Regional Shake Up: The Impact of Lower Oil Prices on Canada’s Economy

Regional Shake Up discusses the positive and negative effects to Canada of the dramatic decline in oil prices. It is challenging to derive the exact effect of the sharp drop because there are both winners and losers in the Canadian economy as a result of weaker prices. Oil extraction companies are obvious losers. But other sectors of the Canadian economy, including transportation and some manufacturers, could benefit from lower energy prices. Also, consumer spending will receive a modest boost from the drop in gasoline prices. Regionally, Alberta will experience the largest decline in real GDP as it is Canada’s largest oil producer. Saskatchewan and Newfoundland and Labrador will also be hurt, but not to the same degree as Alberta. Ontario and Quebec—Canada’s two largest provinces—will benefit the most from weaker oil prices.