Happy New Year and welcome back to The Twenty-Four.

The big news to kick off 2026 is the U.S. arrest of Venezuelan President Nicolás Maduro on January 3. According to U.S. President Donald Trump, the current plan is to “run the country until such time as we can do a safe, proper and judicious transition.”

The geopolitical implications are far reaching and we are closely monitoring the potential impact on crude oil markets.

The main economic issue for Alberta is that Venezuela is home to the world’s largest proven oil reserves (Canada is third after Saudi Arabia). The type of crude oil also matters. Venezuelan crude has similar qualities as that produced from the Canadian oil sands - it is a heavier and more sour grade and therefore competes most directly with Canadian oil sands barrels on quality and refinery fit (U.S. Gulf Coast refineries are equipped to process heavier grades from both Canada and Venezuela).

Added to this are Trump’s comments on Saturday about revitalizing Venezuela's oil industry: “We're going to have our very large U.S. oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country.” While a bold objective, the pace of this revitalization may be tempered by Venezuela’s history of nationalization of its energy industry twice. Many hurdles exist for new investment, which will take years to resolve. 

This led to wild speculation on social media that the U.S. may no longer need Canadian oil, but these claims are wildly exaggerated.

Venezuela has lots of oil in the ground, but only produces less than a million barrels per day due to the dilapidated state of its oil infrastructure* (Canada’s crude oil production is closing in on five million barrels per day). It would take years and billions and billions of dollars of investment to significantly increase Venezuela’s production. Furthermore, the unstable political situation is not going away anytime soon.

In addition, Alberta’s oil exports to the U.S. are part of a well-established system of contracts, relatively stable relationships, and physical infrastructure that is not about to be suddenly displaced by extra oil production from Venezuela. The impact on oil prices has been muted so far, with WTI up slightly since the arrest (trading at US$58.25 early this morning vs. a close of $57.32 on January 2) and the light-heavy differential (WTI minus WCS) holding at about US$14/bbl**. This suggests that in the near term, oil prices will be driven more by other factors like OPEC+ policy, Canadian west coast egress, Russian exports, and global demand, rather than the situation in Caracas.

If, however, Venezuela’s oil production rises significantly over time, this would add to global supply and represent a potential substitute for Canadian heavy oil barrels in the U.S. market. The main threat are refineries in the U.S. Gulf Coast (PADD 3), where Venezuela has a location advantage. However, the vast majority of exported Canadian crude flows to the U.S. midwest (PADD 2), which is far less exposed due to its close proximity to Canada, existing pipeline network and land-locked destination.

How deeply this might impact Canada’s exports to the U.S. remains unclear, but one thing is clear: it highlights the strategic importance of diversifying Canada’s customer base.

We have argued that the key for Canada to become a leading energy superpower - a goal of PM Mark Carney -  is to look overseas. The good news is that there has been a structural improvement in market access to Asia over the last two years with the Trans Mountain Expansion (see our contribution to the Globe and Mail’s Charts to Watch in 2026 series) in May 2024 and LNG Canada phase 1 in June 2025. However, even with these gains, the U.S. remains, by far, the most dominant customer for Canada’s energy.  Recent overseas export gains are still a drop in the barrel.

Bottom line: Building new export and pipeline infrastructure to overseas markets reduces market risk, improves pricing and enables Canadian export gains. Last year, we were reminded of this risk when President Trump launched the trade war and imposed new tariffs. This year, we have a new reminder with the situation in Venezuela quickly unfolding and presenting a new source of uncertainty for Canadian oil producers. 2026 will be the year of execution, and we wait to see if promises to expand non-U.S. exports translate into meaningful action.

*The decline in Venezuela’s oil sector can be traced back to policies put in place by President Hugo Chavez that led to the mismanagement of Venezuela's national oil company and scared away foreign investment.

**WTI is West Texas Intermediate, the North American benchmark price for light crude oil. WCS is Western Canadian Select, the oil sands benchmark price.