23rd January 2015

Harper says there’s more to the Canadian economy than oil – by Bill Curry (Globe and Mail – January 23, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Ottawa — Stephen Harper is playing down the impact of energy on the overall Canadian economy, noting that other sectors will help keep growth strong during hard times for the oil patch.

The Prime Minister, who has previously promoted Canada abroad as an emerging energy superpower, stressed the importance of small business, manufacturing and innovation during an event in St. Catharines, one of many Southwestern Ontario communities that have lost manufacturing jobs in recent years.

“It’s obviously significant for the Canadian economy, particularly certain sectors and regions, but the oil industry isn’t remotely the entire Canadian economy,” said Mr. Harper. “There are many benefits to other parts of the economy because of these developments and although the oil industry in those regions are going to face some pretty significant adjustments, the fact of the matter is that this is a resilient industry that knows that prices go up and down.”

The Prime Minister’s comments, which followed an announcement to expand a program for small-business loans, marked his first public response since Bank of Canada Governor Stephen Poloz shocked markets Wednesday by cutting interest rates in response to lower-than-expected growth and inflation. Read the rest of this entry »

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23rd January 2015

Saudi Arabia’s King Abdullah, the careful reformer, dies at 90 – by Mark MacKinnon (Globe and Mail – January 23, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

LONDON — King Abdullah, the monarch who led Saudi Arabia through a period of wrenching change in the Middle East – keeping the oil-rich country stable as the region convulsed around it and critics demanded urgent reform – died late Thursday, a statement from the royal palace in Riyadh said.

The death, while immediately mourned in the Arab world, was hardly unexpected. The 90-year-old Abdullah had been seriously ill for several weeks, suffering from pneumonia and breathing only with the help of a tube.

Abdullah became king after the 2006 death of his half-brother, Fahd, but with Fahd in ill health, he had been de facto regent for a decade before that. He led the country through the worst years of the Iraq war, kept the kingdom intact through the upheaval of the Arab Spring, and in recent years built an informal Sunni Arab coalition that confronted what he saw as Iran’s rising influence across the region, particularly in Syria.

Saudi Arabia’s role in Syria will remain a controversial part of Abdullah’s legacy. Saudi Arabia gave money and weapons to jihadi groups opposed to Syrian President Bashar al-Assad, helping give birth to the force now known as Islamic State. Read the rest of this entry »

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22nd January 2015

Can Harper’s Canada defy oil dependence’s ugly history? – by Brian Milner (Globe and Mail – January 22, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

History shows that political leaders who rely heavily on oil earnings to paper over economic cracks, balance budgets and spread largesse among the voting public can end up paying a heavy price for putting too many eggs in the energy basket.

We are about to find out if that holds true in Canada, where the Bank of Canada responded to the steep drop in oil prices with a surprise rate cut Wednesday.

Every major oil exporter is scrambling to deal with sudden economic reversals, tax shortfalls and greater demands on the public purse as capital investment is slashed, massive projects are shelved and layoffs mount in the wake of plunging oil prices.

It was a Saudi-orchestrated price collapse in 1986 – when oil bottomed at $10 (U.S.) a barrel after dropping by two-thirds in just four months – that set the stage for a stunning falloff in Russian production in the late 1980s and the breakup of the Soviet empire.

Another price crash in 1998 played a key part in the collapse of the ruble and a humiliating bond default that cleared the way for Vladimir Putin’s swift rise to the top of the Russian heap. Read the rest of this entry »

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22nd January 2015

Billions in oilpatch investment up in smoke as crude plunge reverberates across Canada – by Claudia Cattaneo (National Post – January 22, 2015)

The National Post is Canada’s second largest national paper.

There’s nothing like losing something to understand the value of what you had. With billions in investment going up in smoke, the Bank of Canada cutting its key interest rate and growth forecast, governments struggling with big budget gaps, the oil price collapse is highlighting the big shoes filled by the oil and gas sector in Canada’s economy.

As Tim McMillan, the president and CEO of the Canadian Association of Petroleum Producers, put it Wednesday: The industry has been growing so much, is active in so many parts of the country, works with so many suppliers, low oil prices “are having more of a national effect now than at any time in its history.”

In an interim report on investment plans, CAPP provided a glimpse Wednesday of how much the sector — the country’s biggest spender — plans to tighten its belt this year to cope with a 50% decline in oil prices since June, the result of excess world supplies and OPEC’s refusal to cut its own: Capital investment in Western Canada, including the oil sands, will decline 33%, to $46 billion, from $69 billion in 2014.

