“There is no honor among thieves” is a truism that apparently also applies to oil companies. In an Q4 earnings call to shareholders, U.S. refinery giant Marathon Petroleum Company unequivocally told investors they plan to abandon their long-time Alberta oil patch suppliers now that President Donald Trump has implemented 10 percent tariffs on Canadian energy imports. 

“We could look to pivot to alternative crudes because of our logistics capabilities,” Rick Hessling, chief commercial officer at Marathon assured investors asking about the company’s tariff exposure to Canadian heavy oil. “I would give you crudes to think of such as Bakken, Rockies, Utica, Marcellus as a few…We do believe the producer will bear a large part of the impact. So I would say a light switch within our system we believe would have minimal impact.”

These few words portend a devastating blow to Canadian oil exporters now that the shoe has finally dropped on long-threatened U.S. tariffs. The Trump administration imposed 25 percent tariffs on all non-energy goods from Canada and Mexico Tuesday, sending stock prices tumbling. On Wednesday the U.S. announced a one-month exemption for the auto industry only, leaving the 10 percent energy levy in place.

Our country produces about 5 million barrels of crude per day, 80 percent of which is delivered to refineries in the U.S. Marathon is the biggest American processor, handling over 2.5 million barrels per day. Almost half of Marathon’s capacity is located in the U.S. Midwest, which is the largest U.S. export region for Canadian crude. 

Marathon CEO Maryann Mannen further flagged for investors that her company would isolate the financial pain of Trump tariffs onto suppliers and consumers. “We believe that the majority of that will ultimately be borne by the producer and…to a lesser extent, the consumer. We, MPC, will use…our operational performance to really minimize…the margin impact to our financial results.”

Other U.S. refining companies like PBF Energy have less ability to switch to a lighter crude feedstock but assured their investors that Alberta producers would have to take whatever price they were offered after a 10 percent tariff. “If they don’t sell it to the U.S., it’s going to stay in the ground,” PBF CEO Mathew Lucey stated bluntly on their Q4 earnings call. 

Abandoning Alberta

The biggest U.S. buyers of oil sands crude have revealed how quickly the Albertan economy will be thrown under the bus if their short-term profitability pointed elsewhere. This truth bomb lays waste to a cherished narrative within the Alberta oil patch that their global market position is secure for decades into the future. Premier Danielle Smith has regularly boasted there is room to double provincial production. 

Extremist elements within her political base — fueled by years of political rage-baiting towards Ottawa — have also mused that Alberta would be better treated if they abandoned Canada for the embrace of our American neighbours. These sedition-adjacent conceits now lie in smoldering ruin. 

Some analysts have speculated the short-term loss of U.S. market share from tariff-related feedstock switching could amount to 500,000 barrels per day for Alberta producers — a hit of almost 15 percent of provincial production. Goldman Sachs predicts Trump’s energy tariffs would cost Canadian oil producers $7 billion and reduce the price of Western Canadian Select by $4 per barrel, taking more than $2.5 billion out of the Alberta budget. 

Further undermining the presumed certainty of Alberta’s oil future is the sheer volume of political chaos currently swirling out of Washington. The Trump Administration originally threatened 25 percent tariffs on all Canadian exports including energy effective February 4. Trump later reduced planned energy tariffs to 10 percent and pushed the implantation deadline back to March 4, though even this date was unclear until after the fact.

The alleged reason for Trump’s unprovoked trade war with America’s biggest trading partner was illegal fentanyl crossing the border from Canada — a puny proportion that has since been further reduced after Canada spent $1.3 billion on enhanced border security. So how long will the U.S. impose crippling tariffs on Canada? That seems as randomly unpredictable as the president himself. 

As if the tariff uncertainty was not enough, Trump also mused on social media about quickly building the long-cancelled Keystone XL pipeline. “Easy approvals, almost immediate start!” declared the U.S. President, apparently unaware that the original proponent had abandoned the pipeline business, the right-of-way easements had been returned to landowners, and 180 miles of pipe had been sold to move water through the Mojave Desert. 

Trump also somehow ignored that Keystone XL is designed to carry Canadian crude to American markets, something he says the U.S. doesn’t need and is actively undermining with his energy tariffs. 

Oil sands extraction is a massive industrial undertaking requiring financial planning horizons spanning decades. Many companies making such investments are naturally reluctant to admit to their investors or the public the dangers of predictable market disruptions such as the impending price parity of electric vehicles. We are now living through a teachable moment that market disruptions can also be unpredictable and unfold faster than anyone imagined. 

The other major lesson with the Trump tariff chaos is that America can no longer be considered a trusted ally of Canada. As jarring as this transition will be, we also need to embrace the opportunities it affords.

In many ways our economy has existed as a vassal state, shipping minimally processed natural resources — and the lion’s share of profits — to the U.S. Can our country pivot towards the future and upgrade our vast resource wealth into the products of tomorrow? Our nation needs to bravely face the future united and with our eyes open.