CERI: Low oil prices hurt Canadian economy

Persistence of low crude oil prices through 2021 would hurt more than help the Canadian economy by constricting oil-producing and affiliated industries, finds a study by the Canadian Energy Research Institute.

“The regional differences suggest that some provinces will hurt and some will benefit from lower crude prices, but on the national level Canadian economic growth will suffer as a result of low crude prices,” says the study by Dinara Millington.

The study models economic effects of a reference case assuming a West Texas Intermediate crude price rising from $53.25 (US)/bbl in 2015 to $72.88/bbl in 2021 and a low case with a WTI price of $46.26/bbl in 2015 rising to $51.25/bbl in 2021.

In the reference case, oil sands production rises to 3.1 million b/d from 2.1 million b/d over the study period. Capital investment averages $19.576 billion (Can.)/year, and the US/Canadian exchange rate is 0.85.

In the low case, oil sands production rises to 2.9 million b/d from 2 million b/d, capital investment averages $13.703 billion/year, and the exchange rate is 0.75. Nonenergy exports are $7.558 billion higher on a 7-year average in the low case.

In comparison with the reference case, the study finds, the low case yields national declines of 24.5% in cumulative gross domestic product growth, 22.6% in compensation, 19.7% in employment, 25% in federal taxes, and 22.4% in provincial taxes.

“Despite some mitigating factors, lower oil prices are, on the whole, not favorable for Canada,” the study says, suggesting, “For every Canadian-dollar gain in WTI price, Canadian GDP would gain almost $1.7 billion on average.”

Did You Like this Article? Get All the Energy Industry News Delivered to Your Inbox

Subscribe to an email newsletter today at no cost and receive the latest news and information.

 Subscribe Now


Making DDoS Mitigation Part of Your Incident Response Plan: Critical Steps and Best Practices

Like a new virulent strain of flu, the impact of a distributed denial of service (DDoS) attack is...

The Multi-Tax Challenge of Managing Excise Tax and Sales Tax

To be able to accurately calculate multiple tax types, companies must be prepared to continually ...

Operational Analytics in the Power Industry

Cloud computing, smart grids, and other technologies are changing transmission and distribution. ...

Maximizing Operational Excellence

In a recent survey conducted by PennEnergy Research, 70% of surveyed energy industry professional...