Donald Trump Is Not Brat for the Canadian Oil and Gas Industry
While Trump is pro-oil, another administration under him may only spell trouble for the oil and gas industry on both sides of the border.
By J. Seth Bumagat
For months on end, the world watched a historic election period unfold, anticipating one day in mind: November 5th. Now, as millions of Americans head to the polls to vote for their next President, the election reaches a crescendo. And as we start to move on from Kamala Harris’ historic, brat campaign and Trump’s third attempt for the White House, we begin to wonder what a win from either would mean for Canada’s relationship with the United States. More specifically, would Trump’s pro-oil stance favour the Canadian oil and gas industry?
To begin answering this question, it’s important to understand the broader context in which the US-Canada trade relationship exists. After all, it didn’t just fall out of a coconut tree. Rather, it’s rooted in a long history and deep partnership between the two countries. For decades, agreements like the North American Free Trade Agreement (NAFTA) and its successor, the Canada-US-Mexico Agreement (USMCA), allowed trade between the two countries to flow freely. An average of $3.6B worth of goods and services crossed the border each day in 2023. In the same year, 97% of Canada’s crude oil exports went to the US; a majority of which was produced in Alberta.
So, do Trump’s promises of “drill baby, drill” during his nomination acceptance speech at the Republican National Convention mean more flow of oil and gas between the two countries? Not necessarily. While Trump may be an ally of Big Oil, his proposed America-First policies include a 10% tariff on all imports. With the deeply integrated trade relationship between the two countries, such tariffs would undoubtedly harm the oil and gas sector on both sides. In fact, a report from the Canadian Chamber of Commerce estimates that the Canadian economy could see a reduction of up to 1%. This is equivalent to economic costs of $30B annually. The same report also estimates annual economic costs of $125B for the US, underscoring the consequences of the tariffs for both countries.
Challenges with refinery infrastructure also come to light. Many oil refineries in the US are designed specifically to process the unique properties of Canadian crude oil. “Heavier” and “sour” crude is more viscous and has a higher sulfur content which requires more advanced technologies to process. This is in contrast to crude that is “light” and “sweet” which is less viscous and has a lower sulfur content. The crude oil from Alberta is heavy and sour, which is what many refineries which receive Canadian crude in the US have been designed to process. Switching the feedstock to process lighter and sweeter American crude would present significant manufacturing challenges.
Despite Trump’s proposed tariffs, some in Alberta – the province with arguably the largest stake in the trade of oil and gas between Canada and the US – still believe that another Trump presidency would bode well for the province’s oil and gas industry. This is largely due to his friendly stance with the cancelled Keystone XL pipeline. The previously proposed pipeline was intended to transport more oil from Alberta to the United States and generate thousands of jobs on both sides of the border. During his first term, Donald Trump issued a permit allowing the pipeline to cross the border. However, a time of death was announced for the project on President Biden’s first day in office. This was met with disappointment from officials on both sides of the border, especially from former Alberta Premier Jason Kenney, whose government invested $1.3B of taxpayer money into the failed project.
Kenney’s successor, Premier Danielle Smith, is anticipating what a win by Trump or Harris would mean for the province’s oil and gas industry. Like others, Smith is hopeful that a Trump administration would open the door for more projects to export Albertan oil to the US. However, in light of a possible Harris administration, Smith continues to identify opportunities for natural gas projects, seeing them as a cleaner and cheaper alternative to crude oil.
While there is some purchase to the idea that a Trump win may reopen talks for the cancelled Keystone XL pipeline and present opportunities for new projects, it is important to remember that a second Trump presidency would only last 4 years. There is uncertainty around whether a succeeding administration might cancel permitted projects, much like President Biden did with Keystone XL. Additionally, it remains uncertain whether Trump would be inclined to exempt Canada from his proposed tariffs.
This leads us to the original question: would the election of Donald Trump be auspicious for the Canadian oil and gas industry? Based on his proposed tariffs and the precarity of cross-border oil and gas projects, the answer is no. For now, we can only be certain of one thing: while he may be a pro-oil candidate, Donald Trump has a history of being unpredictable and protectionist. This is why we should not place any investments, expectations, or bets for a crucial Canadian industry on the leniency of a former President with an erratic temperament.
J. Seth Bumagat (he/him) is a Production Editor at The Bell. He’s from Edmonton, Alberta and is a recently graduated chemical engineer with aspirations of addressing issues at the forefront of engineering, environment, and public policy. He has experience in academic and industrial research, primarily in water treatment, water quality analysis, and oil sands tailings treatment and management. He hopes to assure others that many pro-environment Albertans who recognize the urgency of climate change do, in fact, exist.