Opinion | Why Canada Still Needs a New Oil Pipeline
The development of intraprovincial oil pipelines in Canada has long been a politically fraught topic. The discussion of Canada’s energy sector is often mired in regional beliefs and identity politics. This can be seen through the media sparring between Alberta Premier Danielle Smith and BC Premier David Eby, who use their respective support or opposition of an oil pipeline to score political points, while having little to say on the economic impacts of the prospective project itself.
The economic benefits of an oil pipeline from the Alberta oil sands to the BC coast are clearly demonstrated by the opening of the Trans Mountain Expansion in May 2024. The expansion project twinned the original 1953 Trans Mountain Pipeline by building a second pipeline along the original path, increasing the capacity of the Trans Mountain system from 300,000 to 890,000 barrels per day. As a result, pipeline export capacity of crude oil has increased by 13 per cent, providing much-needed relief to Canada’s other pipelines.
As crucial as the increase in total capacity, the Trans Mountain Expansion created a nearly 700 per cent increase in export capacity to western tidewater, allowing Canadian bitumen to reach Asian markets where oil demand continues to grow. Oil from Western Canada has traditionally traded at a discount to other benchmarks, with the gap between Western Canadian Select (WCS) and West Texas Intermediate (WTI) averaging $18.70 USD per barrel between April and September 2024. The price gap is multifaceted, with light sweet WTI crude oil requiring less processing than Canada’s heavy sour crude. However, by easing the pressure on export capacity, the opening of the Trans Mountain Expansion narrowed the differential to $12.00 USD per barrel between June 2024 and July 2025, representing a drastic increase in value for Canada’s 5 million barrels of oil produced per day. The increase in oil production made possible by the Trans Mountain Expansion, combined with the higher price per barrel, means Canada’s oil industry will be able to generate more revenue and profit.
The introduction of a new pipeline can have far-reaching effects on economic activity. First, as the rest of Canada’s economy stalls, growth in the energy sector can provide a ballast as Canada tries to avoid a recession, while also generating much-needed revenue for federal and provincial governments through royalties, payroll taxes, and capital gains taxes. While some may see the increased flow of capital into Canada as primarily benefiting the provinces involved in oil production and transit, it is undeniable that, through programs like the federal equalization system, the wealth is spread across the country.
Increased oil exports also have an outsized macroeconomic impact on the Canadian dollar. Despite making up only 3.3 per cent of GDP, oil and gas are Canada’s largest exports, accounting for around 25 per cent of total exports, and represent a significant contribution to Canada’s current account balance. The $100 billion CAD in yearly oil exports helps to offset Canada’s trade deficit and buoy the dollar as oil companies exchange the US dollars they receive for Canadian dollars to pay employees and dividends. This upward pressure on the CAD is essential in staving off further devaluations as the weak loonie continues to face additional pressures.
The opening of an oil pipeline has a clear and strong positive effect on the economy, as demonstrated by the Trans Mountain Expansion. However, it raises the question: If a new pipeline was just built, why does Canada need another? Since its opening, the Trans Mountain Expansion has achieved an average capacity utilization of 82 per cent. As oil production continues to increase, it is expected that export constraints may reappear by 2027. A return of export constraints will again push down the price per barrel received from Canadian producers as the attempt to get their oil through the congested pipelines discourages exploration and growth in one of Canada’s most productive sectors.
One of the strongest arguments against building a new oil pipeline is the resulting emissions from the extraction of the oil and the later consumption of the oil at its end destinations. Greenhouse gas emissions have already increased global temperatures by one and a half degrees and are projected to keep rising. However, the question Canadians need to ask themselves is: Is the reduction in global emissions worth the resulting harm to the standard of living?
Despite previous predictions that peak oil demand is imminent, revised forecasts now predict that demand growth will continue into 2050. While Canada’s six per cent of global oil production is not insignificant, any potential cut in future oil production will likely be supplemented by another oil-producing country with no plans to slow production, happily eating up the market share. Suppressing growth in the oil industry to reduce global emissions, however virtuous, will likely have a minimal effect on global emissions. Considering Canada’s ageing population, declining productivity, and tariff-induced struggles in other sectors, failing to invest in one of Canada’s strongest industries will likely mean Canadians’ quality of life will continue to decline.
It should be a focus of the Canadian government to support the development of an oil pipeline from Alberta to the coastal waters of British Columbia. Through the passage of Bill C-5 and the Building Canada Act, the current government has clearly shown its desire to grow Canada’s economy through economically productive infrastructure projects. Yet despite the clear potential benefits, no oil pipeline is included as a project of national interest under C-5. Opponents of building a new oil pipeline argue that the government should not invest in one because there is no business case; however, that argument is wholly repudiated when considering that the business and regulatory environment created by the government is the force that has driven off corporate interests in a new project. Through policies that the Carney government has decided to keep on the table—like Bill C-69 Impact Assessment Act, Bill C-48 Oil Tanker Moratorium, and the emissions cap exclusively on the oil and gas industry— any interest in a project that carries such a large timeline and investment has been stifled.
If the Canadian government were to change direction and move towards catalyzing the construction of another pipeline, the largest challenge it is likely to face would be doing so while respecting and upholding the rights of the Indigenous communities along the path of a new project. As demonstrated by the Coastal GasLink, the government must consult with the elected band councils established under the Indian Act and, where appropriate, hereditary chiefs, and make reasonable accommodations to address the concerns of Indigenous groups in the project’s path. Importantly, large infrastructure projects bring economic opportunities to remote Indigenous communities—which have historically been disadvantaged by poor access to infrastructure and the wider economy—and the rising trend of including First Nations groups in equity and revenue sharing deals, represents a tool for Indigenous communities to see lasting benefits from the pipelines running through their land. There will always be Indigenous voices who oppose oil and gas infrastructure on Indigenous land, and Canada must fulfill its duty to consult and accommodate Indigenous communities. Still, the Canadian government must also balance opposing perspectives with the economic benefits to all Canadians, including the Indigenous group it will be directly affecting.
The path forward for the Canadian government is clear: to secure long-term economic strength, it must throw its full support behind a new oil pipeline. Starting by creating a regulatory framework that is actually conducive to growth and investment, the addition of an oil pipeline to the list of national interest projects will allow the government to fast-track this crucial piece of infrastructure. While with any policy decisions, there will undoubtedly be adverse consequences with increased emissions and a potential to build on Indigenous land against their wishes, the prosperity of Canadians should be our government’s top priority.
Edited by Annabelle Zehner
Featured Image: “Red and brown train on rail tracks during daytime” by Dan Loran is licensed under Unsplash.
