Oil Export Plunge Signals Canada Economy Running on Empty

[Purveyor]

By Greg Quinn Jan 8, 2015 12:07 PM ET

Plummeting oil prices are taking a toll on Canada’s energy exports and threatening to leave little in the economy’s tank for 2015.

Shipments of crude oil and bitumen dropped 9.9 percent to C$6.9 billion ($5.8 billion) in November, the biggest decline in almost three years, the federal statistics agency said Wednesday from Ottawa. The trade report is among early signs this may be a tough year for an economy that’s suffered least among developed nations from the 2008 financial crisis, as energy-export woes add to concerns the nation’s housing market is in jeopardy.

Canada, the Group of Seven’s biggest crude exporter, “has nothing going for it,” Paul Ashworth, chief North America economist with Capital Economics Ltd., said by telephone from Toronto. “You have a collapse in oil prices which is going to hit that industry. You have a housing market that could fall over at any point.”

Benchmark crude prices dropped below $50 a barrel this week for the first time since 2009, prompting Alberta energy companies to scale back investment and economists to question their 2015 growth forecasts. David Wolf, co-manager of Fidelity Canadian Asset Allocation Fund and a former Bank of Canada adviser, said the commodity-price slump has substantially increased odds the central bank will cut interest rates rather than raise them.
Dimming Picture

The value of energy exports has dropped for six straight months, triggering a November trade deficit of C$644 million, more than triple the median forecast in a Bloomberg News survey of 14 economists. Crude represented about 18 percent of all exports last year, up from 6 percent a decade ago.

more...

http://www.bloomberg.com/news/2015-01-08/oil-export-plunge-signals-canada-economy-running-on-empty.html

[fredamae]

1. Did they seriously

put all their eggs in one basket?

[polly7]

16. NO. nt.

[polly7]

2. OTTAWA - Perhaps an era of cheap crude won't be so bad for Canada after all.

A new bank forecast argues the financial blows of low oil prices on the Canadian economy could be more than cancelled out by the weaker loonie and additional consumer spending on both sides of the Canada-U.S. border.

The prediction, contained in a Royal Bank of Canada (TSX:RY) report released Monday, is an outlier among many expert assessments that have projected low crude prices to be a net negative for Canada.

The RBC report said lower oil prices will have significant impacts on government budgets in oil-producing provinces.

But it argues these provinces — Alberta, Saskatchewan and Newfoundland and Labrador — have seen big increases in revenues from price increases in recent years, putting them on relatively strong footing to absorb the shocks of a prolonged decline.

Other provinces, meanwhile, are seeing benefits from the low crude prices in the form of cheap gasoline and the falling loonie, which is creating a better climate for their manufacturers and exporters.

http://www.huffingtonpost.ca/2015/01/05/falling-oil-prices-canada_n_6415274.html

Also ......... Canada is much more than 'oil'.

[Fred Sanders]

3. Bloomberg? The article is jaw droppingly dumb, another propaganda attempt to inflate the

importance of oil and energy as the oil barons and oil investors cry daily at their lost profits.

Energy extraction accounts for about 6% of Canadian GDP, America less than 2%, and that is a recent peak.

Trying to convince the common man that there is not a huge net benefit to any industrialized energy consuming nation is put to the lie at each refill of their automobiles.

Not even a nice try by Bloomberg..."Canada has nothing going for it.....", except record high wages, record low inflation, plunging unemployment, stable but rising housing prices for the last 10 years, a soon to be balanced budget, record low interest rates....shall I go on?

[Purveyor]

5. About that 'housing market': Canada Home Prices Are 63% Too High: Deutsche Bank

By Neil Callanan Jan 8, 2015 11:39 AM ET

Homes in Canada are 63 percent overvalued and the level reaches about 50 percent in Australia and Norway, Deutsche Bank AG said in a report today.

Homes in Wollongong, a seaside city in the Australian state of New South Wales, are more expensive than in New York when the median house price is compared to the median household income, economists Torsten Slok, Matthew Luzzetti and Peter Hooper wrote in the report. The report compares home values to their historic multiples of rent and household income.

Central bankers have been using financial policy to reduce the risk of house-price bubbles in countries including the U.K., Hong Kong and Singapore. Restrictive policies reduce credit growth and price gains by 1 percent annually, Goldman Sachs Group Inc. economist Hui Shan estimated last year.

Home values in the U.S. are about 5 percent below their historical average based on the measurement, the Deutsche Bank report said. In the U.K., where the government has encouraged low down payments on mortgages, they’re 38 percent overvalued.

Values in Canada are 35 percent higher compared with income than the historical average and 91 percent higher compared with average rentals. Prices in Belgium are 51 percent higher than the average relative to income.

more...

http://www.bloomberg.com/news/2015-01-08/canada-home-prices-are-63-too-high-deutsche-bank.html

[Fred Sanders]

6. Same alarm bells more than 3 years ago.

http://www.huffingtonpost.ca/2011/11/25/canada-housing-market-bubble-overvalued-economist_n_1113031.html

[polly7]

12. Is this just a 'Canadian' phenomenon?

Has it never happened in the U.S.?

