Our reliance on a single market is bleeding billions from the Canadian economy

In September, I warned that Venezuela’s oil revival could drive down the price Canadian producers receive from U.S. buyers.

That threat is becoming harder to ignore. More Venezuelan heavy crude is competing for American buyers, while shipping costs and refinery disruptions are adding pressure on Canadian prices.

Canada sent about 90 per cent of its crude oil exports to the United States in 2025, according to the Canada Energy Regulator. Those sales were worth approximately $126 billion. When American buyers pay less, Canadian producers are left with few alternatives.

Western Canadian Select, or WCS, is heavier and costs more to refine than the U.S. benchmark, West Texas Intermediate, or WTI. Those differences and the cost of transporting Canadian crude to American refineries normally mean WCS sells at a discount. Competition, refinery demand and access to other markets also affect that price gap.

The gap has grown substantially. WCS for December delivery at Hardisty, Alta., traded at US$28.75 a barrel below WTI on Nov. 4, according to brokerage CalRock. The discount had narrowed from US$31.60 a day earlier, but remained unusually wide.

Oil Sands Magazine reported that the discount grew from less than US$22 at the end of September to more than US$31 in late October. The magazine projected an October average price of about US$70 a barrel for WCS, down from US$77 in September, even as WTI’s monthly average rose.

Global prices then fell sharply on Nov. 4. Canadian producers faced that decline with an unusually wide discount already weighing on their returns.

The money involved is considerable. An additional US$1 discount on one million barrels a day means US$1 million less in daily gross sales revenue. If it lasts a full year, that amounts to US$365 million.

Canada’s actual losses depend on sales volumes, contracts and how long the wider discount lasts. Producers with their own refineries can offset some losses through cheaper crude. But a lasting squeeze on production revenues could leave less money for investment and reduce the royalties and taxes governments collect.

The return of Venezuelan oil to the U.S. market adds to the pressure. Its heavy crude competes with Canadian oil for buyers and refining capacity. Venezuela does not have to replace Canadian supplies to hurt Canadian producers. Giving American refiners another source of supply can be enough to weaken the price they are willing to pay.

Washington is now backing an expansion of that supply. North American Blue Energy Partners announced that two tankers carrying one million barrels of Venezuelan crude arrived in Corpus Christi, Texas, in October under its agreement with the United States. The company says it plans to raise production above one million barrels a day, although that expansion requires substantial investment.

Other factors are adding pressure. High shipping costs have reduced demand for Canadian crude shipped through the U.S. Gulf Coast to overseas buyers. Refinery maintenance has also weakened demand.

How much of the wider discount comes from Venezuelan competition remains unclear. North American Blue Energy Partners’ planned expansion will also take time. But its deliveries have begun, giving American buyers another source of heavy crude.

Some of the current pressure may pass. Cenovus Energy chief executive Jon McKenzie said on Nov. 4 that he expected the unusually wide discount to be temporary. The company is maintaining its production plans.

Temporary relief, however, would not change Canada’s dependence on American buyers or remove Venezuelan competition. Canada needs other markets before the next disruption, and reaching them takes years.

The Canada Energy Regulator lists Trans Mountain’s smaller optimization project as under construction, with up to 90,000 barrels a day of additional capacity expected in late 2026. Its larger mainline optimization project could add another 210,000 barrels a day in 2028 or later, subject to approval.

The proposed Pacific Link pipeline has been designated a project of national interest, but the regulator lists its proposed in-service date as 2032. Canadian producers would have to wait years for that additional route to market.

Improvements to existing pipelines could help sooner. But producers also need willing customers and prices that justify the shipping costs.

In September, Venezuela’s revival was a warning to Canada. Deliveries have since begun, and Canadian heavy oil is under greater price pressure. Canada cannot give American buyers more choice while leaving its own producers with so few alternatives.

The discount may narrow, but the need for other buyers will remain. Canada should use the time available to reach them, rather than wait for the next squeeze to remind us what dependence on one market costs.

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.