The Venezuela crisis has prompted Canada to double down on oil. Is that the right move?

The dramatic takeover of Venezuela and its oil industry is sparking more talk of pipelines and a fossil fuel bonanza in Canada. But climate experts, economists and others say don’t bet on it.

The geopolitical drama doesn’t change climate realities, energy forecasts showing oil’s decline or Indigenous legal rights that could block new projects, these observers note.

In an open letter to Prime Minister Mark Carney published on X Tuesday, Conservative Leader Pierre Poilievre said the federal government must “immediately” approve a pipeline to the Pacific to shift millions of barrels worth of oil to overseas markets. 

“Venezuela’s re-entry to American markets means time is running out,” he wrote.

Poilievre’s comment fits a longstanding pattern: even before this weekend’s stunning snatch-and-grab of Venezuelan President Nicolás Maduro, the Canadian oil and gas industry and its political allies said Canada needed to build a new pipeline to the West Coast to sell the world more “ethical oil” in the face of oil produced by other countries. 

Since US President Donald Trump’s re-election, the logic has shifted to focus on the need to diversify Canada’s crude export away from the United States — and now, with Trump saying American oil majors will develop Venezuela’s oil industry, the Canadian industry and its political proponents have turned up the dial on that rhetoric.

Carney appears to be listening. 

On Tuesday, Carney said he believes Canadian oil will continue to be competitive, and that his government is working to boost access to Asian markets — pointing to the memorandum of understanding he signed with Alberta Premier Danielle Smith in December that could see a new pipeline built. 

On Monday, Smith said in a statement that the events in Venezuela "emphasize the importance that we expedite the development of pipelines to diversify our oil export markets," including a pipeline to the coast.

Whether it's the COVID pandemic, Russia’s invasion of Ukraine, Trump talking about Canada as the 51st state, or now the US planned takeover of Venezuela’s oil industry, the solution to these global problems, for Canadian oil and gas proponents, is more fossil fuels. 

Experts say they have it backwards. 

Shutting Canada out

John Foster, an international oil economist who spent decades with the World Bank, Petro-Canada and British Petroleum, said many refineries in the US Gulf and Midwest were built to handle Venezuelan crude. Then in 2007, the country’s former president, Hugo Chavez, began requiring that foreign oil companies sign contracts to include the country’s national oil company in production. The American oil majors launched lawsuits in response — and still see Venezuelan oil as rightfully theirs, he said. 

That heavy, sour Venezuelan crude is very similar to the bitumen from the Alberta oilsands, much of which is currently sent to those same US refineries.

“If Venezuelan oil were, as a result of this snatch, to start flowing again under the auspices of American oil companies into Texas, it would have the effect of shutting out Canadian heavy oil,” he said. 

But how quickly US oil majors flood Venezuela is an open question, and even if they do, how quickly could production ramp up to provide US refineries with new input? 

“To build up to bigger amounts of exports would clearly take a lot of time,” he said. “What could happen is diversion — so the oil that is currently going to China would instead go to the US — in which case this is bad news for Canada.”

For Canada, the impact of potentially ratcheting up output of Venezuelan exports could certainly increase market risk for Canadian oil producers by heightening competition, said Philip Gass, director, energy programs and just transition for Canada at the International Institute for Sustainable Development.

But it is the “uncertainty shock” Trump continues to cause in Canada that is the biggest concern, he said. The US managing Venezuelan oil could drive prices up or down, which would play havoc for Canadian companies or consumers, or both.

“Right now, we simply don’t know what the particular impacts on Canada will be, and this uncertainty creates risk of price shocks one way or the other. Both bad.”

However, Gass believes the uncertainty could also have a silver lining.

Rethinking national interest

Money tends to flow to "safer places" in times of uncertainty, Gass explains. In the context of the current energy markets, this "could help promote [Canada's] shift to renewable energy,” he said. 

“Wind and solar are inexpensive, stable, broadly predictable, quick to deploy, and if we could better electrify transport with EVs and so on, we would also be in a position to rely on our massive hydropower resources as a back-up to renewables,” said Gass.

“This could be a unique opportunity for Canada to get off the oil market roller-coaster, the ups and downs, the price shocks, to double down on renewables. That would be good for our economic development, for job creation, for the climate.” And, he adds, for Canada’s “energy sovereignty.”

Philippe Le Billon, a professor at the University of British Columbia specializing in the links between natural resources and armed conflict, told Canada’s National Observer that if the United States gets its way with Venezuela, Canadian oil production would be at a disadvantage. However, he said that underscores the need for economic diversification and transitioning off fossil fuels, rather than building a new, multi-billion dollar pipeline. 

“I would not advocate at all for the Canadian government and Albertan government to sink tens of billions of dollars into a new pipeline for the simple reason of, where will the market be?” he said. 

Government officials point to Asian markets, but “by the time any pipeline gets finished, I think we will have seen a very clear reduction, a drastic reduction, in oil demand in that region.”

Sven Biggs, Canadian oil and gas program director at Stand.earth, said how Canada responds will determine if the country “starts to invest in catching up or are left behind economically” in the transition away from fossil fuels.

“This comes at a time when we are making big, nation-building investments, rethinking our economy and our trading partners,” he said. “It would be a huge missed opportunity if [the government] didn't take the situation in Venezuela to look beyond the short-term gains that might come with investment in capital-intensive fossil fuels.”

Biggs added that instead of using the US’ strategic play in Venezuela as a pretext for building another oil pipeline, the Canadian government should “focus on investing in interties, a national clean energy grid that connects provinces to reduce reliance on fossil-fired generation, and build a ton of renewables with Canadian steel and aluminum and Canadian workers.”