Low Oil Prices Show Risk To Canada’s Economy

Policy shift is necessary to succeed in more competitive environment

Oil has dropped to its lowest level in the past six weeks, as continued strong US production raises doubts about the impact of possible OPEC cuts.

As reported by Bloomberg, US gasoline reserves grew unexpectedly, while their crude oil production reached the highest levels since August of 2015.

The continued rise in US output presents serious ongoing concerns for the Canadian economy. The rise of US oil production is a new variable in the oil market, meaning Canada cannot expect oil prices to settle in the usual way.

While OPEC has attempted their usual response in an attempt to raise oil prices and end the oil glut – production cuts – that effort is being undermined by growing US production.

According to Bloomberg, US “Crude production advanced 17,000 barrels a day to 9.25 million in the week ended April 14, the highest since August 2015. Output in the lower-48 states rose 21,000 barrels a day to 8.72 million, also the highest since August 2015.”

Combine the shifting market with the pro-business policies of the Trump Administration, and it is clear Canada is heading down a dangerous policy path in a more competitive world.

The response to a tougher oil market and more economic competition from the United States should be to strengthen domestic consumption, and remove constraints on our energy sector. That would mean lowering personal & business taxes, and eliminating the carbon tax, along with removing more regulations.

Unfortunately for Canada, Trudeau is going in the opposite direction.

Trudeau’s carbon tax and increased regulations make our economy less competitive, and will reduce domestic demand as consumers will have less to spend. This will put us in a weaker position to deal with oil prices, and puts our economic future in jeopardy.

Bad policies will lead to bad results.

Spencer Fernando