Canada Just Replaced the Middle East… Trump Wasn’t Ready

Added: 2026-05-12

[00:00:00]Two days ago, on May 7th, 2026, the executive director of the International Energy Agency, Fatih Birol, did not fly to Riyadh. He did not fly to Washington, Moscow, Beijing, or Doha. He flew to Ottawa. He sat down with Prime Minister Mark Carney in a meeting that the IEA itself described as addressing the implications of shipping traffic disruptions on global oil, natural gas, and commodity supplies. This was not a scheduled policy consultation. It was not a routine bilateral engagement between an international institution and a member government. This was an emergency meeting, and it was driven by a single specific ongoing reality. Since March 4th, 2026, the Strait of Hormuz, through which 20% of the world's daily oil supply has flowed for decades, has been functionally closed by Iranian military action. The world's most important energy choke point is effectively shut. Every tanker captain who wants to move Persian Gulf crude to an Asian buyer is now pricing in the risk of Iranian fast boats, missiles, and mines. On March 2nd, Iranian drones struck Ras Laffan, Qatar's massive liquefied natural gas facility. Qatar Energy declared force majeure on all LNG exports. Within 10 days, the Gulf's four largest producers had collectively lost at least 10 million barrels per day of export capacity. Brent crude surged past $120 per barrel. So, why did Birol go to Ottawa? Because the answer to the most acute energy security crisis the world has faced since 1973 runs through Alberta. And right now, Alberta is breaking every production record it has ever set. Let me give you the numbers that every analyst covering Canadian energy has been watching build for 2 years. According to the Alberta Energy Regulator, Alberta oil production exceeded 4.1 million barrels per day in 2025.

[00:01:57]That is a record and a 3.8% increase from the previous year. December output alone averaged approximately 4.4 million barrels per day, a new monthly record for the province. Total Canadian crude oil and equivalent production averaged 5.13 million barrels per day in 2024, up from the previous record of 4.93 million in 2023. Through the first half of 2025, the average was 5.19 million barrels per day. Canada is now the fourth largest oil producer on Earth. Its four largest producers, Canadian Natural Resources, Cenovus, Suncor, and Imperial Oil, are collectively targeting combined production of approximately 3.9 million barrels of oil equivalent per day in 2026.

[00:02:45]Canadian Natural Resources alone is targeting a record 1.62 million barrels of oil equivalent per day. And here is the critical point. Every barrel of that production can reach a tanker on the British Columbia coast through the Trans Mountain Expansion pipeline. From there, it can travel across the North Pacific to an Asian buyer without passing through the Strait of Hormuz, without passing through the Strait of Malacca, without passing through the South China Sea, and without coming within range of any Iranian drone, fast boat, or any other instrument of asymmetric warfare that has made the Persian Gulf the most expensive place on Earth to move oil right now. This is the moment that every analyst who watched Trans Mountain come online in May 2024, and every energy minister who watched LNG Canada ship its first cargo from Kitimat in June 2025, has been describing as inevitable. The Hormuz disruption is not a temporary spike. It is a structural stress test that proves every argument for Canadian Pacific energy infrastructure that its developers made for 20 years against opposition that nearly killed the projects entirely. The test is running right now. The IEA director is in Ottawa. Asian buyers are signing long-term contracts, and Canada is pumping more oil than it has ever pumped in its history. Consider the geography.

[00:04:10]The landlocked oil sands of Alberta were long seen as a vulnerability. Stranded by the absence of tidewater access, forced to sell at a deep discount only available buyers in the American Midwest. But that landlocked geography sits behind a mountain range. And on the other side of that mountain range is the Pacific Ocean. And the Pacific Ocean has no Strait of Hormuz. Warren Buffett once said that in 70 years of business, the most durable competitive advantages are not the ones built by corporate strategy. They are the ones given by geography. Geography cannot be replicated, cannot be acquired, cannot be disrupted by a competitor's innovation, or a regulator's ruling, or a market's cycles pressure. Geography simply exists. And right now, the geography of Canadian oil is the most strategically advantaged energy geography on Earth. Oil that originates above the 49th parallel, processed in a jurisdiction that no hostile actor can currently reach with the tools that are disrupting every other major supply corridor, moving through a pipeline built through the Rocky Mountains to a marine terminal on the British Columbia coast, loading onto tankers that sail northwest across the top of the Pacific and arrive in Yokohama, Ulsan, Ningbo, and Zhoushan without having passed through a single contested waterway. No Iranian drone can reach Fort McMurray.

[00:05:32]No Iranian fast boat can intercept a tanker in the North Pacific. No IRGC missile battery can target the Westridge marine terminal in Vancouver. This is what energy security looks like when you buy it from Canada in 2026.

[00:05:46]Now, let me take you through exactly what happened at the Strait of Hormuz and what it means for the global energy system. The Strait is just 33 km wide at its narrowest point, flanked by Iran to the north and the UAE and Oman to the south. On March the 2nd, 2026, an IRGC advisor named Ibrahim Jabari declared the Strait closed and threatened to burn any ship attempting transit. What followed in the next 10 days was the most severe disruption to global energy supply since the 1973 oil embargo. Iran cannot defeat the US Navy in open battle, but it can impose disproportionate costs through asymmetric tools. Fast attack boats that can close on a tanker in minutes.

