Werner Antweiler is an energy economist at the Sauder School of Business, University of British Columbia, where he also holds the chair in international trade policy.
This essay is part of the Prosperity’s Path series. In a time of geopolitical instability and a shifting world order, the challenges facing Canada's economy have only gotten more visible, numerous and intense. This series examines the path forward.
The world is in economic turmoil as the closure of the Strait of Hormuz has pushed crude oil above US$100 per barrel. Prices of many other goods will rise as the higher cost of oil percolates through the supply chain. Fertilizer prices are spiking already. Amidst the crisis, Alberta Premier Danielle Smith and various pundits are pushing for new oil pipelines. Is there an economic case for more oil and gas pipelines?
Proponents of more oil infrastructure point to the fact that Canada, with its limited export capacity, cannot readily up its production to help oil-starved allies amid international strife. Proponents also point to nation building, energy security, and export diversification in the wake of U.S. President Donald Trump’s erratic tariff policies and international strife.
We’ve heard some of this before, when the U.S. attacked the oil producer Venezuela. Talk is cheap, and the timing is opportunistic. What happens in Venezuela or Iran today is not what drives long-term investment decisions tomorrow.
New energy infrastructure operates over a project lifetime measured in decades rather than months. A short-term price hike doesn’t justify billion-dollar investments. Today’s spot oil price is not a good indicator of prices a year from now, or in 10 years. It’s the futures’ prices that matter. Even today, oil futures traded at the Chicago Mercantile Exchange reveal that traders expect oil to drift back to about US$70/barrel by the middle of next year. Markets appear to view the Middle East conflict as limited in duration and scope.
Long-term market conditions depend on demand and supply. The demand for oil is flattening as population growth has slowed and the world has embarked on an energy transition towards renewable energy, which isn’t just cleaner, but increasingly also cheaper than fossil fuels. In fact, what Canada must do in the wake of the Iran oil shock is focus on hastening the energy transition – if not for the environment, then for the future of our economy.
Drivers fill their vehicles at a gas station in Baltimore on March 19 amid rising fuel prices caused by the conflict in the Middle East.Stephanie Scarbrough/The Associated Press
Take your gas-powered car and do the math. Driving a kilometre on gas costs you about 15 to 20 cents at today’s prices, depending on where you live in Canada. Driving the same kilometre on electricity costs you between 2 and 6 cents. The case for driving electric is very compelling in Quebec and B.C., and this is where motorists are increasingly making the switch. The cost savings accrue over a vehicle’s lifetime, and in many cases offset higher purchase costs. If we were all driving EVs, the Mideast war would not ripple through the economy the way it is currently.
Moreover, a business case for a pipeline needs to be compelling, offering a profit margin that offsets risks. That is not there. The Trans Mountain pipeline system makes a tidy profit through a toll of US$10 per barrel. But building the Trans Mountain Pipeline Expansion (TMX) cost $34.2-billion, largely borrowed. Financial statements indicate the pipeline company is taking some 30 years to repay this. A brand new pipeline, more expensive than an expansion, will require higher tolls to recover the cost. Such tolls are feasible for oil producers at the currently high per-barrel prices. But at long-term prices of US$60-70 per barrel, Trans Mountain’s US$10 toll is already close to the limit of what oil producers can pay and still profit.
Building a new pipeline to British Columbia’s North Coast, as mentioned in the Ottawa-Alberta agreement last year, does not seem to find investors. This idea is also facing strong opposition from B.C. and coastal Indigenous communities.
There is also renewed interest in an East-West oil pipeline. Canada is an oil-divided country: exports in the West, and imports in the East. But recall that investors walked away from the Energy East project in 2017. Getting this 4,600 kilometre pipeline approved seemed impossible then, and it doesn’t look more feasible today. There is also the issue of refining capacity in the east. We sell from Alberta across the border because U.S. refineries can process the heavy crude that many other refineries cannot.
A tugboat guides a crude oil tanker through the Burrard inlet, en route to the Westridge Marine Terminal in Burnaby, B.C., in November, 2025. A proposal is under review to dredge the Burrard Inlet to allow Aframax tankers to be fully loaded.Jennifer Gauthier/The Globe and Mail
There is a stronger business case for enhancing the existing TMX pipeline. A proposal is under review to dredge the Burrard Inlet near the Westridge Marine Terminal to allow Aframax tankers to be fully loaded. Trans Mountain is also investigating the addition of new pumps and compressors to push capacity from 0.89 million to 1.19 million barrels per day by 2027–2030. This is not as expensive as a brand new pipeline, and to pay for it, tolls would not need to rise beyond what oil producers will pay.
Selling liquefied natural gas (LNG) to Asian markets also looks more viable economically. Unlike oil, LNG is typically traded in long-term contracts that assure a predictable return on investment for expensive liquefaction terminals. LNG Canada Phase 1 came online last year. Multiple projects, among them Ksi Lisims and LNG Canada Phase 2, are nearing a final investment decision in 2026. LNG has an enormous carbon footprint. Electrification of liquefaction trains would add cost. But Asian buyers could be ready to pay a premium for safer and cleaner supply from Canada.
New LNG facilities will need the proposed Prince Rupert Gas Transmission pipeline to be built, but aside from that, the bottom line: Canada does not need new pipelines.
The Cedar LNG site on the Douglas Channel in Kitimat, B.C., in May, 2025. The project on the Haisla’s traditional territory plans to start exporting LNG to Asia by late 2028.Aaron Whitfield/The Globe and Mail
If investors can get behind a new oil or gas pipeline, make your case and put up the money yourself. Public funds are scarce and the country has more pressing priorities – from health care to national defense. Declaring a new pipeline to the West Coast a “priority” does not automatically make it economically viable. The fast-tracking project approval process touted by the Major Projects Office is also questionable: great if it means finding procedural efficiencies by consolidating overlapping provincial and federal regulatory processes, but terrible if it means running roughshod over environmental standards or respecting rights of Indigenous communities.
It is true that we will remain dependent on oil and gas for quite some time, but as renewable energy is getting cheaper every year, the balance of new investments has started tilting towards cleaner energy sources that are already attractive today in many locations. While Mr. Trump is fighting a futile battle against offshore wind farms that end up defeated in court, people in Bangladesh and Pakistan who are experiencing fuel shortages because of Mr. Trump’s war are turning to rooftop solar instead. If there is one lesson from today’s energy crisis, it is not doubling down on fossil fuels, but embracing renewable energy sources and clean electricity. And Canada has plenty of those too.