Pipe dreams

   By Guest Blogger Ryan Lewenza

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Canada is fortunate to possess an abundance of natural resources that the world needs.

Unfortunately, previous federal leadership failed to recognize this advantage and implemented policies that hindered resource development. Growth has slowed, productivity has stagnated, and critical investments in oil and gas (O&G) infrastructure, such as pipelines, have been neglected. That era may finally be coming to an end, a change that is long overdue.

Last month, Prime Minister Mark Carney and Alberta Premier Danielle Smith announced a historic step forward: the signing of a memorandum of understanding (MOU) to advance construction of a pipeline capable of transporting one million barrels of oil per day from Alberta to the BC coast. This project would boost oil exports, open new markets, and help diversify away from our reliance on the U.S.

The agreement confirms that the federal government will support this privately funded pipeline by granting it a “national interest” designation – streamlining approvals and potentially removing barriers such as the emissions cap and BC coast tanker ban. Premier Smith hailed the announcement as “a great day for Alberta,” signaling a notable and positive shift in the historically tense relationship between Ottawa and Alberta.

A key condition for federal backing was the inclusion of the Pathways carbon capture initiative, designed to store CO2 and keep Canada on track for its 2050 net-zero targets. That debate can wait for another day. For now, this MOU – and the détente between the federal and Alberta governments – marks a potentially transformative moment for the country, promising significant economic benefits.

First, our economy has been languishing and is in dire need of a boost. While Trump’s tariffs have weighed on growth over the past year, the reality is that stagnation has persisted for much longer.

At first glance, headline GDP numbers appear reasonable, but they mask the impact of our rapid population growth. According to the IMF, Canada’s GDP growth has averaged 1.8% from years 2000 to 2023 – the second fastest growing country of the G7 nations.

However, when adjusted for population – measured as GDP per capita – the weakness becomes clear: Canada has grown at just 0.7% annually from 2000 to 2023, placing us near the bottom among G7 nations.

Adding another pipeline could help reverse this trend. It would create thousands of direct jobs in the construction and ongoing maintenance, as well as thousands more indirect jobs across related industries. Beyond employment, it would attract investment – a key driver of GDP growth – and help our overall economy.

Real GDP per capita, compounded growth rate, 2000-2023

Source: IMF

Second, with more than 8 billion people on the planet and an ever-growing demand for commodities, Canada is perfectly positioned to deliver – and profit. We hold an estimated 170 billion barrels of oil, roughly 10% of global reserves, ranking third in the world behind Venezuela and Saudi Arabia.

For potash, we have about 1.1 billion tonnes, representing 20% of the world’s supply. And when it comes to rare earth minerals – arguably the most strategic resources of all – we have approximately 15 million tonnes, or 7% of global reserves.

Simply put, Canada is a commodity powerhouse. It’s time we start acting like one.

Canada has the third highest oil reserves in the world

Source: WorldoMeter

Third, because of our geography, Canada’s oil is landlocked – and with 99% of our exports going to a single customer, the U.S., we’re stuck selling at a discount. In the U.S., the benchmark price is West Texas Intermediate (WTI), while in Canada it’s Western Canada Select (WCS). As seen in the chart below, our oil consistently trades at a sizable discount to WTI largely because we have so few buyers.

Building another pipeline to the BC coast changes that. It further opens access to high-growth Asian markets that are eager for a stable, secure energy source. More buyers mean a shrinking discount, higher prices for Canadian oil, and increased production and sales for our O&G companies. That’s a win-win – increased sales at higher prices.

Canadian & US oil prices – the discount of WCS to WTI

Source: Bloomberg, Turner Investments

Fourth, there’s this big aversion to pipelines in Canada – which I honestly don’t get, because we all use oil – but the reality is we don’t have that many to begin with. As shown below, Canada essentially has four major pipelines: Enbridge Mainline, Line 3, Enbridge Line 5, and the Trans Mountain Pipeline. For a country that spans nearly 10 million square kilometers – the second largest country in the world – that’s hardly an extensive network.

In my view, given the mounting pressure from the U.S., we need to be pragmatic and realistic. Our relationship with the U.S. will never be what it once was, so we must diversify our oil sales into new markets. And that requires building another pipeline – or maybe even two.

Canada’s pipeline system

Source: Oil Sands Magazine

Finally, increased sales will translate into higher government tax revenues – funds that can be reinvested in social services and, ideally, start chipping away at our debt. Beyond that, these revenues could accelerate investment in green energy, positioning Canada as a leader in next-generation CO? technology.

We need to be pragmatic. The world has changed, and Canada must start thinking big – finding ways to stimulate economic growth and productivity while reducing our reliance on the U.S. A new pipeline accomplishes both goals. So, if anyone’s listening (PM Carney?), it’s time to move forward and start building much needed infrastructure like pipelines.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

Source: https://www.greaterfool.ca/2025/12/13/pipe-dreams/