ANALYSIS: Alberta oil risks becoming collateral damage in Ottawa’s trade war

CALGARY — If Ottawa follows calls from some sectors to use oil and other energy resources as leverage against the United States in the ongoing trade war, Alberta will become one of the first casualties.With Canada-US trade talks collapsing and US President Donald Trump threatening new 50% tariffs Monday on Canadian automobiles, parts and steel beginning January 1, 2027, politicians such as Ontario Premier Doug Ford are now saying “everything is on the table.”Ford suggested Canada could use oil and potash against Washington while Ontario could restrict electricity and critical mineral exports south of the border.“We power 1.5 million homes and businesses,” Ford said.“Everything’s on the table. I’ll do whatever it takes.”On Monday, Trump hit back at Ford’s threat saying in a Truth Social post that the premier was “less charismatic, intelligent, and overall unimpressive brother of the late, great, Rob Ford” and that the US will “always be far bigger, richer, and stronger than Canada.”.“Remember, much of the electricity, oil, and gas that Canada gets is transported through the USA. Someone should get these clowns to 'fall in line' or, the consequences for Canada will be far worse,” Trump said. “Their businesses are fleeing for the United States, and it's all because of their failed policies, and inept leadership! The days of ripping off our farmers, and other businesses, are over.” While oil exports give Ottawa some leverage, using that leverage could require Alberta to absorb much of the economic damage.In 2025, Canada exported 4.3 million barrels per day (bpd) of crude oil, of which 90% — 3.9 million bpd — went to the US.Those exports were valued at $126 billion.Alberta produces most of Canada’s crude and is the source of most Canadian oil exports, meaning a federal restriction would fall disproportionately on the province.However, energy dependence works both ways, as numerous refineries in the US Midwest and on the Gulf Coast would face difficulty replacing Alberta’s oil immediately, since they have invested in specialized equipment to process Alberta’s sulphur-rich oil sands crude rather than the lighter oil produced across much of the US.Restricting Alberta’s oil exports would therefore create problems for the Americans, but Alberta would also face an immediate problem: what to do with millions of barrels that can no longer move south?The Trans Mountain expansion has improved access to the Asian marketplace, but Canada still lacks enough alternative pipeline and marine capacity to redirect all of the crude currently sold to American buyers.Premier Danielle Smith’s proposed one million bpd West Coast pipeline has yet to be approved by the Major Projects Office (MPO), and now, with the uncertain trade situation, Trump’s talk of a possible revival of the Keystone XL pipeline is up in the air.The proposed Prairie Connector pipeline — which would follow portions of the former Keystone XL route — is advancing through Calgary-based South Bow and its US partner, Bridger Pipeline LLC, with final investment decisions expected by the middle of next year.Trump already issued a cross-border permit to Bridger for that proposal in April, but none of these proposals could provide Alberta with an escape route if Ottawa decides to restrict existing exports..Smith hints proposed Prairie Connector pipeline could become ‘Keystone 2.0’ with Trump’s support.If Alberta’s exports were to be restricted, domestic producers would be competing for limited access to alternative markets, while the price of Canadian crude would likely fall relative to international benchmarks.In 2018, Alberta faced similar conditions when oil production exceeded available export capacity and Western Canadian Select (WCS) traded at a record discount to US crude.At the time, the provincial government capped production at 3.56 million bpd in January 2019 to reduce the storage glut and support prices.A restriction that significantly reduced oil exports during a trade war could create similar pressures by leaving more crude stranded in Alberta, although the additional capacity provided by the Trans Mountain expansion would offer producers more ability to redirect shipments to Asian markets than they had in 2018.A new export restriction imposed during a trade war could recreate those pressures, with lower prices reducing revenue for producers and shrinking the royalties the Alberta government uses to help fund provincial programs. Also, if the restrictions persisted, companies could delay investment, reduce drilling and eventually curtail production.Despite talk of using Alberta’s resources as leverage, Premier Smith has strongly opposed using them as a retaliatory weapon.Her approach has contrasted sharply with Ford’s throughout the ongoing dispute.As Ontario’s manufacturing-heavy economy is expected to be among the hardest hit by the latest American tariffs, most Alberta exports — for the time being — continue crossing the border tariff-free..WATCH: Ford tells Trump to ‘kiss my ass,’ threatens triple prices on oil and critical minerals.Smith has argued against retaliatory tariffs and called on Ottawa and Washington to continue negotiating.“I know those who are experiencing tariffs is painful, and we're going to do what we can to get that down to zero, but 97% of our products go across the border tariff-free, and we have not done nasty ads in the United States,” Smith said, seemingly making a reference to advertisements put out by Ford's government.In July, Smith stated that she would try to prevent Canada “from making a very dumb decision of putting energy on the table, because [Enbridge Line 5] goes through Michigan.”“If you cut off energy to the United States, they can cut off Line 5 and cut off energy to Ontario and Quebec,” she said.“So no aviation fuel, no diesel, no gasoline, and we don't want to do that. I would just say that it may sound tough to say those kinds of things, but if you cannot do it practically, and you're not prepared to live with the consequences of doing it, don't threaten it.”That integrated pipeline system between Canada and the US also creates another vulnerability, as the Enbridge Mainline begins in Alberta and enters the US after crossing southern Manitoba.Parts of the network carry Alberta crude through the American Midwest before shipments return to Canada at Sarnia, Ontario..Enbridge’s Line 5 transports up to 540,000 bpd from Superior, Wisconsin, through Michigan and into Sarnia.The system then connects with Line 9, which carries crude east to refineries in Ontario and Quebec.That limits Ottawa’s ability to target American consumers without threatening Canadian supplies.The vulnerability also illustrates why Alberta has spent years seeking additional pipelines to Canadian coasts, such as the proposed Energy East, which would have carried Alberta crude to eastern refineries and an export terminal in New Brunswick.That project was cancelled by TC Energy in 2017 following political opposition and regulatory uncertainty.In July, Smith and Ford announced the Northern Shield Energy Corridor, a proposed 3,300-kilometre pipeline from Hardisty to Sarnia that could initially carry 500,000 bpd and potentially expand to 800,000.However, it remains nothing more than a concept, meaning the proposal provides neither additional leverage in the current dispute nor an outlet for Alberta crude..The prospect of using Alberta oil as a bargaining chip has also aggravated broader concerns about how the province’s resources are treated within Confederation.Those concerns have intensified recently, with Prime Minister Mark Carney announcing $70 billion in federal funding for an initiative to boost clean energy, including upgrades to Churchill Falls and the Gull Island project involving Quebec and Newfoundland and Labrador.Some Alberta critics contrasted Ottawa’s support for those projects with the federal restrictions and regulatory uncertainty that have confronted Western oil and gas development.With Albertans set to vote in the October 19 referendum, a potential confrontation over oil exports could also provide independence supporters with an argument that reinforces their claims that Alberta oil is treated as a national resource when Ottawa and other provinces need revenue or economic leverage, while Alberta is nothing more than a resource colony for the rest of Canada..“For ten years, Trudeau’s Liberals blocked pipelines, banned tankers and demonized Alberta oil and gas. Carney refuses to reverse any of it. But now Ottawa needs leverage, suddenly our energy is useful,” political commentator Lawrence Magee, also known as BertaProudDad, said on X.“They don’t respect Alberta. They use Alberta.”

ANALYSIS: Alberta oil risks becoming collateral damage in Ottawa’s trade war

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