A New Energy: Steering Canada's next oil and gas boom
The desk anticipates that Canada is on the cusp of an oil and gas boom, driven by proposed investments totaling $200 billion over the next three years. Per the full note from RBC Royal Bank, this potential growth hinges on resolving key challenges, including investor certainty, labor availability, and market access. Should these issues be addressed, Canada could significantly strengthen its position in the global energy market, especially as new energy initiatives unfold. As the consensus currently anticipates a range of CAD strength against the USD, this economic growth could potentially support a bullish CAD outlook.
What the desk is arguing
Canada stands on the brink of a new energy boom that could redefine its economic landscape. The RBC report emphasizes a $200 billion investment opportunity in oil and gas over the next three years, which hinges on addressing key uncertainties surrounding project execution and labor availability.
The report outlines five critical issues that Canada must navigate, including securing investor confidence with stable fiscal terms and developing a cohesive strategy for market access beyond traditional pipelines. These developments could revitalize the CAD as demand for energy commodities increases both domestically and abroad.
Where it sits in our coverage
Our consensus target for CAD/USD is 1.075, with a range spanning from 1.04 to 1.12. Notable targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This viewpoint aligns well within the range, sitting towards the upper bound suggested by the bullish outlook on energy investments. RBC's thesis could reinforce CAD as a stronger contender against the USD given the positive sentiments expressed in their research.
How other firms see it
Firms like jpmorgan maintain an aligned view with this potential CAD appreciation, supported by the ongoing narrative of increasing energy investments. However, bofa adopts a more cautious stance, holding a lower target that reflects skepticism regarding the realization of these projects.
As energy policies evolve, related currency pairs such as AUD/USD and NZD/USD may also reflect similar investment trends as commodity-driven currencies tend to move in tandem.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Canada could experience a $200 billion oil and gas investment boom over the next three years.
- 02Key challenges include investor certainty, labor supply, and effective project execution.
- 03Positive energy developments may buoy the CAD against the USD.
- 04Current consensus targets reflect a moderately bullish sentiment on the CAD.
Market implications
Traders should monitor CAD/USD levels around 1.075 as potential bullish factors from energy investments take shape. A break above 1.10 could signal increasing strength for the CAD, particularly if labor and investment challenges are mitigated in the coming months.
Risks to this view
Failure to secure investor confidence or delays in project approvals could derail the anticipated boom, leading to a stronger USD as market sentiment shifts. Monitoring labor market developments and government policy shifts will be essential to gauge the sustainability of this bullish outlook.
RBC Royal Bank View Online Dear Brian Canada stands at a pivotal moment, with the potential to embark on a significant oil and gas boom. Our latest report, "A New Energy: Steering Canada's Next Oil and Gas Boom," reveals that the next three years could see the launch of several major energy projects, presenting a $200-billion building opportunity and long-term economic benefits for the nation. But first Canada needs to navigate five issues before it can reap its benefits: 1.
Investor Certainty: Fiscal terms need permanence 2. Labour Availability: Certified trades, headcount and housing 3. Fabrication and Procurement: A national plan for a national build 4.
New Markets: Finding a second customer needs a fulsome strategy beyond building pipelines 5. Project Execution: From approvals to a clearing house Read the report We encourage you to share this message with your network and ask them to join our mailing list to get in-depth research on the big ideas that can drive Canada’s economic prosperity. - Please do not respond to this email as this inbox is not monitored. You received this email because you subscribed to RBC Thought Leadership.
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