RBC Economics notes Canada’s Oil and gas sector is smaller than a decade ago but still important for GDP and exports. Higher Oil prices lift corporate profits and royalties but squeeze household purchasing power. The bank sees limited new investment, a largely neutral GDP impact, and only gradual, conditional inflation pass-through to broader Canadian prices.
Higher oil hits consumers but aids producers
“Higher energy costs curtail household spending, but other areas of the economy tied directly to energy production benefit. Corporate profits and government natural resource royalties rise alongside oil prices, and this is true for Canada and the U.S. as oil exporters.”
“In Canada, the sector is smaller than a decade ago, but still accounts for 6.6% of gross domestic product and 15% of total goods exports in 2025.”
“Outside of the direct effect on fuel prices, rising energy prices increase packaging expenses, and fertilizer prices among other critical business inputs across different sectors. However, these pressures take time to materialize. Oil prices must remain elevated for months rather than days or weeks to cascade through supply chains and influence business pricing decisions.”
“These estimates don’t account for disinflationary pressures from reduced household demand for non-energy goods and services, which may result in a more muted inflation impact.”
“Oil and gas investment in 2025 accounted for less than half of what it was in 2014 as a share of Canada’s GDP. The remaining investment in the sector is now largely devoted to maintaining existing production capacity, making it insensitive to oil price fluctuations.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/canada-oil-driven-inflation-risks-and-growth-trade-offs-rbc-economics-202603111453
