Canadian energy policies undermine a century of North American integration, finds the MEI
- Energy trade with the U.S. alone is over C$80 billion more than all merchandise trade between Canada and China
Montreal, November 27, 2025 – Canada’s energy sector is a cornerstone of North American prosperity, but a number of federal policies have weakened its foundation over the past decade, observes a new MEI publication released this morning.
“For a century, this North American energy machine kept churning, irrespective of political winds and to the betterment of everyone on both sides of the 49th parallel,” says Taylor MacPherson, associate researcher at the MEI and author of the report. “But we can’t take it for granted; we must be steadfast in protecting this unique, mutually beneficial relationship.”
Canada is the world’s fourth-largest oil producer, fifth-largest natural gas producer, and third-largest hydroelectric generator.
Canadian exports of hydrocarbons—commodities such as crude oil, natural gas, natural gas liquids, and refined petroleum—to the United States alone totalled C$169.8 billion in 2024. This represents 22 per cent of all goods Canada exported that year.
Canada imported C$33.4 billion in U.S. hydrocarbons, representing 4 per cent of all goods imports.
“This partnership is a genuine two-way lifeline,” said Mr. MacPherson. “In the winter, U.S. gas backs up Ontario during the frigid months, while Canadian gas feeds Californian power plants in the summer, so neither country is exposed to excessive price shocks.”
The two nations have complementary market structures: for instance, Canada produces heavy crude ideal for America’s complex refineries. In the meantime, U.S. shale fields produce light oil that eastern Canadian refineries can use.
Two-way energy trade stands at over C$200 billion annually, equalling 13 per cent of all Canadian merchandise trade. This is larger than Canada’s entire two-way merchandise trade with China in 2024, which stood at C$118.7 billion.
The energy sector accounts for 10.3 per cent of Canada’s GDP in 2023 and 3.4 per cent of employment, totalling 697,000 jobs.
Employment in the sector is among the best paid in the country, with average annual compensation in oil and gas reaching roughly C$200,000, compared to just over C$75,000 across all industries.
Total contributions to government coffers from the industry are substantial, with tens of billions of dollars collected in 2024-2025, including close to C$22 billion by Alberta alone.
“This is not just money on a spreadsheet,” says Mr. MacPherson. “It is what funds our schools, our hospitals, and the services Canadians rely on. The government risks weakening our communities with its recent actions.”
Recent legislation has made the development of the energy sector increasingly difficult, which risks undermining this integration, to everyone’s detriment.
In 2019, the Impact Assessment Act replaced earlier legislation, and uncertainty created by its adoption has been reported to be a contributor to the drop in Canadian investment.
Another emerging threat has been the federal government’s proposed oil and gas emissions cap. If Ottawa were to remove it, as has been suggested, it would be removing what has long been perceived as a production cap by the industry.
Canada’s 2019 Oil Tanker Moratorium Act bans large crude and “persistent” oil tankers from B.C.’s north coast, effectively shutting the door on any major export terminal at Prince Rupert, Kitimat, or nearby ports.
“North American energy integration is a marvel of pipelines and power lines,” says Mr. MacPherson. “A confluence of harmful legislation risks toppling Canada as an energy leader, and will leave us a far cry from becoming the ‘energy superpower’ promised by Prime Minister Carney.”
You can read the Economic Note here.
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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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