A Canadian Pipe(line) Dream

Peter Zeihan 4 min

Canada's heavy crude is trapped in North America due to lack of export routes and political friction with the US. Albertans keep talking about independence because if they can get a different relationship with the United States, then all of a sudden a lot of that mechanical stuff just disappears.

Chapters

  1. 0:00

    The Canadian Pipeline Dilemma

    Canada relies on US refineries for its heavy crude, but political tensions and lack of alternative export routes threaten this supply chain. Canada proposes a new $35 to 45 billion dollar pipeline to export crude to the west coast, aiming to bypass US dependence.

  2. 2:21

    Logistical Obstacles and Delays

    The proposed route faces severe challenges including population density, insufficient port depth, and a lack of a finalized destination. Even under perfect conditions, construction would not begin until 2027, leaving Alberta dependent on the US for over a decade.

Key points

  • 0:00

    Most of the energy production in Canada comes from the province of Alberta and most of that is heavy sour crude that has a limited market in the wider world.

  • 0:00

    Alberta's crude is transported by pipeline and rail to US refineries designed to run on heavy sludge.

  • 0:00

    Canadian crude often sells at a discount because selling primarily via pipeline into a closed market makes you a price taker.

  • 0:00

    Albertan crude sometimes sold at a discount of $25 a barrel before recent diplomatic falling out.

  • 0:00

    Canadian-American relationships are now at the worst since the arguably the War of 1812.

  • 0:00

    The Canadians are desperate to find any other outlet because they have a limited market in the wider world.

  • 0:00

    Alberta is landlocked and nobody else really wants Albertan crude because they would have to retool the refineries.

  • 0:00

    Any fresh crude source will find a buyer if you can get the crude to them given Persian Gulf and Russian crude issues.

  • 0:00

    Prime Minister Kearney announced state backing for a 35 to 45 billion dollar pipeline to export crude from Alberta to the west coast of Canada.

  • 0:00

    Aspirations do not make policy even though it has been announced by the Prime Minister.

  • 0:00

    There is not a route at the moment as they have tried six different ports where this might technically be done and none of them worked out.

  • 0:00

    They just have a placeholder of a place called Delta which is just to the south-southeast of Vancouver.

  • 2:21

    Exporting to Delta requires running the pipeline through the most densely populated part of British Columbia including Vancouver proper.

  • 2:21

    The destination port is not deep enough to handle a fully loaded supertanker.

  • 2:21

    They do not have a port, they do not have a destination, but they do have state backing.

  • 2:21

    The Prime Minister used to be a central bank chief who's pretty good at the math so this is going to move a lot faster than previous projects.

  • 2:21

    They still have to worry about all the niggling details about how to get it to wherever they're going to get it.

  • 2:21

    This is still early stages as best case scenario they hope to begin construction in 2027.

  • 2:21

    Best case scenario, they hope to finish construction by 2034.

  • 3:09

    If everything goes perfectly, this is an issue for the middle of next decade until then Albertan crude stays mostly trapped within North America.

  • 3:09

    Albertans keep talking about independence because if they can get a different relationship with the United States, then all of a sudden a lot of that mechanical stuff just disappears.

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