[00:06:28]Anti-ship missiles launched from mobile platforms that the US Navy cannot neutralize comprehensively. Mines that can be seeded faster than they can be swept. Submarines operating in shallow thermocline disrupted waters where detection is compromised. US naval superiority cannot eliminate this risk premium. It can only manage it. And in managing it, it keeps the Hormuz route open at a cost denominated in insurance premiums, route diversions, cargo delays, and the specific commercial calculation that every tanker owner makes each time a ship approaches the Larac Island traffic separation scheme.

[00:07:06]Is this cargo worth the risk? The Gulf Cooperation Council does have alternative pipelines. Saudi Arabia's East-West pipeline runs 1,200 km from the Eastern Province oil fields to the Red Sea port of Yanbu, bypassing Hormuz.

[00:07:21]The UAE's Abu Dhabi crude oil pipeline runs 370 km to the port of Fujairah on the Gulf of Oman. Combined, these bypasses can redirect approximately 6.5 million barrels per day at maximum capacity. The problem is that combined Gulf flows through Hormuz were running at 20 million barrels per day in 2024.

[00:07:43]The bypasses cover only about 32% of Gulf supply. The remaining 68% has no alternative route, and there is no bypass for LNG at all. Qatar is the world's largest LNG exporter, and every molecule of Qatari gas that travels to Asian buyers must load at Ras Laffan and transit Hormuz as liquefied cargo. The Iranian drone strikes on March 2nd forced Qatar Energy to declare force majeure. As of mid-March, Qatari LNG still cannot be delivered. The gas that powers South Korean power stations, Japanese city gas networks, and Indian industrial facilities simply stopped flowing. And the question that arrived simultaneously in every energy ministry in Northeast Asia was the question that Canada is now answering from a terminal in Kitimat and a marine terminal in Vancouver. Where do we get the oil and gas that is not coming through Hormuz?

[00:08:38]The answer that Trans Mountain provides is structural and permanent. The expansion came online in May 2024, tripling the original pipeline's capacity from 300,000 barrels per day to 890,000 barrels per day. It runs from Hardisty, Alberta to the Westridge Marine Terminal near Vancouver, British Columbia. The terminal loads tankers directly into the Pacific Ocean. Those tankers sail northwest. They do not enter the Persian Gulf. They do not pass through the Strait of Malacca, the narrow passage between Malaysia and Indonesia through which 80% of China's Middle East oil imports have historically flowed, and which China's military planners describe as its Malacca dilemma. They do not pass through the South China Sea, where territorial disputes create a separate category of geopolitical risk. They sail across the open North Pacific on a route that is faster to Northeast Asian ports than any Middle East route, more cost-effective than the Panama Canal route from the US Gulf Coast, and geopolitically safer than any oil trade corridor currently active in the global energy system. The specific routing matters to specific buyers. China imports approximately 10 million barrels of oil per day. 80% of those imports have historically transited the Strait of Malacca. The North Pacific route from British Columbia bypasses Malacca entirely. South Korea imports about 3 million barrels per day, the majority from Middle East producers whose route to Busan and Ulsan runs through Hormuz and Malacca. Japan imports roughly 3 million barrels per day with similar routing dependencies. The Asia Pacific Foundation of Canada's analysis describes the Canada-China oil trade in terms that are precise about the commercial logic. North Pacific shipments are faster and more cost-effective. This strategic advantage has revived interest in future Pacific pipeline projects, including renewed discussions of the long-stalled Northern Gateway pipeline to Prince Rupert.

[00:10:40]Canada's Pacific geography solves in one pipeline and one shipping lane two separate strategic vulnerabilities that China, Japan, and South Korea have been trying to address for years. The Hormuz problem and the Malacca problem simultaneously disappear when the oil comes from Alberta. The LNG dimension is where the structural transformation becomes most visible in long-term contract LNG contracts are written for 20 to 40 years. The buyers signing them in 2026 are committing to supply relationships that will outlast any individual geopolitical crisis. LNG Canada's Phase 1 facility at Kitimat, British Columbia, shipped its first cargo in June 2025.

[00:11:25]It is the first LNG export facility Canada has ever operated. Its annual capacity at full Phase 1 throughput is approximately 14 million metric tons.

[00:11:34]The facility is operated by a joint venture that includes Shell, Mitsubishi, Korea Gas Corporation, Petronas, and PetroChina. Four of the five partners represent the specific Asian utility and trading companies that are the buyers for the cargoes this facility produces.

[00:11:52]That joint venture structure is not accidental. It is the commercial expression of Asian buyers recognizing that securing a stake in Canadian LNG production is how you solve the problem that Qatari LNG's Hormuz dependency represents. Phase two of LNG Canada, targeting a further 14 million metric tons annually, would bring total capacity to 28 million metric tons per year with a final investment decision anticipated by late 2026 or early 2027.

[00:12:23]Cedar LNG and Woodfibre LNG are advancing through their respective processes. If both Cedar and phase two proceed, Canada's total Pacific LNG export capacity will exceed 40 million metric tons per year by the early 2030s.

