By Christopher Hernandez-Roy

May 18, 2026

During a business event at the White House on May 4th, President Donald Trump said “We have hundreds of millions of barrels of oil coming out of Venezuela, going to Houston, to different places, to have it refined. And we’re sort of, it’s almost really a partnership.”

The gradual re-emergence of Venezuela as a meaningful oil producer is now possible, after the removal of Nicolás Maduro, the US management of the regime, and of the country’s oil resources.

For Canada, Venezuela’s return should accelerate the debate around how to preserve privileged access to the United States while simultaneously reducing the vulnerabilities that arise from overwhelming dependence on that same market.

At first glance, Venezuela’s oil recovery may appear too gradual to matter strategically. The country’s petroleum industry remains deeply degraded after years of under-investment, sanctions, operational collapse, political turmoil, and deep corruption.

Even in the best case whereby elections are held, the country democratizes, sanctions are further lifted, and foreign investment begins to flow, Venezuela is unlikely to return quickly to the production levels it enjoyed in the 1990s, when it peaked at 3.22 million barrels per day (b/d) in 1997.

In April, Venezuelan production reached 1.23 million b/d. Estimates in a moderate recovery scenario driven by the return of U.S. oil services companies calculate that Venezuelan output could rise to approximately 1.5 million b/d by 2028, while a more ambitious longer-term scenario could see production approach 3 million b/d by 2035. Rystad Energy estimates that to return to 3 million b/d would require an investment of US$183 billion over 15 years.

With the completion of the Trans Mountain pipeline, Canada now supplies roughly one-quarter of the crude oil processed by U.S. refineries, showing both the scale of continental integration and the importance of preserving access to the American market.

Canada exported 4.5 million b/d to the United States in 2024, more than double the amount it exported in 2008. Venezuela’s recovery, while gradual, would reintroduce meaningful competition into the North American heavy crude market; and the country’s oil is uniquely suited to the refining system of the U.S. Gulf Coast.

Canadian crude will continue to dominate certain markets like the U.S. Midwest, where geography and pipeline infrastructure make foreign competition economically implausible.

But the Gulf Coast is a globally connected refining hub where barrels from Canada compete on price, quality, and availability with barrels from around the world. Rory Johnston, a leading Canadian oil analyst has said that Venezuelan oil may gradually push Canadian oil out of the Gulf Coast refineries.

Canadian heavy crude, particularly Western Canadian Select (WCS), trades at a discount, or differential, relative to benchmark U.S. crude prices such as West Texas Intermediate (WTI). A meaningful increase in Venezuelan crude would result in a widening differential between WCS and WTI, reducing the value received by Canadian producers for every exported barrel.

At the moment, any additional Canadian production is increasingly dependent on re-exports through the Gulf Coast into international markets. This lays bare fundamental problem facing Canada’s energy sector: it is not a problem of production capacity, but rather one of egress capacity.

Canada is the world’s fourth largest oil producer, yet its ability to move crude efficiently to multiple global markets remains constrained.

The overwhelming majority of Canadian oil exports flow south into the United States (receiving 97%  of Canadian oil in 2023), mostly through pipeline systems connected to the Midwest and Gulf Coast.

This integration has delivered enormous economic benefits over decades, but it has also produced a strategic asymmetry: the United States is both Canada’s greatest energy customer and its greatest source of market vulnerability.

This dichotomy explains both the differential between WCS and WTI and Canada’s exposure to policy risk; trade disputes, tariffs, sanctions-related measures, or regulatory shifts in Washington can have outsized consequences for Canadian producers.

This vulnerability has transformed pipeline politics in Canada from a largely economic debate into a broader conversation about sovereignty, resilience, and strategic autonomy. The question is no longer simply whether Canada needs additional pipeline capacity. It is in which direction that capacity should flow and what strategic purpose it should serve.

For Canada, Venezuela’s return should accelerate the debate around how to preserve privileged access to the United States while simultaneously reducing the vulnerabilities that arise from overwhelming dependence on that same market.

Several options exist, each reflecting different priorities and trade-offs. Southward expansion into the United States remains the most economically efficient path, with one new line authorized by the Trump administration last month.

