XPost: can.politics, bc.politics, ab.politics   
   XPost: sk.politics, man.politics, edm.general   
   From: puela@nyet.ca   
      
   Special to The Globe and Mail - Monday, Jan. 05 2015   
      
   How $40 oil would impact Canada’s provinces   
      
      
   What does Canada’s economy look like with oil prices at $40 a barrel?   
   Certainly it won’t be the energy superpower envisioned by Prime Minister   
   Stephen Harper.   
      
   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   production from high-cost sources isn’t withdrawn from an oversupplied   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   
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   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   
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   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.   
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   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.   
      
   Not long ago, the grand vision for the oil sands saw production doubling over   
   the next 20 years.  Now that dream is in the rear-view mirror.  Rather than   
   expanding production, the industry’s new economic imperative will be   
   attempting   
   to cut costs in a bid to maintain current output.   
      
   With the exception of oil sands players themselves, no one will feel those   
   project cancellations more acutely than new Alberta Premier Jim Prentice.  His   
   province’s budget is beholden to the gusher of bitumen royalties that will no   
   longer be accruing as planned.  He could choose to stay the course on spending,   
   as former Premier Don Getty did when oil prices plunged in the 1980s, in hopes   
   that a price recovery will materialize.  That option, as Getty discovered,   
   would soon see Alberta’s budget surplus morph into spiralling deficits.   
      
   The province’s balance sheet wasn’t cleaned up until the axe-wielding Ralph   
   Klein took over.  In his first term, Klein slashed spending on social services   
   by 30 per cent, cut the education budget by 16 per cent and lowered health care   
   expenditures by nearly 20 per cent.   
      
   Of course, falling oil prices are a concern for much more than just Alberta’s   
   budget position.  Real estate values also face more risk, particularly downtown   
   Calgary office space.   
   For oil sands operators, staying alive in a low price environment won’t just   
   mean cancelling expansion plans and cutting jobs in the field.  Head office   
   positions are also destined for the chopping block, which is bad news for the   
   shiny new towers going up in Calgary’s commercial core.   
      
   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.   
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   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   
   													   
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   of manufacturing jobs that were lost in the last decade amid a severely   
   overvalued currency.   
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   For the Canadian economy as a whole, much is about to change, while much will   
   also remain the same.   
      
   Once again, oil will largely define the fault lines that separate the haves   
   from the have-nots (or at least the growing from the stagnating).  But at $40   
   oil, it’s the consuming provinces that will drive economic growth.  Rather   
   than   
   oil flowing east through new pipelines, jobs and investment will be heading in   
   that direction instead.   
      
   		ヽ(´▽`)/   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)