Post Election Take: Energy Sector

Canadians took to the polls on April 28, 2025, voting to elect a Liberal minority government, with the Liberal Party of Canada (LPC) elected or leading in 168 seats, the Conservative Party of Canada (CPC) elected or leading in 144 seats, the Bloc Québécois (Bloc) elected or leading in 23 seats, the New Democratic Party of Canada (NDP) elected or leading in seven seats, and the Green Party of Canada (Green) winning one seats.

The Liberals will hold a large minority, requiring support from just four additional seats to pass policy. While minority governments offer less certainty than majority governments they also generally have lower rates of change, and we believe Canadian energy equities will likely continue to trade primarily on macro economic fundamentals. Highlights:

Focus Shifts to USMCA
As of the time of publication the electoral landscape points to a minority Liberal parliament. The focus for Canadian energy equities will quickly shift to potential USMCA renegotiation scenarios, scheduled to open by July 1, 2026. The current agreement ensures that Canadian oil and gas exports (e.g., crude oil, natural gas) to the U.S. and Mexico receive non-discriminatory treatment, with zero tariffs applied to Canadian originating goods; the adherence to the agreement has largely protected Canadian oil and gas exports from the impact of tariffs on wellhead price realizations.

If the Canadian government is able to preserve the key principles of the current agreement, Canadian energy equities are likely to maintain a higher correlation to global hydrocarbon prices and egress related differentials, despite the theoretical increase in the political risk premium associated with higher federal energy policy uncertainty.

LPC Minority Viewed as Unfavourable to Energy Sector Sentiment
For the first time here, we publish the results of sentiment related questions regarding different election outcomes from ATB’s Spring 2025 Energy Sector Survey in this report. Across all respondent groups (E&P, energy services, and buyside), the results show that a CPC government was widely viewed as favourable to the willingness to invest in Canadian energy operations and equities, and a LPC government is widely viewed as negative to energy investment.

That said, the results also showed that institutional investors were more moderate in their view of the federal election’s impact on their willingness to invest in Canadian energy equities than energy services and E&Ps were regarding Canadian operations. Ultimately, a LPC minority was viewed as widely unfavourable to Canadian energy investment trends.

Historical Trends Show Energy Stock Performance Driven More by Commodity Prices Than the Party in Power in Ottawa
Our analysis indicates that the TSX Capped Energy Index performance relative to the broader TSX index has been dictated more by the direction of oil and gas price movement rather than the party in power. This relationship to a global commodity that depends on global supply/demand trends, isolates the energy sector equity performance somewhat from the local Canadian political situation.

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