[00:12:38]Asian utilities and importers that lock in 20 to 40-year contracts will have structural insurance against the next Hormuz-related supply shock. The pricing consequence of the Hormuz closure for Canadian oil has been unambiguous and compounding. The Western Canada Select Discount, the gap between the price Alberta oil commands at Hardesty and the world price benchmark of Brent Crude, has been a persistent structural feature of the Canadian oil market for decades.

[00:13:07]It existed because Alberta's oil was landlocked, because the only available buyers were American refiners in the Midwest, and because there was no alternative to accepting the American discount. The Trans Mountain expansion began changing this dynamic the moment it came online. The Canada Energy Regulator's data shows that the WCS Brent spread, historically ranging from 15 to $30 per barrel, had already narrowed to approximately $10 by June 2025.

[00:13:35]The Hormuz closure has compounded that narrowing further. With global Brent above $100 per barrel, driven by the loss of 20% of the world's daily supply, Asian buyers are paying a premium over Brent for any crude that arrives with a Hormuz-free origin certificate. The premium for Alberta oil moving across the North Pacific is the highest it has ever been relative to the discount it used to accept. Cenovus Energy posted an 83% profit jump in Q1 2026, its strongest quarterly result in years. The company's CEO, Jon McKenzie, warned in the same earnings release that Canada risks losing oil investment to carbon policy uncertainty and regulatory delays. His warning captures the tension of this moment. The Hormuz closure has made Alberta's oil production capacity a strategic asset of global significance.

[00:14:29]The geology is there. The infrastructure is being built. The buyers are arriving.

[00:14:34]The prices are rising. But the regulatory and policy environment in which investment decisions must be made is not yet aligned with the urgency that the geopolitical situation has created.

[00:14:46]The Trans Mountain expansion itself would not exist without federal government intervention. Kinder Morgan, the original developer, announced in May 2018 that it was suspending all non-essential work and threatening to cancel the project entirely due to political opposition in British Columbia, regulatory uncertainty, and the cost of the environmental review process. The Trudeau government purchased the project for $4.4 billion in August 2018 specifically to ensure it would be completed. The total cost ballooned to $22.5 billion by the time it came online in May 2024. It is the most expensive infrastructure project in Canadian history and it is the physical foundation of every barrel of Alberta oil currently loading onto a tanker at Westridge. The IEA meeting of May 7th is the institutional expression of what the commercial market has been demonstrating since March. Director Birol's engagement with Carney signals that multilateral energy institutions now view Canada's Pacific energy infrastructure not as a regional supply story, but as a systemic component of global energy security architecture. Warren Buffett's geography principle applies directly. The most expensive lesson any investor learns is the lesson about supply chains. Most investors look at supply chains and see logistics. The investor who sees geography sees something different.

[00:16:10]Which part of the supply chain is irreplaceable and which part is substitutable. The Strait of Hormuz is substitutable in theory by every possible alternative route from every possible alternative supplier. In practice, it is not because the volumes are too large, the alternatives are too incomplete, and the infrastructure to route around it at scale takes years to build. Canada has spent 6 years and $22 billion on one pipeline and 10 years and billions more on one LNG terminal building the infrastructure that makes it the practical substitute for the Hormuz dependence that Asia has been trying to cure for decades. The moment the Hormuz closure made the cure urgent, the medicine was already on the shelf.

[00:16:53]The tankers were already loading. The contracts were already being offered, and the production was already at record levels. So, here is where we stand. The Strait of Hormuz has been functionally closed since March 4th, 2026.

[00:17:06]Iranian drones struck Ras Laffan on March 2nd. Gulf oil production dropped by at least 10 million barrels per day by March 12th. Brent crude surged past $120 per barrel. Alberta oil production exceeded 4.1 million barrels per day in 2025, a record. The Trans Mountain expansion, operational since May 2024, at 890,000 barrels per day, routes Alberta crude to the Westridge Marine Terminal in Vancouver. LNG Canada Phase 1, operational since June 2025, ships 14 million metric tons annually from Kitimat. The Western Canada Select Discount is narrowing as Asian buyers pay premium prices for Hormuz-free crude. Cenovus posted an 83% profit jump. The Northern Gateway Pipeline to Prince Rupert has been revived from regulatory stasis. Canada's Pacific LNG export capacity could exceed 40 million metric tons per year by the early 2030s.

[00:18:06]And the country that spent 60 years selling its oil at a landlocked discount to the only available buyers in the American Midwest is now loading tankers at world price for buyers in Yokohama, Ulsan, Ningbo, and Zhoushan. The geography that was once a curse has become the geography the world needs.

[00:18:24]And every tanker that sails northwest from Westridge answers the question that Fatih Birol answered by boarding a plane to Ottawa. When the geography that trapped Alberta's oil for 60 years turns out to be the geography that separates it from every hostile actor who can close every other supply corridor on Earth, what do you call the landlocked province that just became the most important energy supplier on the planet?

[00:18:49]You call it Canada's Pacific Coast. And it is loading tankers right now. Please hit the bell icon and subscribe my channel for daily updates.