I notice most of the Erie Canal in upstate New York runs parallel to Lake Ontario. What was the purpose of creating the canal for that entire stretch when goods could’ve theoretically been shipped over Lake Ontario to Oswego or another port and then from there down to Albany and the Hudson?
The reason for having a canal for that entire stretch was that grain ( or anything else) could be loaded on a boat anywhere on the western Great Lakes and sent , by boat, to anywhere on the Atlantic coast. Without it, anyone trying to get grain by boat from Ohio or Michigan to the east was blocked by Niagara Falls, had to load their grain on wagons: and then get those over the Niagara and Onandaga Escarpments, over whatever roads existed.
Boats are so familiar that most people don't notice how immensely efficient they are. At a few miles an hour, in still water, a boat has almost no friction. In the late 18th c. -early 19th c. most motive power was limited to people, draft animals or sails, and that lack of friction made a difference. In 1830, a team of mules could easily move a canal boat with 120 tons of coal,grain, or stone at 3 miles per hour. On the National Road, six horses could pull no more than six tons- and that's assuming that the road ( notoriously badly maintained) didn't knock the wagon apart. This is why canals became so popular in the period: almost 3,000 miles of canals were built in the eastern US. After the Erie Canal opened, the price of grain in New York City dropped enormously. Trade routes shifted: with grain shipments from large midwestern farms coming into Boston by boat , small New England farms were put under economic stress (and noticed by Henry David Thoreau, who thought they were just buying too many things) . Farmers in the Shenandoah Valley of Virginia stopped hauling their produce north to Philadelphia.
After energy became cheaper, with the advent of steam, canals became less important. Boats become less efficient at higher speeds. Canals are difficult to run through deserts, and over mountains. Not having those limits, railroads would come to dominate transportation after around 1850. Though, for hauling bulk goods like coal and gravel canals would continue to see a lot of use through the 1800's into the 20th c.
Peter L Bernstein : Wedding of the Waters: The Erie Canal and the Making of a Great Nation