Ontario benefits as oil prices plunge
The steep drop in crude prices that continued Friday hurts oil-rich provinces like Alberta and Newfoundland, but Ontario comes out a winner thanks to increased demand for auto production and overall exports.
“For us, it’s very good news, even if it’s not so much for the rest of the country,” said Mike Moffatt, assistant professor at Western University’s Ivey School of Business.
“We are a net importer of oil. Obviously, we use oil in our day-to-day lives, but it’s a big input for our manufacturers as well,” he said.
“It’s always a good thing when the stuff you buy becomes relatively cheaper,” Moffatt said. “And lower oil prices drive down the Canadian dollar, which helps our exporters.”
According to the 2014 Ontario budget, every $10 drop in the price of a barrel of crude oil results in a 0.1 to 0.3 percentage point in economic growth for the provincial economy. “If you put it in dollar figures, that’s between $1 billion and $2 billion for Ontario’s economy,” Moffatt said.
The impact is expected to be even greater here, given that the price of oil has plunged since OPEC decided Thursday to leave its production targets of 30 million barrels a day unchanged despite an oversupply and falling prices.
Western Canada Select, the Canadian benchmark, has lost more than a third of its value since June, in step with declines for West Texas Intermediate and the international gauge Brent. WCS spot prices traded Friday at $48.40 a barrel, the lowest in the world. (Source: Toronto Star)