Why Canada no longer reaps the full benefits of high oil prices

The price of crude has hit levels not seen in years, but at least one economist said oil-rich Canada is not reaping the full benefits of these higher commodity prices it has in the past.

The price of crude has hit levels not seen in years, but at least one economist said oil-rich Canada is not reaping the full benefits of these higher commodity prices it has in the past. 

Higher oil prices have always been a double-edged sword for Canada. On one hand, it’s positive for our large energy sector but on the other, it means consumers are shelling out more at the pumps while companies see increased input costs. 

This time around however, Canada’s energy sector looks very different from previous boom times. 

“The oil sector is not the driver of GDP growth that it once was,” said Stephen Brown, senior Canada economist at Capital Economics, in a note released on Wednesday. 

“Due to pipeline capacity constraints, there is little supply response to rising prices, with oil production still stuck near 2018 levels. With export capacity out of their hands, producers have been using their income to pay down debt rather than invest.”

He points out capital spending in the energy sector is sitting at 0.3 per cent of GDP, less than a third of what it was in 2014.