
As US oil drilling activity hits a three-year low, Canada’s oil and gas sector — especially in Alberta and Saskatchewan — is experiencing a notable resurgence, underscoring shifting dynamics in North American energy production, much to the chagrin of US president Donald Trump.
In Texas, the heart of US oil production, only 570 new drilling permits filed with the Texas Railroad Commission, the lowest since February 2021.
The Permian Basin, a key shale oil-producing region responsible for almost half of all Lower 48 output, has seen a reduction in active rigs with major producers laying down rigs due to profitability pressures at present oil prices.
Meanwhile, north of the border, Canadian drillers are pressing ahead even during the spring “breakup,” when rising tides of mud force field operations to pause.
Nonetheless, the Canadian Association of Energy Contractors (CAOEC) forecasts 6,604 wells to be drilled in Western Canada in 2025, a 7.3% increase from the previous year.
The growth is attributed to the completion of major infrastructure projects like the Trans Mountain pipeline expansion and the anticipated startup of LNG Canada, enhancing export capacities for Canadian producers away from its single customer.
Since 2015, when Justin Trudeau came to power, Canadian producers have also become more resilient to price fluctuations than their US peers.
After a decade of cost-cutting — thanks in part to Ottawa’s punitive energy and tax policies that had the opposite effect of shutting in the industry — many companies can maintain profitability even if oil prices dip to around USD$50 per barrel, a full $10 less than the $60-$70 often cited by US shale producers as the breakeven threshold.
For instance, Cenovus Energy in its first quarter financial results this week, said it can produce a barrel of oil for less than USD$13 per barrel. Total production costs at its Christina Lake thermal oil sands plant are even less, at roughly USD$6.30 per barrel.
However, the Canadian sector still faces potential headwinds from US trade policies.
Trump’s proposed 10% tariff on Canadian crude imports has introduced a level of uncertainty not seen in decades, potentially impacting investment decisions and employment on this side of the border.
Despite those challenges, Canada is expected to remain a top non-OPEC producer through 2025 and beyond, highlighting its growing significance in the global energy landscape. Alberta presently exports about 4.3 million barrels per day (bpd) to the US, a number that is only expected to inch higher.
The shifting cost dynamic creates an ironic twist for Trump. Despite his administration’s push for energy independence and plans for tariffs on Canadian crude, the US is growing ever more dependent on Canadian oil — whether he likes it or not.
Especially if he’s forced to back out lower-cost Canadian barrels with his own high-cost ones. That in turn will force the US to reduce its own exports, which receive premium pricing through the Gulf of Mexico.
“After years of being seen as high-cost producers, Canadian firms are now some of the leanest in the industry,” Heather Exner-Pirot of the Business Council of Canada and senior fellow at the McDonald-Laurier Institute told The Logic. “We’re not the expensive option anymore.”
That resilience isn’t just about lower costs — it’s about strategy.
Canadian firms have prioritized balance sheet health and operational efficiency, helping them weather price volatility better than their shale-focused US counterparts. As American producers retrench, Canadian oil may fill the gap despite the tariff — whether Washington wants it to or not.
Analysts now warn that US oil production — long seen as the bulwark of global supply growth — may soon plateau or even begin to decline by 2027.
Permian shale producer Diamondback Energy told investors on Wednesday that it now expects US oil production to peak and then decline this year due to low prices.
Diamondback is the third-largest Permian producer and the third-largest US independent.
Company CEO Travis Stice warned that falling production not only threatens two million American jobs and GDP growth, but also the country’s trade balance and US energy security.
“Therefore, we believe we are at a tipping point for US oil production at current commodity prices,” he said in a shareholder letter ahead of first-quarter results.
“It is likely that US onshore oil production has peaked and will begin to decline this quarter… this will have a meaningful impact on our industry and our country.”