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How Low Can Oil Go?

Every other Tuesday, we release 5 Minutes for Business, a publication written by Hendrik Brakel, our Senior Director of Economic, Financial and Tax Policy. In these publications, Hendrik briefly describes current issues that affect the Canadian economy and provides insight on what it will mean for Canadians today and the future. In this week’s edition, he explains why we are seeing lower oil prices and what it will mean for the Canadian economy.

Oil prices have dropped by 40% since June, an astonishingly rapid decline. Why has this happened? Supply is soaring due to new production in U.S. shale, while demand has faltered because of the slow-down in emerging markets. In fact, we are likely to witness an oversupply in oil markets in the coming year that could temporarily push prices lower, possibly to $50 per barrel, before heading back to the $70 range as global growth picks up speed. The effects on Canada are mixed, likely subtracting a quarter of a percent from Canadian GDP growth, but there will be a nice boost for Canadian and U.S. consumers as less money spent on gas will leave more available to spend elsewhere.

Read 5 Minutes for Business.

For more information, please contact Hendrik Brakel.

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