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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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Canadian Oil Industry On Edge Ahead Of Election Outcome

The Conservatives in Canada could see a decade of rule come to an end this week, and although there is a lot of uncertainty about what that means for the oil and gas sector, it is clear that a new government would not be as friendly.

Canadians headed to the polls on October 19 to choose the next Prime Minister. Three parties are neck and neck, with the Liberals expected to squeeze out a slight advantage. Without a clear majority, Liberal Party leader Justin Trudeau will need to form a coalition. Related: Russia Could Gain A Stranglehold On This Market

Canadian Prime Minister Stephen Harper has been an ally of the oil and gas industry in Canada, representing a district in oil-rich Alberta. He has strongly supported drilling and the construction of pipelines, including heavily lobbying the U.S. government to approve Keystone XL.

However, in addition to his long tenure as Prime Minister, which has likely contributed to some fatigue among the electorate, Harper has also been undermined by the collapse in oil prices. With crude trading for less than half of what it was compared to the boom years, the Canadian economy fell into recession earlier this year. Related: Oil Market Showdown: Can Russia Outlast The Saudis?

Alberta, home of the vast oil sands, has been especially battered by the plunge in commodity prices. Major oil sands producers have dramatically scaled back investment and spending, and the shrinking flow of capital has reverberated throughout the economy. Canada’s manufacturing sector has declined in recent years, leaving the country with fewer options to pick up the slack.

All of this adds up to an electorate seeking change. And political change could rub salt in the wound for the oil and gas industry. A potential Liberal government, especially if they formed a coalition with the more leftist New Democrat Party, would, by all accounts, be less accommodating to resource extraction companies than the current government. Trudeau has already come out against the controversial Northern Gateway Pipeline that would allow oil sands producers in Alberta to export their product by reaching the Pacific Coast. Related: Downturn Hits Bottom But High Oil Storage Could Delay Recovery

At the same time, Trudeau has promised to run deficits in order to finance major infrastructure spending, which could cushion the blow to the economy from declines in spending by private industry.

But after ten years of a friendly government, oil and gas companies are about to enter a new political era, adding yet more uncertainty to an already tough period.

By Charles Kennedy of Oilprice.com

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