[polly7]

7. MY point is, that Canada has much more going for it than oil exports .......

and no, we don't 'live by the barrel'. Of course it will affect us, but we've survived so far, and will do so again.

https://www.ic.gc.ca/app/scr/sbms/sbb/cis/definition.html?code=11-91&lang=eng%2522
https://www.ic.gc.ca/app/scr/sbms/sbb/cis/gdp.html?code=11-91&lang=eng
https://www.ic.gc.ca/eic/site/cis-sic.nsf/eng/h_00007.html

Lots of Canada hate here - which baffles me, actually - but c'est la vie, and you can think what you like, but I live here and have relatives from coast to coast, working in many different industries from tourism, manufacturing, oil, and everything in between. We're going to be JUST FINE.

What about your oil and gas industry? Will this be the end of the U.S. too?

[Fred Sanders]

8. Should be reply to other comment, your comment is truth.

[polly7]

9. Ack, I'm so sorry. I read too fast and did reply to the wrong comment. nt.

[Andy823]

13. Yes it is all BS

On both sides of the border big oil is trying their best to paint doom and gloom for everyone if oil prices do not go back up. The only ones really hit hard are the billionaire oil company owners who want everyone to feel sorry for them. Their profits have skyrocketed since George W. took office and now their manipulation of oil prices has come back to hit the hard, and yet they will still make billions of dollars no matter what the price does in the future. Yes some small companies are going to shut down, but neither the US nor Canada is going to crumble simply because oil and gas prices have dropped. It's plain propaganda by the MSM who are owned and programed by the richest people in both countries.

[Fred Sanders]

14. ^^^^^YES^^^^ An economist in the thread.

The obscene taxpayer subsidized (???-WTF) profits in the oil industry in the last 5 years will keep them afloat for a century.*

*exaggeration for effect - there should be an emoticon...

[ChairmanAgnostic]

4. live by the barrel, die by the barrel.

except with the small (g)OV morons currently in charge, there is no Plan B. Not even levonorgestrel or ulipristal for bad economic decisions.

[polly7]

10. Like you're doing with your oil and gas industry? nt.

[ChairmanAgnostic]

17. Honestly, I no longer have a clue what they do do.

All I know is currently we have slowed (or stopped) the possibility that they would drill under Lake Michigan - which is extremely welcome news. Of course, it could be that because their refineries on the south end of the lake are polluting the air and water so badly already* that they feel no need to make it even worse.



*Indiana changed its pollution guidelines because BP could (or would) not meet even their liberal standards for pollution. Instead of fining BP, they raised the amount of pollution permitted to be spewed out.

[Wellstone ruled]

11. Oil is a very fungable commidity much like capital.

This article leaves more questions than answers. Oil like money moves around the glob every second of every day. The Oil Companies are a monopoly within it''s self. If one thinks there is a competition free market working,forget it,these companies all work together and it's a demand and supply as well as geo-politics that run this industry. Every one needs to recognize a key issue,our Military is not buying some millions of gallon of distillates each month to blow countries and people to smithereens. You just do not drill for Oil or Gas in some willy-nilly fashion. Ever inch of our Planet has been explored and all of the known Fossil Fuels deposits are and have been recorded. As far as Canada is concerned,they have huge untapped rare earth minerals and they are the U.S. major supplier of wood and wood fibers. Along with being one of the World's largest supplier of Cereal Grains. Bloomberg does there whoa is me crap all the time. The 1% ers did not and are not being hurt by the price drop in Oil,their investment Guru's are making up any shortfall by short selling equities and playing the option and derivative markets. You and I are paying the freight with all the gyration in our 401's and IRA's.

[Spazito]

15. Canada doesn't live or die on oil exports...

much as the current Con government would like us to believe. Alberta, the Con's voting base, unfortunately, does tend to depend far too much on oil instead of diversifying it's support for sectors other than oil and gas.

We will be fine, federally, there are a few provinces who will suffer because of the plummeting oil prices and reduced exports but the majority will carry on as usual and a few will actually benefit due to the lower Canadian dollar making our other exports more inviting.

Bloomberg often looks at issues through a very narrow lens and this article is but another example of that, imo.

[Baclava]

18. Producers around the world – and in Canada – still pumping oil at record rates

Oil traders are well aware of the supply glut but oil producers seem largely oblivious.

Despite forecasts for lower drilling activity and oilsands investment in the year ahead after a 50 per cent decline in oil prices in six months, Canada is one of a number of the world’s largest producers pumping record volumes of oil with the likes of Iraq pledging even higher output.

Meanwhile, the International Energy Agency said in its December report that production in Saudi Arabia, Kuwait the United Arab Emirates, Canada and the United States are also at or near record levels after substantial growth in the industry as prices have surged in the last five years.

Investment bank Morgan Stanley said production is set to increase in West Africa and Latin America as it warned oil markets are poised for “more trouble” in 2015 as the supply glut grows.

So much for all the worry about “peak oil” a few years ago.

The oil market is so well supplied at this point U.S. producer ConocoPhillips apparently added to the bearish price sentiment Monday by simply announcing it had struck oil in the North Sea.

Canada is producing close to 4 million barrels a day — a record level.

http://calgaryherald.com/business/energy/oil-markets-hit-by-supply-glut-more-than-oil-producers-for-now