In the Alberta-based oil sands alone, capital investment will shrink to $25 billion, from $33 billion in 2014. Capital spending in the conventional oil and gas portion of the Western Canada Sedimentary Basin — which straddles Saskatchewan, Alberta and British Columbia — will decrease to $21 billion, from $36 billion in 2014. Drilling is expected to decline by 30%, to 7,350 wells.

Read the rest of this entry »

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21st January 2015

Resource takeovers no cause for national angst – by Howard Green (Globe and Mail – January 21, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

What a difference a few years makes. Recall the bygone days when there was a fuss about foreigners wanting to buy our miners and oil companies. Sure, Spain’s Repsol played vulture when it scooped up Talisman last month, but it was welcomed rather than turned into a federal case.

The national harrumphing that went on back in 2006 and 2007 when Inco, Falconbridge and Alcan were sold to outsiders is amazing in retrospect. But who would want to be stuck with a fistful of those shares in their portfolios right now, given where commodities are?

Back then, not only commentators, but also Bay Streeters and big shot executives were critical of the CEOs of those companies, railing about how they were selling out Canada’s birthright to rapacious buyers from abroad. Or worse, that they were not willing to step up and pay up to be acquirers rather than sellers.

If only the country had such problems today. The truth is, Inco’s CEO at the time, Scott Hand, and Dick Evans, the CEO of Alcan, got absolutely brilliant prices for their shareholders when they sold their respective companies. Wouldn’t it be something to hear complaints today about selling resource companies at the top of the market? Read the rest of this entry »

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21st January 2015

Oil slide to shave billions off federal and provincial government revenue – by Bill Curry and Shawn McCarthy (Globe and Mail – January 21, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Ottawa and the provinces will lose a combined $14-billion in government revenue this year as a result of falling oil prices, according to new analysis that comes as the federal Conservatives shift their economic message ahead of Parliament’s return next week.

The federal government alone is set to lose $4.3-billion this year, the Conference Board of Canada said in a report Tuesday. The board is among the organizations that provide forecasts to the finance department and its findings add to the growing private sector opinion that Ottawa’s return to budget surplus is in jeopardy.

The International Monetary Fund lowered its forecast for global economic growth, helping trigger a 4.7 per cent drop Tuesday in the price of North American crude, which closed at $46.49 (U.S.) a barrel Tuesday. The IMF also cut its forecast for Canada. The Bank of Canada is expected to comment in detail Wednesday on the impact of low oil prices in its quarterly Monetary Policy Report. Analysts suggest the Canadian dollar could sink below 82 cents U.S. depending on what the bank has to say.

The rapidly changing economic picture is also leading to some mixed messages from the Conservative government. Read the rest of this entry »

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16th January 2015

No help from Ottawa as Alberta’s economy devastated by oil collapse – by Claudia Cattaneo (National Post – January 16, 2015)

The National Post is Canada’s second largest national paper.

The oil-price crash that is causing a major pullback in energy investment is also stirring plenty of worry in oil-revenue dependent Canadian governments. But while top oil-producing provinces such as Alberta are in full damage-control mode, the federal government is taking the oil shock in stride.

In a speech in Calgary Thursday, federal finance minister Joe Oliver was sympathetic to Alberta’s predicament, noting the price crash is the third-largest in four decades. As for the impact on Canada, he said Ottawa remains on track to balance its budget after years of deficit spending triggered by the global recession. He said there are no plans to increase taxes.

“Lower oil prices will adversely impact our federal government’s fiscal situation, but the decline in oil prices will not prevent our government from achieving the budgetary balance in 2015/16,” Mr. Oliver said in a speech to the Calgary Chamber of Commerce, after conducting consultations on the upcoming federal budget.

Because of the high level of instability in the economy, though, he said the budget would not be tabled at least until April.

Tough times in the energy sector are balanced by benefits for consumers at the gasoline pumps, as well as lower energy costs for manufacturers and transport companies that are also getting a boost from a decline in the value of the Canadian dollar, making them more competitive, he said. Read the rest of this entry »

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15th January 2015

Economic uncertainty clouds Premier’s Natural Resources Forum – by Derrick Penner (Vancouver Sun – January 14, 2015)

http://www.vancouversun.com/index.html

Coal, copper prices have stalled, but forestry is rebounding and LNG potential remains

The provincial government’s 12th annual Premier’s Natural Resources Forum will convene next week in Prince George with a cloud shading some of the sunny optimism that has shone on British Columbia’s resource industries in recent years.

“The big story is the overall global setting and global backdrop, and for commodities, that’s relatively weak,” said Ken Peacock, vice-president and chief economist for the Business Council of B.C.

