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This paper examines the risks of future Canadian oil and gas development, using an analysis based on the fundamentals of supply and demand in oil and gas markets. It also considers how this development squares with Canada’s climate commitments and a growing momentum towards a transition away from fossil fuels.

This report comes amid the COVID-19 outbreak, and aims to inform energy planning and economic recovery, especially in Canada. The authors find that it could be a mistake to hitch Canada’s recovery and future economic prospects too tightly to fossil fuel production, even in the western provinces where oil and gas remain top of mind. Canada’s oil and gas industry is particularly vulnerable to drops in global oil demand and price — a trend that may persist well into the future — and the country’s oil and gas producers may face increasing challenges in competing with other, lower-cost producers.

This paper also considers what these market outlooks mean for Canada’s long-term, “net zero” greenhouse gas emissions targets, which will require the country to untangle itself from dependence on oil and gas production.