By Arathy Somasekhar
A looming labor dispute at Canada’s two main railroads is unlikely to significantly reduce oil exports to the United States due to excess capacity on Trans Mountain and other pipelines, according to sources familiar with the situation.
North American shippers, such as fertilizer supplier Nutrien (NYSE:) and U.S. logistics firm C.H. Robinson, are preparing for potential stoppages at the Canadian operations of Canadian National Railway (TSX:) and Canadian Pacific Kansas City (CPKC), which could have significant economic consequences for the nation.
Despite the threat of a strike or lockout starting on Thursday, oil exports are expected to remain largely unaffected. U.S. rail imports of Canadian crude have declined in recent years, with the majority of imports coming in through pipelines.
Experts believe that the expansion of Trans Mountain and available capacity on other pipelines will help mitigate any potential disruptions in oil exports. The increased flow of crude from Alberta to the Pacific coast and maintenance at U.S. Midwest refineries are expected to free up pipeline space for additional barrels.
While prices of Canada’s Western Canadian Select crude typically fall during export logjams, the relatively small discount indicates little market concern about moving Canadian crude. Producers and refineries are closely monitoring the situation and implementing plans to mitigate any potential impacts.
However, a prolonged rail stoppage could have significant implications for the delivery of refined products, such as propane and diesel, to domestic and export markets. Companies are taking precautions, including stockpiling fuel and adjusting logistics to ensure continuity of operations.
Overall, the impact of the Canadian rail strike on oil exports is expected to be minimal, thanks to the surplus pipeline capacity and proactive measures taken by industry players to mitigate potential disruptions.