Market (dis)Connection in Canada’s Oil Sector

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To be profitable, energy resources must be transported economically under favourable market conditions. Factors like the war in Ukraine, general political tensions in Eastern Europe and recent shifts in the trade dynamics of Canada’s oil sector all shed light on the critical link between transportation infrastructure and market access. As shown in Figure 1, a substantial portion of Canada’s oil reserves are located inland; in 2020, Alberta and Saskatchewan accounted for 80.5% and 10.5% of total production by volume, respectively.

Figure 1 – Canada’s Crude Oil Production and Transportation Infrastructure, 2020

This map illustrates the main crude oil and mixed-use pipelines in Canada and the United States as well as the percent of total crude oil production by Canadian province. Alberta is in the category of greater than 80% of total production in Canada while British Columbia, Saskatchewan, Manitoba, and Newfoundland and Labrador and are each in the category of less than 11%.

Sources: Map prepared by the Library of Parliament, Ottawa, 2022, using data obtained from the Federal Geospatial Platform, CanVec Series – Resources Management Features, “Mines, Energy and Communication Networks in Canada”; Natural Resources Canada, Energy Fact Book 2020–2021; Canada Energy Regulator, Pipeline Profiles; U.S. Energy Information Administration, Crude Oil Pipelines; Government of Canada, Administrative Boundaries in Canada – CanVec Series – Administrative Features. Open Government Licence – Canada. The following software was used: Esri, ArcGIS Pro, version 2.9.1.

Figure 1 also illustrates how most of Canada’s oil pipeline network connects Canadian producers to refiners and consumers in the United States. Although fewer pipelines reach the Canadian Pacific coast where oil can be transported directly overseas, once crude oil does reach a marine terminal, it can be affordably transported by tanker to reach a broader range of international destinations.

In 2019, the highest level of crude oil production in the world was in the United States (19%). Canada ranked fourth top producer (6%), with about six million barrels per day (MMb/d), as shown in Figure 2.

Figure 2 – Top Crude Oil Producers, 2019 (world production: 98.1 MMb/d)

This figure presents the top 5 crude oil producers in 2019. It shows that the highest level of crude oil production was in the United States with 19% of world production, followed by Saudi Arabia with 12%, Russia with 12%, Canada with 6% and Iraq with 5%. The total world crude oil production was 98.1 million barrels per day.

Source: Figure prepared by the Library of Parliament using data obtained from Natural Resources Canada, Energy Fact Book 2020–2021, p. 48.

Canada’s pipeline network is a safer, more economical method of transporting crude oil, compared to transport by rail. According to the United States Congressional Research Service, it costs from US$5 to US$10 less to transfer one barrel of oil by pipeline than it does by rail.

Conversely, fewer pipeline connections to a coast means less access to markets overseas, like Europe whose main oil supplier is Russia (see Figure 3).

Figure 3 – Main Oil Suppliers to the European Union, 2020

This figure compares the European Union’s main crude oil suppliers in 2020. Russia was the main supplier with 29% of total European crude oil imports, followed by the United States with 9%, Norway with 8%, Saudi Arabia with 7%, the United Kingdom with 7%, Nigeria with 6% and Kazakhstan with 6%.

Sources: Figure prepared by the Library of Parliament using data obtained from Eurostat, From where do we import energy?, 2020; and Transport and Environment, “Europe increasingly dependent on risky oil imports,” July 2016.

In 2018, although Canada was the third-largest crude oil exporter in the world, 98% of its exports went to the United States.

Figure 4 – Top Five Crude Oil Exporters, 2018 (world exports: 48.8 MMb/d)

This figure presents the top five crude oil exporters in 2018. Saudi Arabia was the largest crude oil exporter with 15% of world exports, followed by Russia with 11%, Canada with 8%, Iraq with 8% and the United Arab Emirates with 6%. World crude oil exports totalled 48.8 million barrels per day in 2018.

Source: Figure prepared by with the Library of Parliament using data obtained from Natural Resources Canada, Energy Fact Book 2020–2021, p. 48.

Moreover, oil sold at a coast is priced differently. Canada’s pipeline network supplies a largely landlocked market in which the dynamics differ from those in the international, waterborne market. Since 2007, oil production in Alberta has more than doubled, while the number of pipeline connections to Canada’s coastal terminals has remained largely unchanged. The surge in continental supply, coupled with insufficient pipeline connections to a coast, may have contributed to oil selling at a substantial discount in Edmonton compared to in a port city like Montréal. Figure 5 illustrates fluctuations in the price differential between the West Texas Intermediate (WTI) and Brent Crude benchmarks. Brent, produced in the North Sea, is the benchmark for light crude oil in Europe, and WTI is the U.S. benchmark. When crude oil is shipped within North America by pipeline or by rail, its price is based on WTI; when it is imported by tankers, crude oil price is based on Brent Crude.

Figure 5 – Fluctuations in Price Differential Between West Texas Intermediate and Brent Crude Benchmarks, 2000 to 2020

This figure shows the price differential between the West Texas Intermediate and Brent Crude benchmarks, from January 2000 to January 2020, two decades marked by a great deal of fluctuation. It shows a positive price differential in January 2000 (+$1.75), which becomes a negative differential in January 2020 (-$6.13). The most substantial negative price differential during this period was -$27.31 in September 2011.Source: Figure prepared by the Library of Parliament using data obtained from the U.S. Energy Information Administration, Petroleum and Other Liquids, “Spot Prices.”

Given these price disparities and limited international market access, it comes as no surprise that proposals for pipeline projects, such as Keystone XL, the Northern Gateway Project, the Trans Mountain Expansion Project and the Energy East Pipeline Project, have sought to connect oil producers in Alberta to international markets through a coast.


Related resources

Canada Energy Regulator. “Canadian Crude Oil Exports: A 30 Year Review.”

Desjardins, Jeff. Visual Capitalist. “Canadian Oil and Gas: The U.S. needs less, Asia needs more,” 26 August 2013.

Natural Resources Canada. Energy Fact Book 2020–2021.

PricewaterhouseCoopers LLP. Energy Visions 2020 – Forward together: What’s ahead for Canada’s oil and gas industry.


Revised by Emmanuel Preville and Sirina Kerim-Dikeni, Library of Parliament
Original content written by Mathieu Frigon and Mohamed Zakzouk, Library of Parliament

Categories: Agriculture, environment, fisheries and natural resources, Business, industry and trade

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