Existing pipeline infrastructure, geography, and market integration make the southward option relatively inexpensive and commercially attractive. Yet it would deepen the very market dependence that policymakers increasingly view as problematic.

Eastward expansion presents a different logic. Pipelines to Atlantic Canada could improve domestic energy security by reducing Eastern Canada’s reliance on imported foreign crude. Such projects could also strengthen internal economic integration and create additional refining opportunities within Canada itself.

However, eastward routes would be much more complicated, longer and more expensive and eastern Canada has refineries that are configured to process lighter grades of imported oil.

Northern routes occasionally emerge in political discussions, often framed through the lens of Arctic sovereignty or national development. The Port of Churchill is receiving newfound attention because it could function as a form of national insurance during periods of geopolitical or market uncertainty.

However, Arctic ice conditions, high transportation and operating costs, and limited surrounding infrastructure present meaningful obstacles. One North American and Arctic Defence and Security Network (NAADSN) analysis of the project concluded it would make a “naive” investment.

The most consequential option, however, is westward expansion to the Pacific Coast. The Trans Mountain pipeline, which nearly tripled Canada’s west-coast export capacity when it became operational in 2024, could be further expanded, including by simply introducing drag reducing agents.

But among all proposed infrastructure pathways, westward access — through the West Coast Oil Pipeline proposal via northern British Columbia — offers the clearest route toward strategic diversification. A new major pipeline to the Pacific would allow Canadian crude to reach Asian markets directly, reducing reliance on U.S. intermediaries.

It would also enable Canada to load larger tankers; the port of Prince-Rupert is the deepest natural harbor in North America and the port with the shortest travel times to Asia. A Pacific export route would provide Canada with the ability to redirect flows to ready markets in response to geopolitical shocks, trade disputes, or pricing pressure from U.S. buyers.

Prime Minister Mark Carney and Alberta Premier Danielle Smith jointly recognized this when they signed an implementation agreement on May 15, which outlines the steps for considering a new million barrel per day low-emission bitumen pipeline as a project of national interest under the Building Canada Act, taking a major step towards resolving the energy debate that has raged for years between Ottawa and Alberta.

The implementation agreement recognizes the need to strengthen Canada’s independence. Infrastructure that appears economically redundant during stable periods can become indispensable during moments of disruption. Saudi Arabia’s East-West pipeline, which bypasses the Strait of Hormuz, has proven its strategic value during the war, exporting 7 million b/d even after being attacked by Iran.

Canada faces a similar calculation. Its existing system is efficient under normal conditions. But efficiency and resilience are not synonymous. A system optimized entirely for cost minimization can lack flexibility when confronted with some sort of disruption, including one aimed at weakening Canadian independence through economic coercion.

Yet westward diversification also confronts enormous practical obstacles. Pacific pipeline projects are extraordinarily expensive due to the major engineering undertaking of traversing the Rockies and the Coast Mountains and the current concept requires roughly $90 billion in upfront investment.

In addition, environmental opposition remains intense, a moratorium on tankers in northern British Columbia waters is in place, and political resistance has repeatedly stalled or derailed major projects.

Moreover, from a purely commercial perspective, the economics are difficult to justify; support from government in the range of $19-60 billion will likely be required.

Private sector actors evaluate projects based on expected returns; the broader strategic benefits of resilience, diversification, and geopolitical leverage are difficult to monetize. Hence, a new strategic pipeline to the West Coast, is deserving of a strategic public investment in the national interest.

For decades, the country’s energy policy largely assumed that market integration with the United States was sufficient to guarantee long-term prosperity and security. But geopolitical developments have challenged these assumptions.

Canada therefore faces a delicate balancing act. It cannot (and should not) realistically replace the United States as its primary energy market, as the relationship remains indispensable to Canadian prosperity. But maintaining access to the U.S. market and reducing dependence on it are not mutually exclusive objectives.

Venezuela’s re-emergence may ultimately make the economics of a West Coast pipeline more attractive, at a time when Canada should be diversifying markets through sovereign export corridors. By illustrating how quickly market conditions can shift, Venezuela’s recovery brings these questions into sharper focus for both Alberta and Canada.

Christopher Hernandez-Roy is a Senior Fellow and Deputy Director of the Americas Program at the Center for Strategic and International Studies.