OIL’S NOT WELL

Threat to Canada’s Oil Industry Is Investment Heading South

If you think the capture of President Maduro of Venezuela wasn’t a good day for him, last Monday wasn’t a good day for Canadian energy stocks either. Some of the biggest names in Canadian energy like Cenovus, Suncor and Canadian Natural Resources saw their stocks sink.

By contrast, some of the biggest American firms such as Chevron, ConocoPhillips and Exxon saw their stock value rise.

It’s all part of the early analysis of what the American incursion into Venezuela and the removal of Maduro means for the oil and gas sector. Venezuela not only has the largest proven oil reserves in the world, like Alberta’s oil sands, it’s a heavy sour crude.

Essentially, Canadian oil just got some competition in the market. This wouldn’t matter as much if Canada hadn’t spent the last decade trying to suffocate the Canadian oil and gas industry. Without the disastrous policies of the last 10 years, Canada would have built a pipeline for Canadian oil to British Columbia’s northwest coast, another to Saint John, N.B., and, of course, Keystone XL would be feeding American refineries.

Canada would not only be exporting to world partners aside from the United States, we would also have a deeper level of integration with the American refining industry that would be difficult to break.

In the 1990’s. the U.S. imported much more oil from Venezuela than they did from Canada. Many of the American refineries along the Gulf Coast were built specifically for Venezuelan heavy crude.

Canada began to become more important to the American oil supply in the late 90’s with the arrival of Hugo Chavez, the predecessor and mentor of Maduro, as president of Venezuela. By 2023, Canada was supplying 52% of all the oil imported into the United States on an annual basis.

That’s at risk now, perhaps not immediately. But it is at risk.

While investors are certainly worried enough to shave a few points from the biggest Canadian energy stocks, other analysts are saying don’t worry, it will take a long time for Venezuela to repair their infrastructure. While the South American country used to be prosperous and successful, a quarter century of socialism has damaged their economy and oil infrastructure is crumbling.

Donald Trump says with Maduro gone, he’s going to fix that.

“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, and start making money for the country”, Trump said last Saturday.

Now isn’t the time for Canada’s oil sector, or our political leadership, to be complacent. The future health of our economy depends on bold and decisive action, which despite promising that, Prime Minister Mark Carney has failed to deliver.

His agreement with Alberta and Premier Danielle Smith, which looked so good a few weeks ago after Trudeau’s disastrous policies, now looks quaint. Canada simply doesn’t have the time they once thought they did.