The Sweet Spot Price: When Do Oil Prices No Longer Benefit the Canadian Economy

While Canada typically benefits from high oil prices, Scotiabank research identifies a US$120–US$130 threshold beyond which those benefits become statistically insignificant due to declining global demand.

Key Takeaways

• 1.Higher oil prices remain a net positive for Canada at current levels, but the macroeconomic payoff diminishes as prices rise toward extreme levels.
• 2.A 'sweet spot' for oil prices exists; once prices exceed the US$120–US$130 range (in 2026 dollars), they no longer provide a statistically significant boost to Canadian activity.
• 3.Supply-led oil shocks, like the current one driven by the Iran war, deliver a smaller boost to domestic activity compared to demand-driven shocks because they are associated with weaker global demand.

Table of Contents

• EXECUTIVE SUMMARY
• COULD OIL PRICES BE NEUTRAL FOR CANADA?
• OUR TWO-STEP EMPIRICAL STRATEGY
• IS THERE A "SWEET SPOT" PRICE FOR OIL?
• BOTTOM LINE

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