Why Canada Is Reassessing Pipelines and Turning Attention Back to Refineries

Canada Rethinks Oil Strategy: Refineries Over Pipelines?

The ongoing national conversation about how Canada should bring its oil to market took an unexpected direction this week. British Columbia Premier David Eby has urged the federal government to focus on expanding domestic refining capacity instead of building new export pipelines—a shift in perspective that challenges years of established energy policy debate.

Eby’s remarks come at a time when U.S. policy toward Venezuela is adding new volatility to global oil markets, highlighting Canada’s heavy reliance on American buyers for its crude. Rather than continuing to export unprocessed oil, Eby advocates for investing in Canadian refineries. This, he argues, would allow the country to retain more economic benefits and reduce its vulnerability to foreign refineries.

Currently, Canada lacks self-sufficiency in refined petroleum products. The majority of Canadian crude is exported without processing, while much of the gasoline and diesel consumed in Eastern Canada and British Columbia is imported. Eby believes that building more refineries would keep jobs and profits within Canada, while also making the energy system more resilient to external shocks.

This proposal comes as Ottawa and Alberta are still considering a privately funded pipeline to the Pacific, a plan introduced last year to help diversify Canada’s trade beyond the U.S. However, the idea faces significant hurdles: no private company has yet committed to the project, and resistance remains strong among Indigenous groups and coastal communities, especially where increased tanker traffic is a concern.

Related: UK North Sea Oil Faces Uncertain Future as Investment Declines

Global Refining Profits and Canada’s Challenges

Refining has become increasingly lucrative worldwide, with profit margins rising in North America, Europe, and Asia due to refinery shutdowns, operational disruptions, and sanctions that have tightened fuel supplies. While crude oil is expected to remain plentiful through 2026, supplies of gasoline and diesel are tighter, making refining capacity more valuable than ever.

Despite this, Canada’s refineries are aging and primarily designed to meet domestic needs, not to serve international markets.

Barriers to Building New Refineries

Constructing new refineries in Canada would require massive upfront spending, lengthy permitting processes, and a level of political coordination rarely seen in the country’s energy sector. Critics warn that Canada could invest billions only to find demand weaker than anticipated or to face stiff competition from newer, more efficient refineries in Asia and the Middle East.

Venezuelan Oil Adds Complexity

The situation is further complicated by developments in Venezuela. The U.S. government has indicated plans to help revive Venezuelan oil production and route significant volumes to American refineries—many of which are already equipped to process heavy crude similar to Canada’s oil sands. An influx of Venezuelan oil to the U.S. Gulf Coast could benefit American refiners but would increase competition for Canadian crude, potentially lowering prices and export volumes.

Looking Ahead: Canada’s Energy Crossroads

Federal officials have downplayed these risks, maintaining that Canadian oil will remain competitive even if Venezuelan exports rebound. Ottawa continues to support carbon capture initiatives and regulatory measures to keep oil sands production viable, while reaffirming its climate commitments.

Ultimately, Canada faces a broader challenge than simply choosing between pipelines and refineries. The real question is whether the country can move up the value chain in a way that withstands political shifts, market fluctuations, and global trade disruptions. With refining markets tight, U.S. trade policy unpredictable, and Venezuelan oil potentially returning, Canada’s next steps will determine its place in the global energy landscape for years to come.

By Julianne Geiger for Oilprice.com

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