Peacock added that it is not all gloom though. While slower growth in Asia has curbed prices for commodities such as steelmaking coal and copper — dulling the prospects for B.C. mining — forestry is experiencing more of a rebound due to recovery of the American economy.

However, the province’s central interior is still buoyed by existing activity in the resource sectors, according to Mike Morris, MLA for Prince George Mackenzie, and resource-sector businesses remain pragmatic about planning for the future in cyclical industries.

“We’re still very optimistic that (liquefied natural gas) is going to move ahead,” Morris said. Morris, whose office played a big role in organizing the event, is expecting up to 600 delegates for the forum, mostly people involved in industry service businesses. Read the rest of this entry »

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14th January 2015

Bank of Canada warns economy could be in for a rough ride – by Barrie McKenna and Bill Curry (Globe and Mail – January 14, 2015)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

OTTAWA — The Bank of Canada is acknowledging for the first time that the world may be facing a prolonged oil-price slump, casting a dark shadow over the country’s economic prospects.

The price of crude, already sliced in half since the summer, could fall further and stay low for a “significant period,” deputy governor Timothy Lane warned in a speech Tuesday.

That could have profound and far-reaching implications for the Canadian economy, including putting more cash in the hands of consumers and exporters. But cheap crude is also likely to sap overall growth, send the dollar lower, dent federal and provincial government revenues, and perhaps delay eventual interest-rate hikes.

The bank’s comments come as private-sector economists are making increasingly bold claims that the federal government is at risk of missing its target for a return to fiscal balance this year.

The latest challenge to the key Conservative promise came in a Toronto-Dominion Bank report that said Ottawa will be in deficit two years longer than planned even if oil prices rebound significantly from current lows. Read the rest of this entry »

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13th January 2015

$50 Oil Kills Bonanza Dream Making Greenlanders Millionaires – by Peter Levring (Bloomberg News – January 12, 2015)

http://www.bloomberg.com/

Greenland, an island that may be sitting on trillions of dollars of oil, has had to acknowledge that its dream of tapping into that wealth looks increasingly far-fetched.

Back when oil was headed for $150 a barrel, Greenlanders girded for a production boom after inviting in some of the world’s biggest explorers, including Chevron Corp. and Exxon Mobil Corp. (XOM) Now, with Brent crude dipping below $50 last week, Deputy Prime Minister Andreas Uldum says Greenland’s hope of growing rich quickly on fossil fuels was “naïve.”

“I myself believed back when I was first elected” to parliament in 2009 “that billions from oil and minerals would start flowing to us the next year or the year after that,” he said in an interview in Copenhagen. “However, that’s just not the reality. I don’t know any politician in Greenland today who won’t admit to having fueled the hysteria.”

Oil Prices

The nation of about 56,000 had imagined its oil and mineral production would turn every citizen into a millionaire. Instead, Greenland continues to rely on an annual 3.68 billion-krone ($586 million) subsidy from Denmark to stay afloat, a sum that’s equivalent to almost half its gross domestic product. Talk of severing ties from its former colonial master has also faded as Greenlanders see little prospect of achieving economic independence anytime soon. Read the rest of this entry »

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13th January 2015

Stephen Harper: Oil’s worst enemy – by Chris Sorensen (MACLEAN’S Magazine – January 5, 2015)

http://www.macleans.ca/

By trying to protect and promote the oil sector, the Harper government effectively shackled Canada’s pipelines in purgatory

It was nine years ago that Neil Camarta first realized an image crisis loomed over Canada’s oil sands. He and his daughter were browsing inside a small shop on London’s trendy Carnaby Street when they spotted a row of “Stop the Tar Sands” T-shirts hanging on the wall.

Camarta, a longtime industry executive who’s held senior positions at Shell, Petro Canada and Suncor, braced for the inevitable as his daughter chatted with the 20-year-olds behind the counter. “She said, ‘You know, my dad works in the oil sands,’ ” he recalls. “And I was like, ‘Oh my God.’ So, all of a sudden we’re in it. I’m arguing with all these young people.”

These days Camarta runs a smaller company that makes upgrading equipment for the oil sands. He was happy to defend the industry’s record, he says, but he still wonders how Fort McMurray emerged as ground zero in the race to save the planet from climate change. After all, the energy-intensive oil sands sector accounts for less than half a per cent of global greenhouse gas emissions, although one would hardly know that based on all the attention it gets.

“Literally everyone now knows what the oil sands are and they don’t think well of us,” Camarta says of the world’s third-largest proven oil reserves. “We had our heads down building these big projects. We weren’t spending enough time managing our reputation.” Read the rest of this entry »

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8th January 2015

Oil collapse threatens Ottawa’s balance plans: ‘There’ll be a big hit right up front’ – by Gordon Isfeld (National Post – January 8, 2015)

The National Post is Canada’s second largest national paper.

