Tag Archives: Kathleen Wynne

Oh, what a messy slick we spill

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Oil has a nasty way of sticking to everything it touches, including the best-laid plans of men, governments and hired gunslingers in the spin-rooms of the nation.

Not so long ago, black gold was Canada’s economic salvation. It was better than  manufacturing, technological innovation in the non-resource sector, and even financial services at generating long-term jobs and huge dividends for high-flying investors.

Indeed, so went the fairy tale, oil was the last, best hope to power these industries and aspirations and return the country to its always mythological status as the world’s next, big superpower of opportunity.

Oh well. Easy come, easy go – which has become, in New Brunswick, our preferred provincial slogan, beating out such bromides as “Be in this place” and (my personal favorite) “Hell, it could be worse, though we don’t possibly see how”.

Still, Alberta’s blackened, big sky country may want to rip a page from the picture-perfect province’s sloganeering songbook as it begins to send thousands of expat Maritimers back home to their sea-bound coasts.

With oil hovering below $50 a barrel – down more than 100 per cent since mid-October – and no discernible bottom to the price plunge, the West’s formerly gilded streets are about to be lined with foreclosure notices, each prettily packaged in recyclable envelopes, courtesy of your friendly, neighbourhood big, Bay-Street bank.

Oh, how the ironies abound.

To Stephen Harper’s Conservatives, oil meant certain reelection in October. That’s because royalties from this resource enabled their utterly fantastical predictions of surplus, their wholly irresponsible promise to permit income splitting among families that could well afford to pay the tax man that which is properly due to him, and their cynically calculated (and needlessly costly) diversions regarding the Child Tax Credit.

Now, they’ll be lucky to muster enough cash to cover the cost of the laces for the finance minister’s new shoes come budget time some months away.

As it is, they can’t work fast enough to fit themselves for boots of clay.

According to a Globe and Mail report last Thursday, “The Conservative government will not release the federal budget until at least April, a delay meant to give Finance Minister Joe Oliver more time to assess the impact of plunging oil prices on the Canadian economy.”

As Mr. Oliver told a press conference in Ottawa, “Given the current market instability, I will not bring forward our budget earlier than April. We need all the information we can obtain before finalizing our decisions. . .“This new reality poses a great, though not entirely unprecedented challenge. . .It represents the third largest price decline in the last four decades, exceeded only by the 1986 OPEC collapse and the sharp decline and rapid recovery we saw during the Great Recession. . .Given the current volatility, there is no consensus about how low will prices fall and how long they stay there. Nevertheless, every knowledgeable person I have spoken to believes, and history tells us, that prices will eventually move well above (the) current level.”

In fact, though oil’s price may not have yet bottomed, there is, evidently, a point at which the Canadian economy’s ability to compensate for its clear and utter dependence on the stuff simply fails.

Only a week ago, Ontario Premier Kathleen Wynne all-but bragged about the coming resurgence in her province’s manufacturing sector. Low petroleum prices, she noted, meant a lower valuation of the Canadian dollar against its U.S. counterpart. Since south of the border is where more than $300-billion of this country’s good wind up each and ever year, logically the boon to exporting ought to be commensurately marvelous. Read: Who needs oil?

Well, apparently, we do; and the sticky, messy stuff is not cooperating.

Says former finance department deputy minister Scott Clark, in a separate Globe piece last week, “If the government tries too hard to show a surplus, in other words twists and turns in the wind and does everything to show a surplus, I think you lose political and professional creditability. . .The reality is a lot has changed and if I were the Conservative government, I’d be saying ‘that’s the fact.’ Things have changed and we should just realize that and deal with it.”

Of course, that makes just too much sense for this country’s leadership, almost more enamoured of its own talking points on oil than it is with the sticky stuff, itself – if that’s even possible.

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The economic pendulum swings again

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The grand expanse that is Canada guarantees that one of the iconic realities of our national character remains our ability and willingness, when necessary, to pull up stakes and head for wherever the pastures grow greenest.

Rarely, of course, has that been Atlantic Canada.

Most often – at least since Confederation made honest European invaders of some of us – the Elysian fields of our economy have been located in Ontario, the country’s traditional manufacturing hub. That’s where, as the late, great Stompin’ Tom Connors once famously wrote, “the Maritimers all go.” 

Or, they did.

Over the past decade, or so, the big employment draws have been the tar sands of Alberta and the surrounding support industries of the oil and gas sector in Saskatchewan and British Columbia. That’s where, lately, my friends and former neighbours sojourn – driving trucks, working back-office jobs and otherwise punching gilded time clocks.

Or, again, they did.

Now, the shift – as inevitable as the ebb and flow of an ocean tide begins again, and one of Canada’s leading financial institutions, the Royal Bank, is sounding almost chipper.

“There has been considerable discussion about the negative impact of falling oil

prices on the Canadian economy,” Bank economists Paul Ferley, Nathan Janzen and Gerard Walsh write in a recent monograph. “This has been reinforced by anecdotal reports about oil-producing companies cutting back on investment spending particularly within the oil sands. However, as we have emphasized in earlier commentaries, there are offsetting positive outcomes from lower oil prices.”

The first, and most obvious one, they note, is the concurrent boost to the U.S. economy, on which Canada depends for much of its export business (some $300-billion a year). “A stronger U.S. economy implies a growing market for Canadian exports. This is the case despite the recent expansion of oil production in that economy reflecting greater utilization of shale oil reserves. Though the U.S. oil and gas sector is likely to see reduced investment activity, its share of overall capital spending is relatively small.”

