Trump's tariff threat pushes Canada's biggest oil producers to break their dependence on the US

Houston – The deep-integrated North American oil and gas market is at a crossroads, with Canada's biggest oil producers warning that they will diversify their exports from the US if President Donald Trump's tariff threat doesn't end.

Alberta Prime Minister Daniel Smith announced two possible futures for the continent on Wednesday. In one, Canada and the US have reached an agreement to create a “North American fortress” with new pipeline capacity built to support 2 million barrels per day in additional exports to the US market, Smith told the Cerawek Energy Conference.

This will support Trump's “energy control” agenda, Smith said, saying the US can increase exports to global markets by filling imported oil from its neighbors. It would maintain low consumer prices in the US, she said.

Alberta wants to supply the US with the energy it needs to compete with China to achieve the domination of artificial intelligence, Smith said. “No one of us wants to see communists, the totalitarian regime becomes a world and is a global leader in AI,” the prime minister said.

In other futures, Trump continues his trade war with Canada, with Alberta beginning to search for oil and gas customers beyond the US, Smith said.

Canada is the fourth largest oil producer in the world, and Alberta is the country's largest producer. According to Canadian energy regulators, approximately 97% of the country's 4 million bpd oil exports were sent to the US in 2023, with European countries and Hong Kong taking away the rest. Alberta provided 87% of the oil exported from Canada to the US in 2023.

“If we can't reach a partnership agreement with the US, at least six or seven projects are emerging in Canada,” Smith said.

The uncertainty caused by Trump's tariff threat has already seen Alberta “see more opportunities outside the US to acquire more barrels from our border,” state Energy Minister Brian Jean said Tuesday.

Alberta is actively discussing with South Korea, Japan and European countries about shipping oil exports to these countries, the Energy Minister said. “The truth is, except for the US in relation to our priorities, we are now looking for all directions,” Jean said.

Trump's tariffs have shaken up financial markets and have caused confusion among investors over the past week. On Wednesday, the president imposed a 25% tariff on steel and aluminum imports from Canada. He has suspended its April 2nd penalty for Canada's oil and gas and its obligations for other goods that are in compliance with the trade agreement governing North America.

The Trump administration has not made clear how much of Canada's energy exports to the US are in line with the trade agreement. Oil and gas that are not compliant face 10% tariffs. When CNBC asked Monday, U.S. Energy Secretary Chris Wright refused to provide details.

Smith said Wednesday that Canadian oil producers are busy filling out documents to ensure their exports to the US are compliant.

“There were a few paperwork issues that our company had,” Smith said. “We had no reason to register, so we have it now, they are all called lawyers and imagine them being compliant.

However, it is unclear whether Trump will proceed with tariffs when his suspension expires on April 2nd. Wright said Monday that a contract with Canada to avoid tariffs on oil, gas and other energy is “certainly possible,” but “it's too early to say it.”

“We don't have to be tariffs or very low tariffs, but it has to be mutual,” Wright said in an interview with CNBC's Brian Sullivan.

If tariffs are enforced, it will take time for Alberta to move to the market beyond the US. Almost every pipeline in Canada runs southward towards the US Canada. There is only one pipeline from Alberta to the West Coast in British Columbia, offering access to the Asian market. There is no pipeline from Alberta to the country's east coast.

Smith said Canada is considering three different pipeline proposals for the West Coast. At least one pipeline is located in Northwest Territories, one in Manitoba, one in Hudson Bay and another in eastern Canada.

“These are conversations we didn't have three months ago,” Jean said of the pipeline. However, it took Canada 12 years to expand its Trans Mountain Pipeline that connects to the country's west coast.

Alberta is not interested in taking pages from Ontario's playbook, Jean said Tuesday. Prime Minister Doug Ford has charged an additional 25% of the electricity exported to the US in response to Trump's tariffs. He later stopped the penalty after the US agreed to resume consultations.

“I don't think this is the right way to do that,” Jean said of Alberta's position. “We want to remove the situation.”

Canada has presented the US with several options, the Alberta Energy Minister said. Although Jean refused to provide details, he said the Trump administration needs strong strategic oil preparations to achieve its energy control goals.

“It also means they have to be able to continue supplying sufficiently stable products from Canada,” he said.

If tariffs were enforced, he said they would hurt both Canadians and Americans, especially those who could not afford price increases. Price increases between Canadian US customers and producers will be split “very evenly,” he said.

“It's going to be felt by all involved, and frankly there are a lot of people out there right now. […] It can't afford it,” he said. “Because we need to think about those people.

Jean swipes Trump's repeated calls to make Canada become the 51st state.

“As long as we're in charge, we don't care,” Jean said. “But the truth is that Republicans will never be elected again.”