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Mark Carney’s triumphant return to the Canadian Parliament after the Liberal Party won the national elections is expected to have a significant impact across key sectors of the economy. Energy stocks are seen as most likely to benefit from his win. In his victory speech, Carney pledged to “build Canada into an energy superpower in both clean and conventional energy.”
This comes as renewable energy stocks have been struggling, thanks largely to US President Donald Trump’s opposition to the technologies and his support of fossil fuel. At the same time, Trump’s tariffs have sent oil prices lower, sending many traditional energy stocks tumbling.
Carney’s win is “a positive for both stocks and the renewables sector in Canada, given Carney’s outspokenness on climate change and embracing the transition to net-zero emissions,” says Morningstar equity analyst Brett Castelli.
What the Election Could Mean for Energy Stocks
While investors with stakes in Canada’s energy sector have been closely awaiting the outcome of the election, the focus will now shift to whether Carney’s Liberal government can make good on its campaign promises.
The new government’s push for clean energy through increased subsidies and tighter emission caps is positive for renewable stocks like Brookfield Renewable Partners BEP.UN, Northland Power NPI, and Algonquin Power & Utilities AQN.
Castelli says that given their global exposure and diversified assets, these companies are less susceptible to trade war turmoil. “We like Brookfield’s diversified portfolio of renewable energy assets across geographies and countries. It should be relatively insulated from President Trump’s tariffs,” he says. The stock is currently trading at an attractive valuation, placing it in 4-star territory, and offers more than 6% dividend yield, which Castelli expects to grow at 5% per year.
Northland Power, another leading clean energy company, has successfully completed two offshore wind farms, one in the Baltic and another in Taiwan. This “should provide a meaningful boost to cash flow in the coming years [and keep it] well-insulated from Trump’s tariffs as well given very limited US exposure,” Castelli says.
This does mean that the outlook for Canada’s conventional oil industry appears more uncertain. Conservative leader Pierre Poilievre sought expansion of oil production and looser regulatory frameworks. Such measures would create a tailwind for traditional energy producers like TC Energy TRP, Enbridge ENB, and Suncor Energy SU. Where this leaves them under the Liberal government remains to be seen.
“The election of the Carney-led Liberal government is likely to be a net negative for Canada’s oil and gas firms, notwithstanding Canada’s position as one of the world’s top five holders of oil and gas reserves,” says Ian Lee, associate professor at Carleton University’s Sprott School of Business in Ottawa. Although the Carney government has vowed to diversify trade to Asia and Europe, he says: “Both regions have made it clear that they want Canada’s resources, not our manufactured goods such as pickup trucks and large SUVs.” That potential demand will remain untapped “if the Carney government continues to restrict development of Canada’s resources as Carney promised.”
Trump Tariffs Deepen Oil Rout Amid Demand Jitters
Much of Canada’s energy sector outlook will hinge on how the Liberal government navigates Trump’s aggressive trade policies, which includes a 10% levy on Canadian energy exports. Crude prices, which have been falling for much of this year, fell particularly sharply in direct response to Trump’s trade war.
While reciprocal tariffs have been suspended for most countries for a 90-day period, uncertainty continues to batter energy markets, as concerns mount over weaker global economic growth and shrinking energy demand. As countries attempt to negotiate economy-upending tariffs before the suspension lapses, oil prices remain depressed, even if equity markets appear to have somewhat stabilized.
Weak Global Growth to Keep Oil Prices Depressed
Lower oil prices and weaker demand outlook create a drag for Canadian energy companies, particularly those heavily invested in oil production and its transportation across the border to the US, their biggest market.
In its April 2025 Oil Market Report, the International Energy Agency downgraded its outlook for global oil demand to 730 kb/d from the previous month’s estimate, as escalating trade tensions have dented the economic outlook. The agency forecasts that growth will slide further in 2026 to 690 kb/d. A faltering US economy will continue to keep oil demand, and consequently prices, depressed. This will inevitably ripple through to demand for Canadian oil.
China’s Shift from US Creates Silver Lining for Canadian Energy
The tension between the United States and China, which retaliated to Trump’s tariffs by slapping similar-sized duties on US goods, has deepened the trade war between the world’s two biggest economies.
China is the world’s leading crude importer, and its decision to diversify its energy imports away from the US creates a silver lining for the Canadian energy industry. Canada has emerged as a key beneficiary of this move, as the Asian economic powerhouse recently slashed US oil imports by as much as 90%, turning to Canada for its energy needs.
Chinese refiners are now importing record amounts of Canadian crude. A Western Canadian pipeline saw Chinese imports jump to 7.3 million barrels in March from a modest half a million barrels in December 2024. Meanwhile, Chinese imports of US crude have fallen dramatically to just under 3 million barrels a month from a peak of nearly 29 million in June, according to data from Vortexa cited by Bloomberg.
Another positive is the growing recognition among Canadian companies of the need to expand into new markets, which Prime Minister Carney has been quite vocal about. “The biggest impact is that it has reopened the discussion in Canada about the need to diversify energy export markets,” says Randy Ollenberger, head of oil and gas research at BMO Capital Markets.
However, while China has increased purchases of Canadian oil, Ollenberger points out that the overall volume may not be significant, and that Canada needs to improve infrastructure to boost its LNG offerings. The Chinese “were importing relatively low volumes of US crude oil (around 225,000 bpd over the last 12 months),” he says. “Canada does not yet have LNG export facilities that are operational, but China could purchase some spot cargos once the facilities are fully operational in 2026.”
Given Carney’s strong advocacy for clean energy, Canada could also see a significant pivot toward renewable energy investments.
Strong Cashflow Bulwark for Canadian Companies
Eric Nuttall, senior portfolio manager at Ninepoint Partners, says Canadian companies are on solid ground and can survive a global energy market rout. Since companies’ annual cash flow is greater than their total debt, they can keep their debt manageable and maintain their dividend offerings even if oil prices stay around USD 60 per barrel. However, if global macroeconomic turbulence persists, Canadian energy companies, like their peers elsewhere, could face cash flow issues.
Oil price weakness has had a “limited impact so far,” says BMO’s Ollenberger. A combination of strong balance sheet, low operating costs, and a low-cost structure positions Canadian oil companies well to ride out the current economic turbulence.
Since the current situation isn’t nearly as bad as the covid-19 pandemic or the 2008 financial crisis, analysts say Canadian energy companies might wait until the headwinds blows over.
Either way, Nuttall asserts that Canada can never again be in a position to be threatened by the US. “Our ‘trump card’ is the unleashing of our enormous resource potential with the buildout of new oil pipelines,” he says. However, with the Liberal government securing another majority, the future of new pipeline projects (and the broader trajectory of Canada’s oil industry) remains uncertain.
Federal Energy Policies Could Reshape the Sector’s Outlook
Besides the trade war, there are other near-term challenges stemming from domestic economic and political uncertainty. “The biggest challenges are the crude oil prices and Canadian federal government policies,” says Ollenberger. “The proposed emissions cap [imposed by the Liberal government, which will remain in power] could significantly impact the sector, depending on the specific form that it takes.”
The Liberals and Conservatives have sharply divergent energy policies. Having managed to stay in power, the Liberal Party can execute its plan to expand clean energy through policy support for supply chains, infrastructure, and new projects that help lower reliance on the US.
The administration aims to work “with provinces and territories to build out an East-West electricity grid in a historic nation-building project to secure Canadians’ access to affordable, reliable, clean, Canadian electricity,” says Lee.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.