Japan and South Korea, have since become increasingly important purchasers of Canadian crude. The U.S. remains Canada’s largest energy customer and almost certainly will for decades, but it is no longer our only meaningful option for export growth.

The benefits extend well beyond energy producers. Every additional dollar earned on a barrel of Canadian crude doesn’t stop at the wellhead. It flows through Alberta’s royalty system, into corporate investment, supplier contracts, federal tax revenues and thousands of Canadian jobs. Better prices don’t simply benefit producers. They strengthen the broader economy.

The economic case is compelling. The strategic case is becoming even stronger.

Recent experience has reinforced a broader lesson: energy markets reward producers that can reach multiple customers. Asian refiners are not looking simply for additional barrels of oil. They are looking to diversify supply and reduce their exposure to geopolitical risk. Instability in the Middle East, sanctions on major producers and periodic disruptions to global shipping routes have reinforced the value of dependable suppliers.

Canada is one of those suppliers. It offers political stability, transparent regulation and a long history of honouring commercial commitments. For refiners making investments measured in decades rather than years, those qualities carry real economic value. But they matter only if Canadian producers can reliably deliver their oil to those markets.

Reliable supply is valuable. Reliable access to customers is indispensable.

The real issue is not pipelines themselves. It is market access and the opportunity cost of limiting competition for Canadian oil.

Every pipeline proposal should stand on its own commercial, environmental and regulatory merits. Nor should anyone claim that additional export capacity eliminates price discounts or shields producers from global market volatility. Heavy crude will always trade differently from lighter grades, and market access is only one factor influencing price.

For years, Canadians have debated the financial, environmental and political cost of building pipelines. That debate will and should continue. But there is another cost that deserves equal attention.

Every barrel of Canadian oil sold at a deeper discount because producers lack sufficient access to competing markets represents income that is never earned, royalties that are never collected, investment that never occurs and economic opportunities that quietly disappear.

Canada has spent years debating the cost of building pipelines. Perhaps it is time to give equal attention to the cost of not having enough of them.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.