Lower oil prices will hold back economy

The slump in the crude oil prices to around US$60 per barrel is a serious threat to domestic business investment and future oil production. With the long-run breakeven cost of most oil sands projects in the US$60 to US$80 range, we fear that the longer oil prices stay this low, the more new oil projects will be put on hold. If sustained, the collapse in oil prices will constrain economic growth and it is hard to see the Bank of Canada giving any serious consideration to raising interest rates in that environment.