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Scotiabank Looks At When Oil Prices No Longer Benefit Canada's Economy

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As a net oil exporter, Canada typically benefits from higher oil prices, but is there a point when the gains diminish or disappear, asks Scotiabank.

The bank results confirm that higher oil prices remain a net positive for activity at current levels, but the macro payoff diminishes as prices rise.

Scotiabank finds evidence that once oil prices move into the US$120-US$130 a barrel range (in 2026 dollars), they no longer provide a statistically meaningful boost to Canadian activity.

Higher oil prices remain a small net positive for Canada, but not without limits, according to the bank. At very high price levels, the negatives, which may come from lower global demand and/or tighter financial conditions, become large enough that the traditional terms-of-trade benefits may no longer dominate.

While Scotiabank's results are necessarily tentative, they suggest that the Canadian economy does have a "sweet spot" for oil prices at around US$120-US$130 a barrel in today's dollars and that pushing well beyond it comes with diminishing, and potentially negative, macro returns.

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