OTTAWA — With oil prices tumbling and no solid bottom in sight, economists are shaving their forecasts for Canadian growth and predicting interest rates will stay lower for longer.

While weak energy costs will likely keep inflation in check, the drop in crude to more than five-year lows could also throw the federal government’s budget-balancing plans out the window as revenues shrink.

Combined with the collapse in oil — one of the country’s major exports — the already-weak Canadian dollar is being held down by near-record-low lending levels that are now not expected to begin rising until late this year or early 2016.

“Depending on where the bottom is on oil prices and how long they stay there, it will definitely be a negative on the economy,” said Pedro Antunes, deputy chief economist at the Conference Board of Canada.

“The reality is we’re going to suck out of the economy billions and billions in terms of profits, in terms of revenues,” he said. “There’ll be a big hit right up front.” Read the rest of this entry »

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7th January 2015

Oil price plunge is Canadian business story of year – by Lauren Krugel (Toronto Star – December 31, 2014)

The Toronto Star has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

CALGARY — From Alberta oilfields to Bay Street boardrooms to the gas station on the corner, the precipitous drop in crude prices is expected to have far-reaching impacts across the country heading into 2015, making it The Canadian Press Business News Story of the Year.

The abrupt turnaround in oil markets was chosen by half of the 50 editors and news directors across the country who participated in the annual survey.

In explaining their pick, many respondents noted the story’s ripple effects beyond the oilpatch. Richard Dettman, business editor at News 1130 in Vancouver, said the halving in crude prices over a six-month span created a “gusher of stories” — the hit to federal and provincial government coffers, the plunging loonie and the benefit to consumers, to name a few.

Lynn Moore, assistant city editor, business at the Montreal Gazette, highlighted several ways in which oil’s decline will reverberate across Canada.

“A sustained period of low oil prices will throw a big wrench into the works of the Canadian economy and collective psyche. Read the rest of this entry »

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7th January 2015

The end of Canada’s oil superpower pipe dreams – by Terence Corcoran (National Post – January 7, 2015)

The National Post is Canada’s second largest national paper.

The Washington dust has not yet settled around Canada’s Keystone XL pipeline, but the fuzzy images visible Tuesday through the political storm do not look promising. Nothing in the current play of politics and oil prices would lead to the conclusion that Keystone will ever get approved.

But it’s worse than that for Canada. As the world oil market swirls, not just Keystone is at stake. The greater risk is that the great national global energy superpower dream is going down the drain, washed away by a confluence of forces over which Canada has no control.

On Tuesday, the White House said President Barack Obama would veto the latest Republican effort to push a Senate Keystone bill through Congress. It was an easy decision for the President to announce, since it appears the Senate failed to come up with the necessary 67 votes to override Mr. Obama’s veto.

When even a Republican-dominated Senate can’t muster enough support to force the President’s hand, it’s a sure sign that environmentalists and other activist opponents of Keystone still dominate the pipeline decision-making process.

While Canada’s dreams of exporting more oil sands production to the United States face a grim political environment, the economic environment looks even shakier. Read the rest of this entry »

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6th January 2015

The coming showdown between Canadian and Saudi oil producers on the U.S. Gulf Coast – by Geoffrey Morgan (National Post – January 6, 2015)

The National Post is Canada’s second largest national paper.

CALGARY – A fight between Canadian and Saudi Arabian oil producers is expected to play out on the U.S. Gulf Coast during the course of this year, as the two countries battle for market share in the world’s largest refining district. The fight could help keep oil prices depressed for another six months.

Citigroup analyst Edward Morse released a report Monday that points to an oversupply of oil on the Gulf Coast thanks in part to an influx of heavy crude from Canada, even without TransCanada Corp.’s long-delayed Keystone XL pipeline. At the same time, the report says Saudi Arabia is attempting to regain its market share in the area.

The 2014 showdown between light oil producers — U.S. shale oil companies and OPEC members such as Saudi Arabia — for share of the North American refining market will change, according to Citigroup. “Now the confrontation should shift to sourer and heavier crudes,” the report said.

Oilsands crude is considered heavy, because it has the consistency of molasses, and sour, because of its sulphur content.

Scotiabank vice-president and commodity market specialist Patricia Mohr agreed there is potential for Canadian oilsands shipments to push Saudi Arabian and North African oil out of refineries on the Texas and Louisiana coastline. Read the rest of this entry »

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