Tariff Threat Unleashes Flood of Canadian Oil Heading to US

The threat of U.S. tariffs on Canadian oil exports has sparked a surge in Canadian crude oil exports to the United States, with record-breaking volumes in recent months. According to the U.S. Energy Information Administration (EIA), Canada was the largest source of U.S. crude oil imports in 2023, accounting for 51% of total U.S. crude oil imports. The expansion of the Trans Mountain pipeline (TMX) has further boosted Canada's export capacity, with the U.S. West Coast becoming a key buyer of Canadian crude oil exports.



The TMX expansion has tripled the previous pipeline's capacity to 890,000 barrels per day (b/d), allowing more crude oil to be exported directly to Pacific Ocean buyers. This has led to a record high of 4.3 million b/d in U.S. imports from Canada in July 2024, with the U.S. West Coast accounting for just over half of all maritime crude oil exports out of Western Canada between June and September 2024. The increased availability of Canadian crude oil exports to the U.S. West Coast may lead to changes in refinery operations, as refiners in the region may now have access to a more diverse range of crude oil sources.

The surge in Canadian crude oil exports to the U.S. has potential implications for oil prices and refinery operations in both countries. The added takeaway capacity provided by TMX has had a mixed impact on Western Canadian Select (WCS) crude oil prices. While the Brent price premium to WCS was $5/b higher in July 2024 compared to the same time last year, it was slightly below the five-year average in September 2024. If the price differentials remain near current levels through the end of the year, it may suggest that the added TMX capacity has helped to insulate Canada's crude oil producers from the operational decisions of refiners in the U.S. Midwest.

The global market may also be affected by the expansion of the Trans Mountain pipeline, as Canada's influence in the crude oil market grows. With more crude oil being exported to the Pacific Ocean, Canada may become a more significant player in the Asian crude oil market, potentially impacting global oil prices and trade dynamics.

In conclusion, the threat of U.S. tariffs on Canadian oil exports has led to a surge in Canadian crude oil exports to the United States, with the expansion of the Trans Mountain pipeline further boosting Canada's export capacity. This has potential implications for oil prices and refinery operations in both countries, as well as the global crude oil market. As Canada continues to diversify its export destinations and strengthen its ties with other trading partners, the broader trade relationship between Canada and the U.S. may be influenced by these strategic options.