The sky high price of gasoline is pushing many Canadians to their financial limits. Usually when this happens, the pain at the pumps is offset by a burst in growth for the Canadian economy. High oil prices used to mean a surge in investments and hiring.
Not this time.
“Typically when oil prices are rising, Canadians get a bit of relief at the pump as a result of a higher Canadian dollar,” said CIBC’s chief economist Avery Shenfeld.
“In this case the Canadian dollar is not following oil prices, in fact it’s moving in an opposite direction at the moment and that’s adding to the pain a lot of households are feeling.”
The loonie generally goes up because there’s an expectations that Canada’s oil sector is about to go on a spending spree, but this time it’s being a bit more cautious despite some record profits.
A pumpjack works at a well head on an oil and gas installation near Cremona, Alta., in October 2016. While higher oil prices normally trigger a new round of investment, the industry is showing more wariness. (Jeff McIntosh/The Canadian Press)
Less investment appetite
The last time the global price of oil surged this high, starting in 2008, there was a surge in investments and a hiring boom. Commodity expert Rory Johnston says years of low prices and low profits have made companies wary of moving too quickly this time.
“There’s a lot of scarring that occurred over the past decade,” said Johnston, author of the newsletter Commodity Context and managing director at Price Street Inc.
The boom bust cycle of oil is well known. When prices are high, companies dig new wells, buy new equipment and hire new employees. They do everything they can to squeeze out as much profit as they can while prices are high.
But like everything else, oil markets are governed by supply and demand. Prices surge because there’s not enough oil to keep up with demand. As companies produce more oil, that gap in supply shrinks and prices fall.
The global price of oil fell in 2015 and remained persistently low for years. It tried to rally in 2019 but then the pandemic hit. Oil prices collapsed into negative territory and investors were clobbered.
Johnston says those low prices were particularly felt in relatively high-cost jurisdictions like Western Canada.
“On top of everything else, [Western Canada] was facing pipeline constraints and environmental push back,” said Johnston. “I think what you saw was a gradual transition toward less investment appetite in the oil sands in any given price scenario.”
Record-setting profits
Higher oil prices are still a net positive for the Canadian economy, said CIBC’s Shenfeld, but things are different this time.
“When they’re caused by disruptions in the global economy they are not as powerful as when they are caused by strength in economic activity around the world,” he said.
As the price of oil has skyrocketed these past few months, oil companies have heaved a sigh of relief that they’re finally posting profits again. Saudi Aramco reported a record-setting $40 billion profit in the first quarter of 2022. Canada’s Cenovus posted its best first quarter ever with $1.6 billion in profit.
“We are getting better revenue and wicked profitability, given the fact that they’re not investing a ton of money right now,” said Johnston.
But the bust part of the cycle now weighs heavily on the minds of oil companies and their investors.
Gas prices in P.E.I. on Tuesday. With high oil prices and a lack of new investment, some oil companies are seeing record profits. (Wayne Thibodeau/CBC)
“There’s much more of a tendency to be careful, to be cautious, to be sure these high prices are here to stay before plowing in as much money as we did during the last up cycle,” said Shenfeld.
Demand flexible, but steady
So will the high prices stay? These past two years have been some of the most tumultuous and volatile in modern history. It’s easy to wonder if maybe things have changed.
“I have an allergic reaction as an economist to any claim that this time is different,” said Brett House, formerly the deputy chief economist at Scotiabank.
He says there were many rash predictions that COVID-19 changed things forever. But more than two years in, those predictions aren’t panning out.
He says it’s clear the work-from-home phenomenon is not going away anytime soon, which gives some consumers more choice about how much they need to travel.
“What’s different potentially is the flexibility of demand in response to high oil prices,” said House. “We’re a bit less inelastic than we were previously.”
Not everyone can work from home, obviously. And not everyone who can work from home will do so — even when gas prices hit all new highs.
Cars drive on the Don Valley Parkway, in Toronto, on May 6. While the COVID-19 pandemic did give some workers more flexibility with commutes, there hasn’t yet been a large downturn in demand due to high gas prices. (Alex Lupul/CBC)
But if some of them do, that would reduce demand and allow the market to work its way back to balance more quickly.
But that comes down to our own habits. And as CBC columnist Don Pittis pointed out this week, even in the face of staggeringly high gas prices, for now at least, Canadian driving patterns are holding steady.
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
