These are not good times for Canada's petro-prime minister. Harper's Holy Grail, Canadian energy superpowerdom, has sprung a leak. Even The Globe & Mail, says bitumen no longer makes any economic sense.
If $40 a barrel still seems a ways off, consider that the benchmark price for oil sands crude is already trading in that price range. What’s more, if production from high-cost sources isn’t withdrawn from an oversupplied market, oil prices may soon be trading even lower.
The first thing Canadians should recognize about the new world order for oil prices is that – contrary to what we’re being told by our federal government – the economy is no longer in dire need of any new pipelines. For that matter, it can live without the new rail terminals being built to move oil as well. Yesterday’s transportation bottlenecks aren’t relevant in today’s marketplace.
At current prices there won’t be any massive expansion of oil sands production because those projects, which would produce some of the world’s most expensive crude, no longer make economic sense.
The recent spate of project cancellations by global oil giants – Total’s Joslyn mine, Shell’s at Pierre River, and Statoil’s Corner oil sands venture – is only the beginning. As oil prices grind lower, we can expect to hear about tens of billions of dollars of proposed spending that will be cancelled or indefinitely postponed.
...If plunging oil prices are writing a boom-to-bust story in provinces such as Alberta, Saskatchewan and Newfoundland, the narrative will be much different in other parts of the country.
Ontario’s long-depressed economy is already beginning to find a second wind, recently leading the country in economic growth. And the engine is just beginning to rev up. As the largest oil-consuming province in the country, lower oil prices put more money back into the pockets of Ontarians, while also juicing the buying power of its most important trading partner. Ontario’s trade leverage with the U.S. is set to become even more meaningful as the Canadian dollar continues to slide along with the country’s rapidly fading oil prospects.
Just as the oil sands boom turned Canada’s currency into a petrodollar, pushing it above parity with the greenback, the loonie is already tumbling in the wake of lower oil prices. And it shouldn’t expect any help from the Bank of Canada, which continues to signal that it’s willing to live with a much lower exchange rate in the face of a strengthening U.S. dollar.
A loonie at 75 cents means GM and Ford may once again consider Ontario an attractive place to make cars and trucks. Even if they don’t, you can bet others will. With the loonie’s value falling to three quarters of where it was only a few years ago, we’ll start seeing Ontario, as well as other regions of the country, start to regain some of the hundreds of thousands of manufacturing jobs that were lost in the last decade amid a severely overvalued currency.
Yes, kids, that was the very conservative Globe & Mail admitting that Eastern Canada has for years been afflicted by the Athabasca-borne "Dutch Disease." Harper, Oliver, Flaherty and the rest of the parliamentary clown car have expended massive energy in denying it but Alberta's wealth (the money they've long since 'pissed away') has hurt Canada's manufacturing sector and the hundreds of thousands of workers that lost their jobs.