February 14, 2025
CALGARY, Alberta – Former U.S. President Donald Trump has announced the reversal of a ban on offshore drilling, opening more than 625 million acres of U.S. coastal waters for oil and gas exploration. The decision marks a return to policies last seen before 2019 and could have significant economic and environmental consequences for Canada.
One immediate effect is the potential for increased energy security and market stability in North America. The U.S. is already Canada’s largest trading partner for oil, importing about 4.3 million barrels per day as of July 2024. If U.S. production rises, it could help insulate North American markets from global price swings. Canadian energy service companies may also find new business opportunities, particularly in the Gulf of Mexico, where some Canadian firms already operate in drilling, engineering, and environmental management.
However, the move also presents challenges. Increased U.S. production could lead to an oversupply of oil, driving prices down. For Canada’s oil sands projects, which have some of the highest production costs in the world, this could hurt profitability. If the U.S. reduces its reliance on Canadian oil, producers could face difficulty securing alternative markets, particularly given pipeline bottlenecks and limited export infrastructure.
Environmental concerns are another factor. More offshore drilling raises the risk of spills, which could impact marine ecosystems, particularly in areas where Canadian and U.S. waters are connected. Meanwhile, Canadian investors with stakes in U.S. energy projects may face uncertainty as regulations shift.
The policy shift could also impact Canada’s long-term energy strategy. The Canadian government may need to accelerate infrastructure projects to diversify export routes or invest more heavily in domestic refining capacity. There may also be pressure for stronger environmental policies or cross-border agreements to address risks associated with offshore drilling.
The oil and gas sector contributes nearly 7% to Canada’s GDP, and any decline in demand for Canadian crude could have wider economic consequences. While the short-term effects of Trump’s decision will likely lead to market fluctuations, the long-term impact will depend on how Canadian policymakers and industry leaders respond to this changing energy landscape.