The recent resurgence in oil prices should be good news for Canada but, since it is partly due to a temporary spike in geopolitical tensions, we expect prices to fall back later this year. Domestic crude oil prices have enjoyed a particularly strong run, in part because of the rapid run down in oil stocks at the Cushing hub, which leaves more room for oil coming from western Canada. Even with the recent pick-up, however, oil prices are possibly still not high enough to encourage new investment in the oil sands, which has higher marginal costs of production than US shale.
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