Economy
Greater oil and gas export capacity will boost Canadian dollar – and productivity
From the Frontier Centre for Public Policy
By Ian Madsen
It may be overly optimistic to think that Canadian producers could reap CAD$10 in gross profit per GJ, let alone the full almost-$20 price differential. However, even if it is just $5 per GJ, that generates $90 million per day, or almost $33 billion per year.
Canada’s productivity performance has been dismal, having not increased over the last nearly ten years. Economists calculate productivity as the value of output divided by hours worked to generate that output. However, the numerator, being the value of the goods and services produced, has been either neglected, or, when it is actually addressed, is looked at from the perspective of new, ‘high tech’ products and services (information technology, artificial intelligence, or advanced equipment, materials and devices). While all these industries are important, other sectors boost value, too.
Foremost among those sectors is energy – where Canada has outstanding competitive advantages, but still does not get full value for its output. Canada’s oil exports now go entirely to the United States, mostly via pipelines from Alberta and Saskatchewan, with a small amount sent by ship from the Vancouver area to U.S. West Coast customers. All Canadian natural gas exports go entirely to the U.S., which already has a surplus.
The situation severely harms Canadian producers’ bargaining power, which causes them to experience severe discounts on natural gas and oil (whether heavy oil sands, Western Canada Select, ‘bitumen’; or conventional crude oil). Fortunately, the situation will change radically, either next year, or, possibly, later this year.
The reason: Canada LNG, the first of possibly several West Coast liquefied natural gas liquefaction export terminals, should soon commence shipments to foreign buyers (South Korean, Japanese utilities, and others in East Asia). The export capacity of the Kitimat, BC, facility is 1.8 billion cubic feet daily, or 1.8 million Gigajoules, ‘GJ’.
Natural gas now sells for about $2.50/GJ Canadian in Alberta, whereas East Asian recent prices were US$16.70: about CAD$22.25. (It costs several dollars to liquify, load, transport and re-gasify at destination each GJ.) Every dollar of after-cost price differential flows directly to producers, and Canada’s balance of payments. The balance of payments determines our loonie’s value, and, thus, Canada’s standard of living (also, to some extent, inflation).
It may be overly optimistic to think that Canadian producers could reap CAD$10 in gross profit per GJ, let alone the full almost-$20 price differential. However, even if it is just $5 per GJ, that generates $90 million per day, or almost $33 billion per year. As total exports were $596.9 billion in 2022, this would constitute an increase of about 5.5%. This amounts to roughly $1,610 per person in Canada’s current 20.5 million-strong labour force – a big productivity increase for ‘little’ extra work (as everything will have already been built).
Yet, that is not all. There is also the TransMountain, ‘TMX’, pipeline expansion, scheduled for completion this year. Its extra capacity of 590,000 barrels per day is all slated to be exported. If ‘just’ $10 extra per barrel is garnered (the U.S. heavy oil differential exceeds that, typically), that would bring $5.9 million more per day: $2.15 billion annually.
This would also contribute to a better balance of payments (perhaps becoming positive once more), a higher loonie, higher productivity, lower inflation, and a higher standard of living. Australia, which now outperforms Canada, does not interfere with its own massive LNG exports. If Canadian politicians can restrain themselves from blocking more oil or gas pipelines and LNG export terminals, a bright future awaits.
Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy
Watch Ian Madsen on Frontier Live on X here.
This article supplied by Troy Media.
U.S. President Donald Trump’s chaotic foreign policy is unravelling years of pressure on Iran and fuelling a surge of Iranian oil into global markets. His recent pivot to allow China to buy Iranian crude, despite previously trying to crush those exports, marks a sharp shift from strategic pressure to transactional diplomacy.
This unpredictability isn’t just confusing allies—it’s transforming global oil flows. One day, Trump vetoes an Israeli plan to assassinate Iran’s supreme leader, Ayatollah Khamenei. Days later, he calls for Iran’s unconditional surrender. After announcing a ceasefire between Iran, Israel and the United States, Trump praises both sides then lashes out at them the next day.
The biggest shock came when Trump posted on Truth Social that “China can now continue to purchase Oil from Iran. Hopefully, they will be purchasing plenty from the U.S., also.” The statement reversed the “maximum pressure” campaign he reinstated in February, which aimed to drive Iran’s oil exports to zero. The campaign reimposes sanctions on Tehran, threatening penalties on any country or company buying Iranian crude,
with the goal of crippling Iran’s economy and nuclear ambitions.
This wasn’t foreign policy—it was deal-making. Trump is brokering calm in the Middle East not for strategy, but to boost American oil sales to China. And in the process, he’s giving Iran room to move.
The effects of this shift in U.S. policy are already visible in trade data. Chinese imports of Iranian crude hit record levels in June. Ship-tracking firm Vortexa reported more than 1.8 million barrels per day imported between June 1 and 20. Kpler data, covering June 1 to 27, showed a 1.46 million bpd average, nearly 500,000 more than in May.
Much of the supply came from discounted May loadings destined for China’s independent refineries—the so-called “teapots”—stocking up ahead of peak summer demand. After hostilities broke out between Iran and Israel on June 12, Iran ramped up exports even further, increasing daily crude shipments by 44 per cent within a week.
Iran is under heavy U.S. sanctions, and its oil is typically sold at a discount, especially to China, the world’s largest oil importer. These discounted barrels undercut other exporters, including U.S. allies and global producers like Canada, reducing global prices and shifting power dynamics in the energy market.
All of this happened with full knowledge of the U.S. administration. Analysts now expect Iranian crude to continue flowing freely, as long as Trump sees strategic or economic value in it—though that position could reverse without warning.
Complicating matters is progress toward a U.S.-China trade deal. Commerce Secretary Howard Lutnick told reporters that an agreement reached in May has now been finalized. China later confirmed the understanding. Trump’s oil concession may be part of that broader détente, but it comes at the cost of any consistent pressure on Iran.
Meanwhile, despite Trump’s claims of obliterating Iran’s nuclear program, early reports suggest U.S. strikes merely delayed Tehran’s capabilities by a few months. The public posture of strength contrasts with a quieter reality: Iranian oil is once again flooding global markets.
With OPEC+ also boosting output monthly, there is no shortage of crude on the horizon. In fact, oversupply may once again define the market—and Trump’s erratic diplomacy is helping drive it.
For Canadian producers, especially in Alberta, the return of cheap Iranian oil can mean downward pressure on global prices and stiffer competition in key markets. And with global energy supply increasingly shaped by impulsive political decisions, Canada’s energy sector remains vulnerable to forces far beyond its borders.
This is the new reality: unpredictability at the top is shaping the oil market more than any cartel or conflict. And for now, Iran is winning.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
Troy Media empowers Canadian community news outlets by providing independent, insightful analysis and commentary. Our mission is to support local media in helping Canadians stay informed and engaged by delivering reliable content that strengthens community connections and deepens understanding across the country.
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