Just as $100-a-barrel oil super-charged Canada's energy-rich regions, suddenly cheaper crude is shifting some economic inertia back to the manufacturing heartland in Ontario and Quebec.
The result is that the overall economic hit to the country could wind up being relatively muted, economists said as the price of crude extended its months-long slide on Tuesday to about $77 (U.S.) a barrel.
"The impact, on net, tends to be relatively small," explained Paul Ferley, assistant chief economist at Royal Bank of Canada.
Bank of Canada Governor Stephen Poloz estimates the lower price of oil will knock a quarter of a percentage-point of Canadian GDP next year.
Every $10 drop in the price of crude subtracts about 0.1 per cent of GDP from an economy that's growing at less than 2.5 per cent a year, estimated Bank of Montreal chief economist Douglas Porter.
Regionally, the effects vary dramatically.
"It's a distinct negative for Alberta, Saskatchewan and Newfoundland, but it's a small positive for the rest of the country," Mr. Porter pointed out.
Lower oil prices will dampen the boom in Alberta, Saskatchewan and Newfoundland, hitting government revenues, investments and jobs.
The price shock could also cost Ottawa as much as $1.5-billion a year in lost tax revenue, according to Toronto-Dominion Bank economist Randall Bartlett.
Because Canada is a net oil exporter, the country pockets less cash for its exports, weakening Canadians' purchasing power in the world. That means lower incomes for Canadians and weaker profits for companies.
But lower prices at gas pumps also act like an instant tax refund to consumers everywhere.
It's already pushing down the value of the Canadian dollar, which fell to a five-year low of 87.60 cents on Tuesday, making car parts, machinery and other non-energy exports more attractive to foreign buyers.
Lower oil prices are also positive for most of the rest of the world, including the U.S. – an effect that will eventually boost demand for many of the things that Canada produces.
Mr. Poloz, testifying Tuesday before the House of Commons finance committee, said the impact of lower oil prices and higher non-energy exports have so far been "largely offsetting" for the Canadian economy. "A couple of months of [good] data on exports can be enough to offset the kind of shock we're discussing," Mr. Poloz told MPs.
The Canadian dollar has shed nearly two cents since oil went into free fall last week. Currency watchers said the Canadian dollar is paying the price for its reputation in foreign-exchange markets as a petro-currency whose fate is closely tied to energy exports – a factor that was a big part of the dollar's strength in the early part of the postcrisis recovery.
"People have started to hone in on oil," said George Davis, chief foreign-exchange technical analyst for RBC Dominion Securities Ltd.
This week's comments from Mr. Poloz, implying the central bank remains firmly dovish on interest-rate increases, has created a double-whammy for the Canadian currency.
"Those two factors have conspired against it," Mr. Davis said.
The Canadian dollar's downward trend isn't entirely unexpected, but it is ahead of schedule. Economists had expected the currency to drift down toward 85 cents, but not until the second half of next year, when the U.S. Federal Reserve is expected to start raising interest rates while the Bank of Canada stands pat, a so-called "rate differential' situation that would support buying of the U.S. currency over Canada's loonie.
"Oil has sort of pulled that forward," said Nick Exarhos, economist at CIBC World Markets.
The day's negative sentiment in the dollar largely overshadowed bullish news on Canada's trade front: A surprise surplus of $710-million (Canadian) in September, a balance that was more than $1-billion better than economists had expected.
Falling oil prices are a double-edged sword for Canada's exports and economic recovery, Mr. Exarhos cautioned.
"A cheaper barrel of oil doesn't necessarily help us," he said, noting that it not only hurts the value of Canada's sizable energy exports, but also could discourage spending by energy companies – weighing on the business-investment growth.
And the Bank of Canada would likely prefer to see lower interest rates drive the dollar down, rather than cheaper oil, Mr. Exarhos said.