Why Canada’s Oil Sands Aren’t Coming Back
In addition to riling up the nation and stoking Canadian patriotism, Donald Trump’s tariff threats have reignited debates in the country about our energy sector. Natural resources and energy minister Jonathan Wilkinson says we should consider a pipeline from Alberta to Eastern Canada to reduce our reliance on U.S. energy infrastructure. Meanwhile, former Alberta energy minister Sonya Savage argues it’s time to revisit previously scrapped pipeline projects to diversify our markets.
As part of his campaign, Conservative leader Pierre Poilievre has pledged to revive the oil sands. He promises to bring back its golden days. In 2004, the year Poilievre entered Parliament, capital expenditure in Alberta’s oil sands was $6 billion. Subsequently, spending in the oil sands boomed, peaking at $34 billion in 2014. But by 2023, it had decreased to $13 billion, primarily allocated to efficiency improvements at existing facilities. Poilievre says he’ll build pipelines every which way and strip away the “oppressive regulations” that he says Justin Trudeau put on the industry.
These messages resonate with Canadians who feel the country’s fossil-fuel sector has been undervalued. But trying to revive Canada’s oil sands is a bad idea. It’s incredibly expensive, uneconomic and ineffective. I should know. I spent my career evaluating crude markets and pipelines for Imperial Oil.
Canada’s first oil sands boom was triggered by geopolitics: in 1973, OPEC imposed an oil embargo, creating an artificial shortage that ended decades of crude prices below $4 per barrel. The Iranian revolution in 1979 further disrupted the supply of crude and drove prices higher. By 1980, crude had surged to $35 per barrel. Flush with cash and eager to keep the boom alive, oil companies scrambled to secure new reserves, turning their attention to Alberta’s oil sands, one of the largest known deposits on the planet.
I began my career in the early 1980s, fresh out of McMaster’s chemical engineering and management program. Back then, the Alberta economy was so strong you could get a job offer just by striking up a conversation on a flight to Calgary. But economics had the final say on the boom. Countries ramped up production even as a global recession reduced demand. A year after I started at Imperial Oil, the company began rescinding job offers for new graduates, and the Syncrude megaproject I was evaluating was cancelled. The boom had gone bust—and it taught me that markets, not wishful thinking, dictate what happens.
Two decades later, in the mid-2000s, an oil sands boom formed again, born from a perfect storm: declining production in traditional oil regions, like the U.K.’s North Sea and the U.S., and China’s skyrocketing demand. The price of crude rose from $13 per barrel in 1998 to over $140 per barrel by mid-2008. The world turned to Alberta’s oil sands once again. Hundreds of billions of dollars flowed into Alberta.
But exploiting the oil sands was not an optimal way to meet global demand: producing and refining oil sands crude is capital-intensive, energy-intensive and requires navigating harsh conditions and long distances to market. The crude’s poor quality requires high-cost specialized equipment to refine. It was a last resort—difficult, expensive and dirty, but technologically accessible. For example, the 300,000 barrels per day Imperial Oil Kearl Lake project took over $20 billion to build. It also required a pipeline built by Inter Pipeline for $1.4 billion to bring diluent in from Edmonton, and another billion-dollar pipeline built by Enbridge to bring the diluted bitumen to Edmonton. That was all needed before any of that crude left Alberta.
Meanwhile, horizontal drilling and fracking—a technology that had been inefficient at lower crude prices—began unlocking vast reserves in places like North Dakota’s Bakken and Texas’s Permian Basin. Unlike the billion-dollar requirements of oil sands projects, there is a much lower barrier to entry for fracking: a typical 500-barrel-per-day well would cost only $5 to $10 million to build. The oil flows and refines easily, without the complexities involved with bitumen. Fracked wells produce most of their oil within three years, making them far less susceptible to market changes.
As the unexpected production of fracked crude accelerated in the early 2010s, foreign capital fled Canada, ending the boom. No major oil sands project has been announced in Alberta since 2013. Meanwhile, by 2018 the U.S. had become the world’s largest producer of oil and, by late 2024, U.S. oil production reached 13.5 million barrels per day. The lack of investment in Alberta wasn’t and isn’t because of the government, insufficient pipelines or overregulation. It’s because U.S. fracking is inherently more economic, higher-quality and less financially risky than the oil sands.
The near-term outlook for reviving oil sands is bleak. Gasoline demand has peaked in major markets like the U.S. and China. The International Energy Agency predicts global peak oil demand in the next few years. They’ve also flagged a huge oversupply of crude oil from new global production over the next five years.
The longer-term outlook for crude demand gets even worse as the world goes off fossil fuels to fight climate change. In a scenario where the world successfully fights climate change, the Canadian Energy Regulator predicts the country’s crude production will fall 75 per cent by 2050—not due to Canadian impediments, but purely the lower global demand for crude.
I haven’t even touched on the severe environmental impacts that result from oil sands exploitation, fracking or, more broadly, the global burning of fossil fuels. Even while working at Imperial Oil, I was a strong proponent for fighting climate change. This is what I told myself: the decision to exploit the oil sands was not mine to make. That choice was made by governments that approved the projects and companies willing to take on the financial risk. My role was to ensure that if we were going to develop the oil sands, we did it profitably for both my company and Canada.
When I retired, fracking had already killed interest in major new oil sands investments in Canada. I began writing op-eds to help change the conversation around pipelines and oil sands. In one of my earliest articles in 2016, I explained why Energy East was no longer viable. Yet, here we are in 2025, with Poilievre still promising to revive Energy East and telling people that the lack of pipelines and refineries are the problem.
As far as Poilievre’s proposals, large-scale oil sands investments aren’t coming back and production will decline no matter what Canada does. The country’s oil sands boom arose out of a time of tight supply, growing demand and limited options. Today’s reality is the opposite of that time. Once we accept this truth, we can focus on preparing this country for the future instead of wasting time trying to resurrect a past that has no place in today’s world.
So, when our natural resources minister suggests a pipeline as the solution to U.S. tariffs, we should think twice. Tariffs on Canadian crude are likely temporary, mostly paid by American consumers, and can be partially offset by exporting out of the U.S. Gulf Coast using existing pipelines. The real question is: who would spend tens of billions of dollars on an uncertain, uneconomic business case for a product with poor long-term prospects? Hopefully not Canada. Trump’s tariffs aren’t going to kill investment in new oil sands plants. Fracking already did that.
Ross Belot is an energy and climate change columnist who worked for Imperial Oil before retiring in 2014.
