Good morning. Prime Minister Mark Carney says Venezuela’s potential re-entry into the heavy crude market isn’t cause for concern to Canada. The perils of that outlook are in focus today – plus, why 2025 was the year of the wage increase.
Up first
In the news
Bay Street’s back: (All right!) Stock sales, corporate borrowing levels, and merger and acquisition activity all finished 2025 at multiyear highs.
A quantum leap: Royal Bank of Canada and Telus Corp. have joined a growing list of Canadian blue-chip institutions backing the country’s emerging quantum computing sector.
Cell spike: Canadian wireless plans could be getting more expensive after years of decline.
A woman waves a Venezuelan flag at a rally yesterday in Caracas, held in support of ousted Venezuelan President Nicolás Maduro.FEDERICO PARRA/AFP/Getty Images
In focus
The meaning of sweet, sour and the future of Canada
The U.S. military action in Venezuela has added new urgency to the debate over whether Canada should build a new pipeline.
In Paris yesterday to attend a “Coalition of the Willing” to support Ukraine, Carney said increased oil production would benefit the Venezuelan people and provide stability to the country. But he said Canadian oil will remain competitive “because it is low-risk.”
That’s certainly the case – at least until Carney’s prediction of oil bringing stability to Venezuela is realized. And that’s part of the tension: U.S. President Donald Trump’s plan to revive the South American country’s industry represents a threat – albeit a distant one – to Canada’s oil sands producers, who create the same product and whose fortunes rest almost entirely on U.S. access.
Doesn’t the United States have its own oil?
The U.S. is one of the world’s largest producers and exporters of light crude, but many of its refineries were designed decades ago to process heavier imported oil, including from Canada and Venezuela. Most were built during a period when domestic production was declining and refiners expected to rely on imports, while American producers focused on selling lighter, more profitable barrels – a strategy that paid off during the early-2000s shale boom, which drove the fastest production surge in U.S. history.
Sweet, sour, heavy and light: What’s the difference?
Oil companies don’t have an assembly line of taste testers – myth busted! – but the first two terms do trace back to legacy oil field shorthand for flavour and smell. Good work, if you can get it.
Crude oil comes in different grades. The first is sulphur content:
- Sweet crude contains little sulphur and is cheaper to refine.
- Sour crude contains more sulphur, which needs to be removed because it corrodes equipment, raises refining costs, and creates harmful emissions when it’s burned.
The second is density:
- Light crude flows easily and requires less processing. It can be refined directly into gasoline, jet fuel and chemicals, making it well suited for transportation fuel needs without costly additional processing.
- Heavy crude is thicker and yields more diesel, heating fuel, asphalt and petrochemical feedstocks after extra refining. These products underpin freight transport, construction, shipping and industrial activity, which is why many U.S. refineries were built specifically to handle heavy blends from Canada and Venezuela.
Why the move on Venezuela?
The South American country holds the world’s largest proven oil reserves – basically, volumes that are known to exist and can be realistically produced – while Canada ranks third behind Saudi Arabia.
For Trump, rebuilding the country’s once-thriving industry gives him the ability to bring down oil prices domestically – bad for producers, good for voters – fixes the shame that comes with being a net importer of anything, and removes economic leverage from his allies and enemies. Mission accomplished!
Mission accomplished?
No! It would take many, many years, billions upon billions of dollars, and major U.S. oil companies finding the courage of Heracles before the South American country could re-enter the global markets in a meaningful way. Wells are impaired, infrastructure is failing, skilled workers have left and restoring output would require years of stability.
So, why is Canada concerned?
Those are major hurdles to clear, and would likely take longer than even a third or fourth Trump presidency – never mind the political instability that will very likely hang over Venezuela.
But as long as the potential is there, that means the possibility of more competition for Canada. More competition means lower prices for producers, and risks displacing Canadian barrels altogether.
Even if Trump isn’t able to immediately convince U.S. oil execs to invest billions – they’re meeting on Friday – talking about convincing U.S. execs to invest billions might be enough to keep investors concerned about oil sands stocks.
That might explain why Canada’s energy traders reacted so viscerally this week, even as the global oil market shrugged. Canadian producers’ valuations are tied at the hip to continued access to the U.S. market, where nearly all of their oil is sold. In this case, a whiff of worry is almost as pungent as sulphur.
If Venezuela is a long shot, why a new pipeline?
Proponents argue Canada should have already put shovels in the ground. Even after the TMX extension went online in 2024, Canada’s capacity to move oil to the West Coast is reaching its limits.
Politicians like Alberta Premier Danielle Smith and industry leaders both argue the U.S. actions make the need for another pipeline even more urgent: If the U.S. was already threatening Canada’s energy sector with tariffs, it’s now adding the threat of self-reliance. That means moving as quickly as possible to diversify its global clientele of buyers. And that can only happen if it can move it quickly enough.
Critics argue the price of oil is too low to support a business case for a massively expensive pipeline, that Canada’s current infrastructure is enough to support demand, and that climate-driven legal and regulatory constraints make Canada a risky proposition. They also point to advances in cleaner energy, and the opportunity lost when more investment is being directed into a finite resource.
There’s a whole lot that would need to happen for another pipeline to get built from the oil sands to the West Coast. Carney has signed a memorandum of understanding with the Alberta government for a new pipeline, but it’s tied to a large-scale carbon-capture project. The economic viability of that effort alone has some wondering if such a deal is little more than a dream – a fresh reminder that investing in Canadian pipelines is not exactly “low-risk,” either.
Charted
Can we have a raise?
Unionized workers achieved significant wage gains last year, negotiating the highest annual increases since at least 2016, according to new federal government data.
In the first eight months of 2025, average annual wage increases for unionized workplaces of more than 500 employees reached nearly 4 per cent, a figure that surpassed inflation and was materially higher than gains in the years before the pandemic.
Quoted
My judgment was that taking that role would be consistent with resigning as an MP and I welcomed her doing that. I’m pleased for Ukraine.
— Prime Minister Mark Carney
The Prime Minister said former cabinet minister Chrystia Freeland’s decision to accept a role as an economic adviser to the Ukrainian President was “consistent” with her plans to leave Parliament.
Noted
More files we’re following
By the numbers: Sorry, bond bears, but there’s more evidence that your warnings about tariff inflation have been off the mark, David Rosenberg writes.
Around the world: Saudi Arabia says it will open its financial markets to all foreign investors next month.
Opening day: … is 77 days from now, and Kazuma Okamoto stands to be a perfect fit with the Blue Jays’ fun vibe, Cathal Kelly writes.
Morning update
Global markets took a breather in cautious trading amid continued geopolitical tensions and as investors eyed the release of U.S. jobs data.
Wall Street futures were mixed, while TSX futures pointed lower after Canada’s main stock market finished at a fresh high yesterday.
Overseas, the pan-European STOXX 600 was up 0.07 per cent in morning trading. Britain’s FTSE 100 fell 0.59 per cent, Germany’s DAX climbed 0.61 per cent and France’s CAC 40 gained 0.07 per cent.
In Asia, Japan’s Nikkei closed 1.06 per cent lower, while Hong Kong’s Hang Seng gave back 0.94 per cent.
The Canadian dollar traded at 72.43 U.S. cents.