If Venezuela were to restore production, U.S. refiners would have new options that could erode Canada’s long-standing position in the heavy-crude market

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The United States’ confrontation with Venezuela could lead to a reduction in the U.S. long-term need for Canadian crude, a shift that would have major consequences for Canada.

About 97 per cent of Canada’s crude exports go to the U.S., according to the Canada Energy Regulator. When Venezuelan supplies are disrupted, prices for heavy oil rise, and Canada benefits in the short term. But if the standoff brings political change and Venezuela rebuilds its oil sector, the U.S. could begin relying less on Canadian barrels.

Canada is one of the world’s major producers of heavy crude, mostly from Alberta’s oil sands. U.S. Gulf Coast refineries were designed to run on heavy oil because it was cheap and plentiful for decades. That is why what happens in the Caribbean matters to Canada.

Venezuela holds almost a fifth of the world’s known oil reserves yet produces less than one per cent of global supply. Most of its crude is heavy and sour, the same type many U.S. refineries are configured to process and similar to what Canada exports. While its oil industry has collapsed, the reserves remain and could re-enter the market under a different government. That puts Canadian and Venezuelan barrels in direct competition.

Relying on one customer leaves the country vulnerable to geopolitical shocks it cannot control.

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