The unstable global economy presents a “maelstrom” for Canada’s energy sector. April 07.
Following a crazy week of financial news that caused the price of oil and energy stocks to plummet sharply, Canada’s energy producers will be keenly monitoring the markets in the days ahead.
Although the elimination of the federal carbon tax has resulted in lower gasoline prices for Canadian drivers, the global economic uncertainty brought on by Donald Trump’s tariffs and OPEC’s unexpected decision to boost production has also caused oil prices to plummet to their lowest point in four years.
Western Canada Select (WCS) finished the week at less than $55 per barrel,while benchmark U.S. crude (WTI) dropped below $62 per barrel on Friday.
Despite the recent narrowing of the price gap between WTI and WCS,Canada’s oil industry and governments that depend on its revenue are preparing for the prospect of further hardship.
According to Kevin Birn,an oil industry analyst at S & P Global in Calgary, it was really a double whammy last week in terms of oil price impact.There is too much supply,and prices are falling, and you already had growing concerns about global economic growth,which is correlated with oil demand.”
The extent and magnitude of the reciprocal tariffs that the United States announced really,I believe,shocked the markets,Birn continued.
According to Richard Masson, an energy expert with the University of Calgary’s School of Public Policy,the tariffs just added to surprise, and investors hate surprises.
Of course,oil is one of the most liquid commodities traded globally,so it’s easy for investors to enter and exit the market when they want to adjust their risk tolerance, Masson continued.
In addition to the tariffs, OPEC increased production,which Masson said seems to be an attempt to punish members who have not been meeting the cartel’s prior production quotas. It also aims to reduce the profitability of oil production in non-OPEC nations, with the ultimate goal of assisting OPEC in regaining greater control over the future price of oil.
“A lot is happening right now, and it’s not just OPEC,” Masson remarked. One thing that is certain is that if the price of oil remains in the low 60s,there will be less drilling and fracking in Texas,which could lead to a rapid decline in U.S. production.
During the market crash last week,Canadian energy stocks were severely damaged. However, Masson believes that drilling may potentially decline in Canada and that the country’s energy sector is generally well-positioned to withstand the economic downturn.
“Natural gas is one of the largest input costs for oil sands producers, and its price is still (a) relatively low in Western Canada,” Masson added.
“They’re going to make cash flow, they’ve paid down debt over the last few years, they have market access, the gap (between WTI and WCS) is narrow, their production is solid — clearly the U.S. wants it, (because) they haven’t put any tariffs on Canadian oil — there is no panic,” Masson continued.
The impact of Donald Trump’s tariff war on global economic development is the major unknown.
Birn questioned how much the ongoing and ongoing trade disputes would detract from anticipated growth, which would weaken demand for oil and further drive down prices.
Birn remarked,We’re right in the middle of the maelstrom.I think you should expect some jostling around commodity prices during this period as everyone is trying to get their feet under them to understand that.
The governments of oil-producing provinces like Alberta and Saskatchewan will also be keenly monitoring the price of oil,even if a further drop in prices may give drivers an even greater discount at the pump.
Oil prices in Alberta are expected to be about US$68 per barrel (WTI) this year, according to the province’s 2025–2026 budget, which currently projects a $5.2 billion deficit. According to the province, the provincial treasury would suffer a loss of $750 million for every $1 decline in that price.
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