Decoding the uncertainty in Canada’s oil patch—and what it means for Carney’s investment ambitions

Several headwinds are shaping the outlook for Canada’s oil and gas sector in 2026: the U.S. is moving to revive Venezuelan oil, a close substitute for Canada’s heavy crude; and prices have tumbled from the $70s to the high $50s, with concerns of oversupply suggesting they could stay there for some time. On top of that, the federal government is set to once again raise the federal carbon pricing benchmark.  Despite these pressures, the most recent Business Outlook Survey reports that oil companies are not backing off investing in a significant way. Normally, uncertain economic conditions lead businesses to scale back spending, yet planned business investment for 2026 is only 1.7 percent lower than last year, based on recent announcements. That said, the impacts of this uncertain environment will not be equally felt. Every oilfield is different, but on average, conventional producers require a break-even price of around $57 USD per barrel, while oil sands operators are estimated to be profitable at prices above $50. The former are likely to feel the impact sooner than the latter. The good news is that, in the recent past, it hasn’t taken a lot of new investment for output and industry revenues to grow. In fact, last year the sector cranked out record crude production, using roughly 60 percent of the capital and 80 percent of the workforce it employed before the 2014 oil price collapse. In other words, it added over one million barrels of production per day using less capital and fewer people. That reflects an industry that’s become leaner and more productive over time—a feat that, unfortunately, not many other industries can lay claim to. However, planned investment shows little growth, and the sector’s efficiency gains have limits. For production to keep growing, the industry has reached a point where additional investment in workers and infrastructure is likely needed, including greater export capacity and pipeline infrastructure. Market conditions alone don’t fully explain these modest capital plans. A separate business survey ranks the oil and gas sector’s outlook among the bleakest in Canada, and ATB’s Fall 2025 Energy Sector Survey sheds light on why: for the seventh consecutive survey, respondents identified government policy as the industry’s top risk. While initiatives such as the Major Projects Office are viewed positively, respondents remain hesitant to invest absent more pro-growth policy reform. That’s not just concerning for the energy sector, it also doesn’t bode well for Prime Minister Carney’s investment ambitions. Reaching his goal of $1 trillion in new capital investment over the next five years, including $500 billion in net new private investment, will be a tall order if Canada’s energy sector is on the sidelines. A version of this post was originally published by the Business Council of Alberta.