Senator Doug Black asks Bank of Canada Governor Stephen Poloz about falling price of oil

OTTAWA – Yesterday at a meeting of the Senate Committee on Banking, Trade and Commerce, Alberta elected Senator Doug Black asked Bank of Canada Governor Stephen Poloz about the potential impacts of the falling price of oil on Canada’s economy.

The question to the Governor was (check against delivery):

Senator Black: Over the past few years the Canadian economy has been bolstered by the strong dollar and the high price per barrel of oil. The global price of oil is currently hovering in the mid $80s, or below, which is a drop of more than 25 percent this year. At what price per barrel would you start to worry about the overall effect on the Canadian economy?

After providing a brief analysis on economic factors contributing to the new price level for oil, Mr. Poloz predicted that the net effect on the Canadian economy would be to take a quarter percentage point off of Canada’s 2015 GDP growth.

An excerpt from the Governor’s answer (check against delivery):

Governor Poloz: …At this state, we would estimate that net effect on Canada, would be to perhaps take a quarter point off of Canada’s 2015 GDP growth. This is sufficient for me to think about it and to be concerned about it.
When we’re predicting growth, it’s somewhere in the two to two and a half percent range. We need more than two per cent growth to help to close our output gap and create those jobs that I talked about in my opening remarks. A quarter point matters quite a lot in that context…

“The insights of the Governor are important for policymakers and business people to understand the potential impacts of this new price context for oil,” said Senator Black. “I appreciate the Governor’s comments and we should diligently monitor these trends as they are important both for the economy in Canada and Alberta.”