Secondly, falling oil prices depresses the value of the Canadian dollar relative to its American counterpart. Again, that’s good for domestic manufacturers and exporters, whose wares suddenly cost less to American buyers.

“The third key offset,” the economists report, “is that Canadian consumers will also be looking at lower gasoline prices that will provide an attendant boost to consumer spending domestically. It is of note that while business investment is a sizable 13 per cent of nominal GDP (including investment in intellectual property products), consumer spending is a massive 54.3 per cent. Thus, a small rise in consumer spending can go a long way to offsetting a marked drop in investment.”

All of which has Ontario Premier Kathleen Wynne fairly salivating. And why not?

For years, that once-mighty, supremely confident, magisterially self-important province, has suffered the indignities that $100-per-barrel oil has wrought on its manufacturing-export economy, including an ignominious slump into have-not status in the federal equalization formula. Now that the price of benchmark West Texas Intermediate oil has settled below $53 a barrel, Ms. Wynne is doing her level best to appear generous.

“Ontario’s economy can be a buffer,” she told the Globe and Mail last week. “We have a diverse economy and it can be a buffer in a time like this, against some of that volatility. I don’t wish for low oil prices and a low dollar for Alberta. But at the same time, we want our manufacturing sector to rebound. So if that (low oil price) helps, then that’s a good thing.”

In reality, though, as long as Canada’s value to the world is predominantly measured by the oil and gas it extracts and the pipelines its builds – which has been the common hymn, soulfully trilled by the western caucus of the reigning Conservative Government in Ottawa – volatility, and all that this implies, is likely to be the national economy’s organizing principle for years, even decades, to come.

Shall we now expect a new wave of pink-slip-bearing, prodigal Maritimers returning to their roots down home, where the pastures are, if not exactly green, a little less brown than they seemed not so long ago?

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The perils of East Coast pipeline politics

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On the energy front, perhaps we should not have been so quick to assume that Maritime economic priorities neatly dovetail with those of Ontario and Quebec. After all, when have they ever?

Indeed, if there was a time when political leaders in New Brunswick considered  TransCanada’s eastbound pipeline project a slam-dunk, that time is over, which leaves the province’s new Liberal premier Brian Gallant with yet another post-election migraine.

According to a Globe and Mail report last Friday, “Quebec Environment Minister David Heurtel sent a letter to (TransCanada) chief executive officer Russ Girling laying down seven conditions (the company) must meet to win the province’s support for the (Energy East) project. With his letter, Mr. Heurtel established conditions similar to those adopted by British Columbia Premier Christy Clark for Enbridge Inc.’s controversial Northern Gateway pipeline that would deliver oil sands bitumen to Kitimat for export to Asia, though his tone was somewhat more agreeable than Ms. Clark’s has been”.

Specifically, “Mr. Heurtel’s conditions include the need for public acceptance of the project, for proper consultations with First Nations, and for clear economic and fiscal benefits for Quebec, as well as assurances to gas customers. Mr. Heurtel also cited a National Assembly resolution demanding the government assess the impacts of ‘upstream”’GHG emissions – those produced by extracting the oil – for the pipeline that would carry 1.1 million barrels a day of western crude to market. But he was vague on whether the government will assert the right to block the pipeline.”

Ontario, too, wants environmental assurances and pledges from TransCanada that its newfound interest in shipping western bitumen through its territory en route to Saint John’s refinery will not overwhelm priorities to make supplies natural gas available to central Canadian industry.

Meanwhile, Premier Gallant is scrambling to put the new developments in the best possible light. “I will meet with Quebec Premier Philippe Couillard to talk about the fact that we are certainly behind the project,” he told reporters on Friday. “For us, what’s important is to assure when we can do it in the most safe and secure way possible. It’s one of the reasons why I read about the project at length two years ago. When we put the project into motion, I was already aware that we can do this in a secure way.”

Of course we can. But that’s not really the point. These days, pipelines are symbols of industrial rapacity and environmental carelessness. As such, they are marvelous for galvanizing public opinion against any expansion of the fossil fuel industry, as Maude Barlow, no shrinking violet on the subject, demonstrated last year.    

Regarding the Energy East proposal, the national chairperson for the Council of Canadians, told her interviewer from the North Bay Nugget,  “I want to let communities know not to be pressured to make a decision or risk not getting the benefits of the pipeline. I can tell you there are no benefits. There’s no argument for this pipeline. It’s an export pipeline and we don’t need it. . .We get the risk and (oil companies) get the reward,” adding “I would like to know what are the big jobs, because this pipeline is for export. It’s about greed. They’re playing with a potential environmental catastrophe that environmentalists have been warning about. . .It’s so much more dangerous (than any other oil) and it’s crossing watersheds and many waterways around the Great Lake Region that are already being threatened. We certainly don’t need to add to that threat.”

Naturally, TrabsCanada couldn’t let that go. It responded with its own statement:

“Quebec and New Brunswick currently import more than 700,000 barrels of oil every day – or 86 per cent of their refinery needs – from countries such as Algeria, Iraq, Saudi Arabia and Nigeria. At current oil prices, this is over $75 million drained out of the Canadian economy – every single day. Energy East proposes to connect Western Canada’s resources to Eastern Canada’s needs. Greater supplies of domestic crude would improve the financial viability of eastern Canadian refineries by giving them access to less-expensive, stable domestic supplies.”

Of course, for Mr. Gallant, it could be worse. He could start talking enthusiastically about shale gas.

Let the protests commence.

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