Canadian investors are preparing for a critical year in 2025 as they contend with geopolitical challenges, major infrastructure projects, and evolving global energy dynamics. From U.S. tariffs under President Trump to the anticipated Trans Mountain pipeline expansion, here’s how to navigate this high-stakes environment and identify stocks poised for success.
Trump’s Tariffs: A Double-Edged Sword
In February 2025, the U.S. imposed a 10% tariff on Canadian energy imports, targeting crude oil and natural gas. This move poses a threat to Canada’s oil-heavy economy, where historically 80% of energy exports are U.S.-bound. However, the impact of these tariffs varies across companies.
Integrated oil firms like Imperial Oil are largely shielded, as 81% of their revenue is generated from domestic refining and retail, minimizing U.S. tariff exposure. Similarly, Suncor Energy (TSX:SU), with its vast Petro-Canada retail operations, refines over half its production domestically, reducing trade tension risks. In contrast, Cenovus Energy faces higher risks, with about 50% of its revenue derived from U.S. refineries. This disparity has accelerated export diversification beyond the U.S., facilitated by the completion of the Trans Mountain Pipeline Expansion (TMX), which now increases Canada’s oil export capacity to 890,000 barrels per day, opening access to Asian and European markets.
Oil Prices: Finding Stability Amid Volatility
Projections suggest global oil prices will stabilize near US$70 per barrel in 2025, though oversupply risks exist. Key factors include OPEC+ production cuts, rising demand from India and China, and potential U.S. shale market impacts if drilling increases.
Canadian Natural Resources (TSX:CNQ) plans a 12% production boost in 2025, targeting up to 1.55 million barrels of oil equivalent per day. With significant reserves and low operating costs, CNQ is well positioned to profit even in lower price scenarios.
Energy Stocks to Monitor in 2025
– Suncor Stock: Suncor’s integrated operations, spanning oil sands extraction to a network of 1,585 Petro-Canada stations, buffer against oil price volatility. Their production hit a record 827,600 barrels per day in 2024, with forecasts ranging between 810,000-840,000 barrels per day in 2025. A 5% dividend increase offers an attractive yield above 4% and plans to return excess cash flow to investors signal robust future returns.
– Parex Resources (TSX:PXT): Overcoming exploration setbacks from 2024, Parex’s Colombian oil sells at Brent Crude prices, potentially bypassing U.S. tariffs. The promising stock maintains its quarterly dividends, yielding an impressive 11% annually.
Industry Developments: Pipelines, LNG, and Mergers
The Trans Mountain Pipeline’s 2024 launch is pivotal for Canadian energy independence, redirecting 890,000 barrels per day to new markets, with China as a significant customer. The $40 billion LNG Canada project also positions Canada as a prominent global natural gas exporter, lessening reliance on tariff-strapped U.S. markets. Mergers may increase if smaller producers struggle with new tariff pressures.
Investor Insights
Though 2025 will challenge Canada’s energy sector, it also offers opportunities. Investors should focus on companies with diverse revenue streams like Suncor and those set for export growth like Canadian Natural Resources. Despite potential tariffs and environmental regulations, Canada’s substantial resources and infrastructure advancements provide strong long-term investment prospects. Remain vigilant to geopolitical changes, prioritize firms with solid financials, and monitor the merger landscape as the industry consolidates.
