Tariff Tussle: How US-Canada Oil Trade Will Weather the Storm, According to Enbridge CEO

Image credits: "Storage tanks at Enbridge's terminal, a critical hub in the US-Canada oil trade, stand as a testament to the complex energy landscape between the two nations. (Photo credit: Reuters)"

The recent imposition of tariffs on Canadian oil by the US government has sent shockwaves through the energy industry, leaving many to wonder about the future of US-Canada oil trade. However, according to Enbridge CEO Greg Ebel, the impact of these tariffs will be felt only in the long term. "It would take a very long time of sustained tariffs before you see changing trade patterns," Ebel said in a recent interview. This statement is rooted in the reality of the deeply integrated energy systems between the two countries.

The US currently imports approximately 4 million barrels of crude oil per day from Canada, with about 90% of Canada's crude oil exports going to its southern neighbor. Enbridge, as one of the largest pipeline companies in North America, plays a critical role in this trade, moving about 40% of the crude oil produced in the region. The company's Mainline network, which spans from Edmonton, Alberta, to various markets in the US Midwest, is currently operating at full capacity.

So, what does this mean for Canadian oil producers? According to Ebel, the tariffs may impact the pricing of Canadian crude, but the "economic reality" of oil demand and market flows is "difficult to break." This is because the US refineries are designed to process the heavy crude oil that Canada produces, making it challenging for them to find alternative sources of supply. Similarly, Canadian producers would struggle to find new markets for their oil, given the limited pipeline capacity and the lack of infrastructure to support large-scale exports to other countries.

One potential option for Canadian oil producers is to bypass the US market by using the Trans Mountain pipeline, which runs from Alberta to the British Columbia coast. However, Ebel noted that Enbridge is not seeing its Canadian oil producer customers shift barrels from the Mainline to Trans Mountain, citing a lack of pipeline capacity to serve the needs of its customers.

In the face of these challenges, Enbridge is investing heavily in its liquids and natural gas systems, with plans to spend C$2.5 billion ($1.7 billion) over the next few years. This investment will focus on expanding the company's Mainline network, which will help to increase pipeline capacity and support the growing demand for Canadian crude oil in the US market.

As the US-Canada oil trade continues to evolve, it's clear that the tariffs imposed by the US government will have a significant impact on the industry. However, according to Ebel, it's unlikely that these tariffs will lead to a significant shift in trade patterns in the short term. Instead, the industry will need to adapt to the new reality, finding ways to navigate the complex web of energy trade between the two nations. As we move forward, one thing is certain – the future of US-Canada oil trade will be shaped by a combination of economic reality, market demand, and infrastructure capacity.