As Donald Trump takes office, Canada's oil industry is bracing for increased volatility. The new administration's plans to impose substantial tariffs on imports and push for American energy dominance have created an atmosphere of uncertainty that is impossible to ignore. Canadian oil producers are particularly concerned about the potential impact on their operations, given that the U.S. is their largest export market.
According to Rory Johnston, an economist and founder of Commodity Context, "Just because this is done for now doesn't mean this is over yet. This is not going to be put back to bed immediately. (It's) going to mean volatility for sentiment and it's going to likely mean volatility for pricing over the next couple of months, potentially years, depending on how long (these) studies take."
Canada's oil and gas sector is overwhelmingly reliant on U.S. demand for its exports, making any disruptions to trade potentially catastrophic. U.S. refineries, particularly in the Midwest and Rockies, have grown structurally dependent on Canadian heavy crude to maintain efficient operations. Any impediment to commodity flows risks damaging the Canadian upstream sector and hiking prices for U.S. consumers.
The recent analysis by ATB Capital Markets suggests that if the full tariff cost is absorbed by Canadian producers, there could be an 18% downside to the average producer's cash flow.
For Alberta, where energy is the province's largest export to the U.S., worth about $125 billion in 2023, the stakes are particularly high. Jackie Forrest, executive director of the ARC Energy Research Institute in Calgary, notes that tariffs would be paid by U.S. refineries and importers, potentially driving up the price of fuel for drivers. However, Canadian oil producers would likely feel financial pressure too, as some refineries may not be able to pass on the extra cost to consumers.
Sources:
https://financialpost.com/commodities/energy/oil-gas/canadian-oilpatch-volatility-trump-takes-office
https://www.cbc.ca/news/canada/calgary/alberta-oil-and-gas-donald-trump-danielle-smith-tariffs-1.7432086
Trade Tensions Shake Energy Markets
Trade Tensions Shake Energy Markets in 2025
The year 2025 is anticipated to be particularly turbulent for energy markets, as escalating global trade tensions lead to unprecedented volatility. Multiple factors are driving these dramatic shifts, including ongoing conflicts in Ukraine and the Middle East, which strain energy supplies. Additionally, trade disputes with China could have significant repercussions on U.S. liquefied natural gas (LNG) exports, while potential tariffs on Canadian oil might provoke retaliatory measures, further complicating global energy dynamics.
The energy landscape is also influenced by geopolitical uncertainties. For example, Russia's invasion of Ukraine has significantly altered global energy flows, with the European Union diversifying its energy sources away from Russia, which previously accounted for 40% of the bloc's natural gas imports. The conflict has prompted a major overhaul of energy trade routes, with Russia increasing energy exports to non-Western countries like China and India. The rising demand from AI data centers is expected to further strain global energy resources.
According to Wood Mackenzie, "The Trump administration's plans for trade tariffs pose a serious threat to global economic growth in 2025. We forecast global GDP growth of 3%, up from 2.7% in 2024. However, 50 basis points (annualised) could be lost if the US imposes 60% tariffs on China and 10% on the rest of the world early in 2025, assuming partial retaliation by major trade partners."
This scenario would lead to a reduction in global oil demand by 0.5 million barrels per day, essentially wiping out half a year's growth.
Furthermore, the potential for significant expansion of the U.S. LNG market under Trump's administration could also have far-reaching consequences. As detailed in Telesto's 2025 Energy Outlook, "Trump's push for deregulation and energy dominance may accelerate the U.S. LNG exports by fast-tracking permitting. The potential for oversupply in global markets could destabilize prices, especially if trade tensions with China reignite, which would then create challenges for U.S. producers and LNG developers."