Global energy shocks and Canada’s exposure
Since Russia’s full-scale invasion of Ukraine in 2022, and as conflict around Iran has threatened the Strait of Hormuz, global energy markets have relearned a critical lesson: overdependence on external fossil-fuel supply sources poses significant long-term energy security risks. Europe’s experience following the Russia-Ukraine war demonstrated the strategic risks of relying heavily on external energy suppliers. After the invasion, Russia sharply reduced pipeline gas exports to Europe, forcing the European Union (EU) to rapidly diversify supply through emergency Liquefied Natural Gas (LNG) imports, accelerated renewable-energy deployment, energy-efficiency measures, and structural reductions in gas demand. The EU response evolved beyond crisis management into long-term energy-system restructuring. According to the International Energy Agency (IEA), clean energy investment in the EU was expected to reach nearly USD 390 billion in 2025, driven largely by the energy security concerns that emerged after the invasion.
The effects of the global crisis in the oil supply market are not immune to any country. Ongoing tensions around the Strait of Hormuz are further distorting energy markets globally. IEA estimates that nearly 20 million barrels of oil per day passed through the Strait in 2025, representing roughly 25% of global seaborne oil trade and about one-fifth of global LNG trade. Recent disruptions around this shipping route and other regional oil infrastructure have already tightened global supply and increased price volatility. By May 2026, the U.S. Energy Information Administration had revised its outlook to account for prolonged disruptions to oil flows through the Strait of Hormuz, projecting production shut-ins of up to 9.1 million barrels per day and maintaining a geopolitical risk premium in its crude-oil price forecast. As The Economist projects, even if the war ends today, about 3% of the world’s yearly oil-production has likely already been lost due to unavoidable delays in restoring export volumes.
The lessons from Europe’s gas crisis and the growing instability in global oil shipping routes should push Canada to think beyond expanding export corridors and toward building a more resilient, integrated, and strategically secure domestic energy system. Canada still maintains significant energy import dependencies despite being one of the world’s largest energy producers. In 2024, about 70% of Canada’s imported crude oil came from the United States. At the same time, more than 90% of Canadian crude exports continued to flow through US-linked pipelines. Canada is resource-rich, yet parts of its domestic energy system remain vulnerable to geopolitical disruptions, cross-border infrastructure constraints, and volatility in global fossil-fuel markets. Countries that retain greater domestic control over critical segments of the energy system are generally better positioned to withstand external energy shocks and disruptions to global trade flows.
Closing the domestic energy production loop
While the federal government continues to pursue climate commitments through initiatives such as the Pathways Project, there should also be greater urgency in prioritizing projects that strengthen Canada’s long-term energy security. As the private sector invests in carbon capture and sequestration technologies and expands pipeline access to new export corridors, Canada should also focus on closing the domestic energy production loop by expanding refining and processing capacity at home. Exporting crude for refinement elsewhere limits the economic value retained within Canada and leaves parts of the country exposed to future geopolitical and supply chain disruptions. The energy debate at the national level should not be about whether there will be another pipeline. The more important question is whether Canada is building a resilient and strategically integrated energy system capable of withstanding future global shocks.
Expanding Canada’s export infrastructure still has an important role to play in any serious long-term energy security strategy. It improves access and optionality in global markets and strengthens economic resilience in an increasingly uncertain geopolitical climate. At the same time, export expansion should be part of a broader national strategy that also strengthens domestic refining capacity.
Transmission, storage and grid modernization
Another critical strategic pathway for strengthening Canada’s long-term energy security is to prioritize the domestic expansion of transmission infrastructure, energy storage systems, and grid modernization as core national infrastructure priorities. Canada already has some precedents: The Canada Infrastructure Bank (CIB) is financing several strategic electricity infrastructure projects aimed at strengthening grid reliability and long-term energy security. The Major Projects Office should put interprovincial transmission, storage and crucial grid-component manufacturing at the front of the queue, with federal finance tied to firm delivery schedules. Similarly, grid transformation should not be built on fragile global supply chains for critical components such as transformers, cables, switchgear, and batteries. If Canada is serious about doubling the grid, it should use federal financing instruments to build domestic capacity to manufacture components that enable grid transformation, while fostering local economic development.
Electrifying sectors exposed to fossil fuel dependency
One strategic pathway that deserves greater national attention is the rapid electrification of sectors with the greatest exposure to fossil-fuel dependency risk. Fossil fuels continue to dominate Canada’s broader energy system despite recent national interests in clean electricity and renewable investment. The latest federal energy data show that oil and natural gas still account for over 75% of Canada’s total energy consumption, particularly across transportation, industrial production, and building heating. Community-based energy efficiency programs and initiatives that facilitate zero-emission transportation systems, building retrofits and demand-response programs help to reduce fuel-import demands in the long term. The federal government has focused significantly on increasing energy export optionality rather than increasing domestic energy systems resilience. Expanding LNG and oil exports may be commercially and strategically beneficial for Canada, but it does not resolve eastern Canada’s continued reliance on imported crude oil, nor does it eliminate the need to strengthen domestic energy resilience through cleaner electricity systems and lower oil dependence at home.
Building the right sequence of pathways
The federal government is not starting from zero. There are already policy frameworks and infrastructure initiatives that can be expanded into a more coherent long-term energy security strategy. Recent announcements, such as the new National Electricity Strategy and the Canada-Alberta Energy Implementation Agreement, suggest that elements of these strategic pathways are already taking shape. The challenge now is not simply launching new initiatives, but scaling and integrating them into a broader national vision for energy security. Canada’s theory of change should be grounded in the lessons of recent global energy disruptions. Some European countries have learned, at enormous economic cost, that overdependence on external energy supply can quickly evolve from a market vulnerability into a national-security crisis.
The question, then, is not whether Canada should build more pipelines or power lines. It is whether Canada can build the right sequence of pathways so that any new pipeline strengthens, rather than substitutes for, a serious national energy security strategy.
