{"id":1729,"date":"2026-01-19T17:56:10","date_gmt":"2026-01-19T17:56:10","guid":{"rendered":"https:\/\/www.rbc.com\/en\/tl\/heavy-oil-market-heats-up\/"},"modified":"2026-06-26T15:15:37","modified_gmt":"2026-06-26T15:15:37","slug":"heavy-oil-market-heats-up","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/thought-leadership\/energy\/heavy-oil-market-heats-up\/","title":{"rendered":"Heavy oil market heats up"},"content":{"rendered":"\n\n\t\t\t
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\n\t\t\t\tAn American plan to revive Venezuelan oil has raised concerns that Canada’s dominance in U.S. crude markets could start to erode\t\t\t<\/p>\n\t\t\t\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n

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Six charts that analyze Canadian-U.S. oil ties amid new geopolitical developments in oil markets<\/h2>\n\n\n\n

The U.S. loves heavy oil. The blend is vital for diesel, jet fuel and petrochemicals, and Canada is, by some distance, its biggest foreign supplier. However, a U.S. plan to influence and revive Venezuelan oil has raised concerns that Canada\u2014already facing U.S. pressure on several other domestic industries\u2014could start losing market share to Venezuelan heavy crude in a few years. It could amount to a Washington squeeze on Canada\u2019s most prized resource.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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Canadian oil has displaced rivals, including Venezuela and OPEC, in the U.S. market over the past three decades<\/strong><\/h3>\n\n\n\n
\"Imports<\/figure>\n\n\n\n

U.S. crude import patterns reflect a clear structural divergence between Canada and Venezuela. The result is a fundamental reorientation <\/strong>of U.S. import dependence toward Canadian supply, reinforced by reliability, infrastructure, and long-cycle capital investment.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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But Canadian oil is not just a Gulf Coast (PADD3) play. It\u2019s also a strategic and critical player in the U.S. Midwest refinery complex (PADD2)<\/strong><\/strong><\/h3>\n\n\n\n
\"U.S.<\/figure>\n\n\n\n

Venezuelan crude once dominated Gulf Coast imports, but its collapse created space that has only partially been filled by Canadian barrels. The Gulf Coast is seen as a battleground, but only 10% of total Canadian imports flow into the region known as PADD 3. Most Canadian crude growth has occurred within the Midwest refinery region<\/strong>, known as PADD 2, which accounts for 69% of total Canadian export growth into the U.S. over the past three decades.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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U.S. refineries are engineered for the oilsands and other heavy oil: the co-dependence with Canada will be hard to break<\/strong><\/strong><\/h3>\n\n\n\n
\"Total<\/figure>\n\n\n\n

U.S. refining capacity growth has been concentrated in PADD 3 and PADD 2, reinforcing the system\u2019s orientation toward large-scale, complex refining hubs. The Gulf Coast\u2019s dominance reflects decades of investment <\/strong>designed to process heavier and more diverse crude slates, positioning it as both a domestic refining centre and a globally relevant supply hub.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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The U.S. and Canada are poised to ride the plastics boom: U.S. refineries spent billions to bolster their heavy-oil dependent petrochemicals sector<\/strong><\/strong><\/strong><\/h3>\n\n\n\n
\"Total<\/figure>\n\n\n\n

Coking capacity remains a defining feature of the U.S. system\u2019s ability to process heavy crude, with the majority of investment <\/strong>concentrated along the Gulf Coast. The steady build-out of coking units over time highlights how refiners structurally adapted assets to heavier barrels, further entrenching supply relationships that favor Canadian crude.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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Canada provides oil security to the U.S., while U.S. refineries serve as gateways for Canadian oil to reach global markets<\/strong><\/strong><\/strong><\/strong><\/h3>\n\n\n\n
\"U.S.<\/figure>\n\n\n\n

The U.S. energy system is increasingly focused on exports, with petroleum products accounting for majority of outbound volumes over time. This underscores the Gulf Coast\u2019s role not only as a refining hub, but as a critical petrochemical and export platform. <\/strong>For Canada it reinforces the importance of market access, blending, refining, and re-export pathways within an evolving global trade landscape.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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However, U.S. oil investments in Canada have seen a decade of capital flight<\/strong><\/strong><\/strong><\/strong><\/h3>\n\n\n\n
\"U.S.<\/figure>\n\n\n\n

For all the cross-border integration, U.S. capital investment in the Canadian resource sector (mining, oil and gas) has fallen by more than half from its US$39.1 billion peak in 2011<\/strong>. Meanwhile, U.S. investments into other Western Hemisphere countries has steadily grown from US$16 billion in 2000 to US$64 billion <\/strong>in 2024, even without Venezuela.<\/p>\n\n\n\n

The competition for investment dollars from the U.S. into the Western Hemisphere is growing\u2014Canada will need to lock in American capital to ensure it preserves its pre-eminent position in the U.S. market.<\/p>\n<\/div>\n<\/section>\n\n\n\n

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Contributors<\/strong><\/p>\n\n\n\n

Shaz Merwat<\/strong>: Policy Lead, Energy, RBC Thought Leadership<\/p>\n<\/div>\n<\/section>\n