In a trade war with the U.S., Canada doesn’t have much leverage against an economy that’s 10 times larger than our own. One of the few pressure points is energy: Canadian oil is one area where President Trump backed off on tariff threats.

That’s why the U.S. intervention in Venezuela and its corresponding takeover of the Venezuelan oil sector is risky for Canada. Some fear that the U.S. could use Venezuelan crude to reduce dependence on Canada and weaken our leverage in trade negotiations or, worse, make our economy more vulnerable to coercion. But in reality, the U.S. still needs Canadian oil, both in market and in geopolitical terms.

On a market basis, President Trump has secured control of 50 million barrels of Venezuelan oil from storage and tankers bound for global markets. This is only equivalent to about 13 days of Canadian oil exports to the U.S. At first, Canadian prices fell by almost 10 per cent due to market concerns over increased supply of competing heavy oil from Venezuela. In the short term, weaker prices for Canadian oil hurt the earnings of oil producers and reduced the royalties and taxes that go to the provincial and federal governments. The Alberta government, in particular, felt the pinch: thanks to lower royalties, every dollar drop in the price of oil could cause a $700 million hit to the provincial budget. But prices recovered quickly when it became clear that any further increases in competing supply, driven by increases in Venezuelan production, could take years to materialize.

Still, the threat of weaker prices adds momentum to government efforts to........

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