While oil's price drop has led to losses on the Toronto stock market and concerns for provincial budgets, it's forecast to bring relief to Canadians filling up at gas stations.
Photo Credit: Michelle Siu/Canadian Press

Oil prices good news, bad news for Canada

The plunging price of oil is good news for Canadian motorists but bad news for the governments of three provinces which receive royalties from oil production. The western provinces of Alberta and Saskatchewan are affected, as is the eastern-most province of Newfoundland and Labrador.

Alberta’s premier has already said government spending will have to be closely watched, but that his government’s low tax policy will continue.  The premier of Newfoundland and Labrador has frozen discretionary spending, but says he’s not worried about the outlook for oil in the long term.

‘Jolt of confidence to consumers’

Motorists have seen gasoline prices drop almost 40 per cent since June. “I think it’s going to give a jolt of confidence to consumers across Canada,” says Ian Lee, assistant business professor at Carleton University. “The estimate is that it’s going to inject half a trillion dollars into pockets of consumers around the world.”

ListenDropping oil prices have sent the Canadian currency lower, which makes the country’s exports more attractive and could boost manufacturing.

Projects unlikely to shut down

Oil companies in Canada are very well-capitalized says Lee, and they still have a positive cash flow as long as prices don’t go below $40 a barrel. With prices still around $68, he doesn’t think any projects will shut down, but there could be delays starting new ones.

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