Welcome back to Adjournment Proceedings, our weekly long read series. We publish a new edition every Friday. In this week’s edition, we look at an oil and gas industry caught between a war premium and a push towards net-zero, and how that shapes possibilities for long term demand.

Missed a week? Take a look through our archives here. 

Every day, oil and gas companies make or divert hundreds of millions of dollars based on projections for long-term demand for their products. 

Governments also consider those different scenarios when developing their policies and priorities.

This is a sector with boom and bust in its DNA, yet even a history of navigating uncertainty isn’t preventing recent events from worsening the fracture in consensus on what comes next. 

The year kicked off with global banks predicting the price of oil would average about $60 a barrel in 2026, with basic supply and demand realities weakening global prices. 

But the war on Iran is a wild card that has sent prices soaring well beyond that, and the U.S. is now contemplating worst case scenarios, including what $200-a-barrel would mean for the global economy. 

Just a month ago, as Iran-U.S. tensions flared, J.P. Morgan predicted there would be some geopolitically induced oil price rallies, but that those would eventually fade.

The bank said markets would expect a return to pre-war levels by mid-2027 should the war wrap up quickly and attacks on energy infrastructure be avoided.

But in the meantime, surging prices fuel political demands for new production, as seen during the global oil and gas conference in Houston, Texas this week. 

The federal Minister of Energy, Tim Hodgson, spent the week there pitching opportunities for growth and investment in Canada’s oil and gas sector.

Alberta Premier Danielle Smith also used the moment to double down on her province’s push for more and new bitumen pipeline capacity. 

But ultimately, companies are the ones building major projects, and no amount of regulatory streamlining and political support can outweigh the need for strong long-term economics. 

And many companies are waiting for clearer tea leaves before pulling the trigger and making final investment decisions in projects like Bay du Nord, Ksi Lisims or LNG Canada Phase 2. 

Current prices don’t reflect future ones

Supply shocks like the one linked to the Iran war could help mitigate some of the investment risk if it pushes countries into long-term supply contracts that guarantee some level of revenues – especially for natural gas projects that depend on such arrangements for financing. 

But what ultimately drives long-term demand is population, economic and technological growth. 

“There’s a lot of speculation right now and no real hard numbers,” says Werner Antweiler, energy economist at the University of British Columbia. 

“The current situation is not indicative of future prices, and ultimately you only want to invest if the price is right,” he tells iPolitics.

Antweiler argues that while conflict in the Middle East could drive Asian markets to diversify their energy imports, major producers like the U.S., Russia and Australia could be better positioned to capitalize on the opportunities.

“Maybe diversification will provide advantages, but then Canada is not alone in this,” he said. “I really sense that this uncertainty has not necessarily pivoted in Canada’s favour.” 

In terms of crude, Antweiler says his research shows most companies are assuming a conservative long-term price hovering around $60 per barrel. 

“If you don’t break even at that price, you’re going to be very much hesitant to go forward.” 

Shareholder profits over new developments

The Canadian oil patch, in particular, has been criticized for prioritizing returns to shareholders instead of investments in major projects, with companies like Suncor planning to return 100 per cent of its excess funds to shareholders this year. 

Following conventional financial wisdom, companies are prioritizing profitability over production volume and aggressive growth.

This is a trend worldwide, as noted in a 2026 insight from Deloitte saying the oil and gas sector should rely on its strengths to keep investor trust.

“Capital discipline and shareholder returns remain core to the industry’s resilience,” reads the note, while adding that “policy-driven growth may prompt some companies to take more risks while reinforcing financial restraint” for others.

Some have taken the lack of prioritization of shareholder returns over investments in new projects as a sign that the industry was gearing up for a future with lower demand for crude. 

Speaking at a recent Canada 2020 event, the president of the Oil Sands Alliance, Kendall Dilling, insinuated those decisions were rather tied to federal policy.

“I’ll just speak transparently,” he said. “We get criticized sometimes in industry, because right now we flow a lot of our cash back to shareholders.” 

“We would love to be reinvesting that more in growth. But for the last decade, there just hasn’t been a way to do that.”

Dilling specifically pointed to “policies that effectively stifled any aspirations of growth” but believes planets have aligned and this is Canada’s moment.

Policy at the core of different scenarios

Government policies are central to the scenario modelling industry uses to guide decision-making. 

These models attempt to predict when demand for oil could peak. 

The International Energy Agency says demand for hydrocarbons is here to stay, and could remain stable in years to come, except in net-zero scenarios. 

This mirrors the position of companies like Cenovus. 

“Oil demand scenarios vary… however all credible reports show oil and gas maintaining a key position in the global energy mix well into the future,” reads a statement on the company’s website.

Similarly, Canada’s energy regulator (CER) predicts consumption of oil and gas will remain relatively unchanged over the decades to come, but its modelling for production is murky because of uncertainty around global prices. 

Its recent report suggests Canada’s oil production could jump by 18 per cent by 2050, or contract by 12 per cent, depending on the scenario. 

The outlook for natural gas products is much brighter, reflecting the federal government’s assessment the sector holds a lot of economic potential.

READ MORE: Energy minister dismisses concerns about long-term LNG prices

The CER’s current measures scenario assumes moderate growth in economic and energy drivers, with two other scenarios modelling what would happen with higher or lower growth. 

The fourth scenario, net-zero, assumes the rest of the world also increases the pace of climate action. 

There are no probabilities or policy prescriptions attached to these scenarios. 

It is notable, however, that recent modelling by the International Energy Agency has incorporated a more conservative forecast for environmental regulations, reflecting increasing uncertainty regarding countries’ resolve to meet climate targets.

Modeling by the agency suggests that changes in US policy could mean the number of EVs on U.S. roads may be 60 per cent lower than previously anticipated.