Published on: 2026-03-11
While oil prices went sky high this week, the Canadian dollar barely benefited from the move. Actually the petroloonie has gone for years with the currency hitting its 22-year low in February 2025.
BMO chief economist Doug Porter noted the correlation breakdown in a research report in 2024, saying that a $10 increase in WTI crude price would push the value of the loonie higher by three cents in the past.
Two reasons were outlined. The US has turned itself into a major oil producer and exporter thanks to shale boom; Canadian producers were unable to ship their oil to global markets given infrastructure limits.
Canada's oil exports are experiencing a strong upward trend, reaching record highs in 2024 and 2025 due to increased production and the completion of the Trans Mountain Expansion.
That came as the global oil market share has been shifting towards non-OPEC+ producers (led by the US, Canada, Brazil, and Guyana). Notably, the WCS-WTI price spread has narrowed markedly this month.
Enhanced market access helps improve netbacks for Canada, particularly in the face of Venezuela's production ramp-up. The South American country sees exports from its main export hub hit a 7-year high.
Alberta Premier Danielle Smith says the war in Iran underscores the need for a new pipeline connecting her province's oil reserves to the West Coast. The problem is lack of private sector investment.
Low gear
Canada's economy contracted in Q4, coming in below expectations, as manufacturers heavily dipped into their inventories to meet demand instead of producing fresh goods.
The readings swung back and forth between gains and losses every quarter last year, due to higher US tariffs. Motor vehicles and parts, the second largest export, was particularly jeopardized.
CUSMA protection applies only to items that strictly meet the agreement's rules of origin A number of categories, such as knock-down kits, do not qualify even if produced in Canada.
Trade deficit last year widened to $31.3 billion, marking the largest annual shortfall on record outside of the COVID-19 pandemic despite an upsurge in precious metal exports.
It is more difficult for the car industry to diversify away from the US than the energy industry. Asia and Europe have long‑established suppliers, so Canada would struggle to penetrate them at scale.
Rafael Gomez, an industrial relations expert at the University of Toronto, told AFP that the Carney government needs to be prepared for a steady loss of auto assembly jobs over the coming years.
Brookings analysis concluded the fork in the road is thus a choice among imperfect strategies, not a clean choice between idealized independence and reluctant dependence.
Glimmering substitute
Gold production from Canadian mines has steadily increased over the past decade. The metal is a historical pillar of the economic framework and now a crucial driver of future prosperity.
Gold has become an increasingly influential part of export picture, accounting for close to 8% as of September, according to The Globe and Mail. That could partly offset headwinds from the post-oil era.
But the current gold export boom is almost entirely a function of the price increase rather than the quantity of precious metals being shipped, which is roughly the same as a decade ago.
The metal's prices broke above $5,000 in 2026, driven by intense central bank purchasing, severe geopolitical instability (specifically in the Middle East and Russia-Ukraine), and, significantly, high sovereign debt levels.
The potential is remarkable as Canada ranks among the top five countries globally for gold reserves. In late 2025 and early 2026, surges in unwrought gold exports were crucial in propping up total export figures.
Gold and oil prices do not move in tandem for sure. Whereas bullion is on record-breaking streaks, oil prices remained far from their historical peaks above $140 per barrel despite the recent spike. That means the loonie will definitely less impacted by global energy markets in the foreseeable future. The car industry's murky outlook also bolsters the case for an end of the petroloonie.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
