Chart: Oil Bust Drags Canadian Dollar to Historic Lows
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Oil Bust Drags Canadian Dollar to Historic Lows [Chart]



Oil Bust Drags Canadian Dollar to Historic Lows [Chart]

Oil Bust Drags Canadian Dollar to Historic Lows [Chart]

“Lower for longer” means loonie could hit US$0.59 by end of 2016

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

The continued pressure on the oil sector is wreaking havoc on the Canadian dollar.

This morning, the Loonie continued its freefall by losing another -1.1% , bringing the current exchange-rate to US$0.69. It’s the first time the Canadian dollar has traded below US$0.70 in 13 years, but the damage could be even worse.

David Doyle, a top forecaster for Macquarie Capital Markets, lowered his projection for 2016 to have the loonie finish at US$0.59. This would eclipse the all-time low for Canadian dollar, which was set on Jan 21, 2002, at just below US$0.62.

“Lower for Longer”

In this week’s chart, we show the well-established relationship between the Canadian dollar and the price of oil. Both prices have moved in tandem since 2000, and they’ve also both nosedived since the collapse of oil prices in mid-2014.

In fact, it may not surprise you to know that there are traders out there who use the Canadian dollar as a proxy for oil prices. If they think oil is going lower, they’ll sell Canadian dollars if it offers them the right kind of market exposure.

Oil is now trading at its lowest price since 2004, and many analysts believe that the pressure on prices will continue. Pundits are talking $20 oil and even $10 oil. While it’s very possible neither of those thresholds are reached, what is known is that low oil prices mean the Canadian dollar will continue to be under duress.

However, what are the specifics of this relationship? Canada is surely an economy that has a heavier reliance on raw materials, but it is no Saudi Arabia, right?

The Relationship Between Oil and the Canadian Dollar

The key to this relationship is based on two major principles.

Firstly, while Canada is a major producer of oil, it also exports the majority of this production to the United States. In 2014, Canada produced 4.4 million barrels of oil and equivalents per day, and it exported 3.4 million of this to the United States. Billions of US dollars are changing hands between American buyers and Canadian producers.

Oil prices are mostly traded in US dollars, which means that as the price drops, there are less US dollars being paid out to Canadian producers. This means producers are exchanging fewer US dollars for the Canadian dollars they need to pay wages and production costs. This drops the amount of “demand” for Canadian dollars, which affects the price of the currency.

Lastly, because oil is denominated in US dollars, the above effect gets further amplified by any other changes to the USD/CAD relationship. For example, while Canada has been loosening its monetary policy, the United States has been trying to do the opposite. This, along with other factors, has led to strength in the US dollar.

A strong dollar means cheaper oil. Cheaper oil means lower demand for Canadian dollars.

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Visualizing the Scale of Global Fossil Fuel Production

How much oil, coal, and natural gas do we extract each year? See the scale of annual fossil fuel production in perspective.



The Scale of Global Fossil Fuel Production

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

Fossil fuels have been our predominant source of energy for over a century, and the world still extracts and consumes a colossal amount of coal, oil, and gas every year.

This infographic visualizes the volume of global fossil fuel production in 2021 using data from BP’s Statistical Review of World Energy.

The Facts on Fossil Fuels

In 2021, the world produced around 8 billion tonnes of coal, 4 billion tonnes of oil, and over 4 trillion cubic meters of natural gas.

Most of the coal is used to generate electricity for our homes and offices and has a key role in steel production. Similarly, natural gas is a large source of electricity and heat for industries and buildings. Oil is primarily used by the transportation sector, in addition to petrochemical manufacturing, heating, and other end uses.

Here’s a full breakdown of coal, oil, and gas production by country in 2021.

Coal Production

If all the coal produced in 2021 were arranged in a cube, it would measure 2,141 meters (2.1km) on each side—more than 2.5 times the height of the world’s tallest building.

China produced 50% or more than four billion tonnes of the world’s coal in 2021. It’s also the largest consumer of coal, accounting for 54% of coal consumption in 2021.

Rank Country2021 Coal Production
(million tonnes)
% of Total
#1🇨🇳 China 4,126.050%
#2🇮🇳 India 811.310%
#3🇮🇩 Indonesia 614.08%
#4🇺🇸 U.S. 524.46%
#5🇦🇺 Australia 478.66%
#6🇷🇺 Russia 433.75%
#7🇿🇦 South Africa 234.53%
#8🇩🇪 Germany 126.02%
#9🇰🇿 Kazakhstan 115.71%
#10🇵🇱 Poland 107.61%
🌍 Other 600.97%

India is both the second largest producer and consumer of coal. Meanwhile, Indonesia is the world’s largest coal exporter, followed by Australia.

In the West, U.S. coal production was down 47% as compared to 2011 levels, and the descent is likely to continue with the clean energy transition.

Oil Production

In 2021, the United States, Russia, and Saudi Arabia were the three largest crude oil producers, respectively.

Rank Country2021 Oil Production
(million tonnes)
% of Total
#1🇺🇸 U.S. 711.117%
#2🇷🇺 Russia 536.413%
#3🇸🇦 Saudi Arabia 515.012%
#4🇨🇦 Canada 267.16%
#5🇮🇶 Iraq 200.85%
#6🇨🇳 China 198.95%
#7🇮🇷 Iran 167.74%
#8🇦🇪 UAE 164.44%
#9 🇧🇷 Brazil156.84%
#10🇰🇼 Kuwait 131.13%
🌍 Other 1172.028%

OPEC countries, including Saudi Arabia, made up the largest share of production at 35% or 1.5 billion tonnes of oil.

U.S. oil production has seen significant growth since 2010. In 2021, the U.S. extracted 711 million tonnes of oil, more than double the 333 million tonnes produced in 2010.

Natural Gas Production

The world produced 4,036 billion cubic meters of natural gas in 2021. The above graphic converts that into an equivalent of seven billion cubic meters of liquefied natural gas (LNG) to visualize it on the same scale as oil and gas.

Here are the top 10 producers of natural gas in 2021:

Rank Country2021 Natural Gas Production
(billion m3)
% of Total
#1🇺🇸 U.S. 934.223%
#2🇷🇺 Russia 701.717%
#3🇮🇷 Iran 256.76%
#4🇨🇳 China 209.25%
#5🇶🇦 Qatar 177.04%
#6🇨🇦 Canada 172.34%
#7🇦🇺 Australia 147.24%
#8🇸🇦 Saudi Arabia 117.33%
#9🇳🇴 Norway 114.33%
#10🇩🇿 Algeria 100.82%
🌍 Other 1106.327%

The U.S. was the largest producer, with Texas and Pennsylvania accounting for 47% of its gas production. The U.S. electric power and industrial sectors account for around one-third of domestic natural gas consumption.

Russia, the next-largest producer, was the biggest exporter of gas in 2021. It exported an estimated 210 billion cubic meters of natural gas via pipelines to Europe and China. Around 80% of Russian natural gas comes from operations in the Arctic region.

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