Alberta and Ottawa’s sweeping new energy accord, signed by Prime Minister Mark Carney and Premier Danielle Smith, is being framed as a nation‑building effort to position Canada as a global energy superpower while still working toward net‑zero emissions. The memorandum of understanding (MOU) pledges a new bitumen pipeline to the West Coast with Indigenous co‑ownership, suspends clean electricity regulations for Alberta, and raises the province’s industrial carbon price to $130 per tonne. It also commits to methane reductions and carbon capture projects under the Pathways initiative.

On paper, the accord looks like a grand compromise. Yet the underlying economics tell a different story.

Oversupply Looming

Global oil markets are already facing surplus conditions. Forecasts suggest supply could exceed demand by four million barrels per day by 2026. Longer‑term projections point to demand peaking around 2030, with declines thereafter depending on climate policy implementation. China—the intended market for Alberta’s new pipeline—is expected to see demand peak around the same time, driven by rapid electrification of transport.

In this context, a new one‑million‑barrel‑per‑day pipeline risks becoming a stranded asset. Existing pipelines, including the recently expanded Trans Mountain system, already provide sufficient lower‑cost capacity. Adding expensive new infrastructure would raise tolls, erode producer margins, and reduce government royalties.

Cross‑Border Trade Dynamics

The U.S. remains Canada’s dominant energy customer, and the numbers underscore the scale. In 2024, U.S.–Canada energy trade totaled $151 billion, with $124 billion of that representing U.S. imports from Canada. Crude oil averaged 4.1 million barrels per day, up 5% from 2023, thanks in part to the Trans Mountain Expansion.

But volumes are now slipping. Since March 2025, U.S. imports of Canadian crude are down about 5%, while U.S. exports to Canada have fallen 28%, reflecting both weaker demand and the impact of new tariffs. Lower commodity prices have also kept overall trade value flat despite higher volumes.

These figures highlight the risk: Canada’s oil is still flowing primarily south, where U.S. refiners prefer heavy crude, but incremental export capacity to Asia may not find sustainable demand. With tariffs and oversupply weighing on trade, the rationale for new pipelines looks even weaker.

Diplomatic and Environmental Fault Lines

The accord’s failure to include British Columbia and its First Nations in initial negotiations has already sparked backlash. Premier David Eby opposes lifting the oil tanker ban, while Coastal First Nations remain firmly against increased tanker traffic. Alienating these stakeholders jeopardizes not only the pipeline but also other national projects such as electricity interties and renewable energy development.

Environmental risks compound the challenge. Expanding oil sands production to fill a new pipeline undermines Canada’s climate objectives, while tanker traffic along B.C.’s coast threatens ecological and economic health. The absence of the words “climate” and “environment” in the MOU underscores the disconnect between rhetoric and reality.

A Better Path Forward

Canada’s energy future lies not in doubling down on high‑cost oil infrastructure but in aligning investment with long‑term demand trends. Critical minerals, renewable energy, and interprovincial electricity transmission offer stronger economic and environmental returns. Even Alberta’s ambitions for AI data centres—referenced in the accord—may prove more durable than a pipeline built into a weakening demand environment.

Fraser Betkowski

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