Middle East Chaos Hands Canada a $65 Billion Gift

At the end of February, the Alberta government released its draft budget for the year, forecasting a deficit resulting from low oil prices, set to extend over the next three years. Now, Canada—and Alberta specifically—are about to become some of the big winners from the oil price rally resulting from the Middle East supply crunch.
Canadian oil producers are set to get an additional revenue of some C$90 billion ($65.6 billion) from the rally, Enverus recently predicted, using modelling that showed for every $10 gain in oil prices, Canadian producers stood to see additional revenues to the tune of between C$25 billion and C$30 billion.
“$90 a barrel over the course of the year would be sufficient to wipe out, and probably turn into a surplus, what was going to be a $10-billion deficit,” one former adviser to the Canadian Prime Minister said earlier this month in comments on the global oil supply situation and its impact on Canadian oil revenues.
In fairness, Canadian crude has yet to reach $90 per barrel. However, it has gone up from around $54 per barrel at the end of February to over $86 per barrel at the time of writing, just like all the other benchmarks. Ninepoint Partners’ Eric Nuttall called the situation a unique opportunity for Canadian oil producers, noting the amount of yet untapped reserves of heavy crude that producers could bring into the market if the supply disruption extends further in time.
“The resource is definitely there. Producers are definitely capable of ramping up production to that level. And it’s just a question of responding to what is a time-bound opportunity,” the chief executive of TC Energy, Francois Poirier, said recently, as quoted by the Financial Times. The problem, however, is the lack of sufficient transport infrastructure to take the oil to customers.
“We would like to see the underlying regulatory environment get simplified, get streamlined and timelines accelerated, because that is what will be required to get capital to flow to Canada,” Poirier said, urging the federal government to implement “fundamental reform of existing regulations” on oil pipelines.
Canada sends almost all of its export oil to the United States. Recently, the industry has gotten more serious about finding more markets, to which end the Trans Mountain pipeline was expanded, doubling its capacity. As a result, China quickly became Canada’s second-largest oil client after the United States. South Korea, India, and Singapore have also become buyers of Canadian crude after the expansion of the Trans Mountain conduit.
Diversification of buyers, then, works. Now, however, the question is how fast Canadian producers can ramp up production in response to the crisis in the Middle East. The industry has been expanding production consistently, despite the growing burden of climate regulations. Last year, the average daily hit 5.19 million barrels, down from an all-time high of 5.44 million barrels daily in December 2024 but up from the 2024 average of 5.13 million barrels daily, according to the latest data from the Canada Energy Regulator. Still, the expansion cannot simply accelerate without an outlet for the additional crude—which is why calls for new pipelines to the west coast are going to intensify in all likelihood.
“This war is yet another screaming example of why it’s in Canada’s national priority and why the global oil market needs Canada to build a new 1 million-barrel-a-day pipeline,” Ninepoint’s Nuttall told the Financial Times. The publication went on to note recent research that calculated Canada could generate an additional C$31.4 billion in annual GDP over the next ten years if it builds a new pipeline with a capacity for 1.5 million barrels daily.
That additional GDP growth would translate into 1.1%, according to the research conducted by Studio Energy and ATB Financial. That 1.1% may seem modest, but it’s not too shabby for a country that saw its economy grow by a rather modest 1.7% in 2025—the slowest GDP growth pace since 2020, according to Yahoo Finance.
“New energy infrastructure doesn't yield just a marginal gain for Canada's economy — it's a structural shift that will pay ongoing export dividends,” the chief economist of ATB Financial, Mark Parsons, said. “Expanding our export capacity would fundamentally improve our national economic health and global standing at a time when Canada needs it most.
Building a new pipeline, however, is easier said than done. For all the Prime Minister’s talk of the new government’s pivot towards a more pragmatic view on energy, opposition to new energy infrastructure could interfere with plans for international expansion. The latest evidence: opposition towards a proposed pipeline from Alberta to the west coast that PM Carney said the federal government would exempt from climate regulations.
Canada certainly has the capacity to become a more prominent international player in oil markets. Whether it can realize its potential in this respect, however, remains to be seen, depending on the federal government’s genuine interest in energy expansion.
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