It’s an unwelcome one-two punch for the global economy, economists say. But for Canada, the second blow is especially serious.
2:16 Stock markets plunge on coronavirus fears and oil price wars
Stock markets plunge on coronavirus fears and oil price wars
Oil markets tumbled Monday in their biggest one-day drop since the Gulf War of 1991, as Saudi Arabia and Russia vowed to ramp up oil production after failing to reach an agreement to curtail supply in order to prop up prices.
Both Brent crude, the global oil-price benchmark, briefly dropped to around US$31 a barrel, while U.S. West Texas Intermediate (WTI) crude, the North American benchmark, went as low as $27 a barrel. (All oil prices are in U.S. dollars.)
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“We’ve seen a number of oil shocks,” BMO chief economist Douglas Porter said. But, he added, “I must say this one is quite abrupt.”
The last time oil prices dived that low was the oil price crash of 2014-2015. Back then, Porter recalled, “we certainly saw the Alberta economy suffering a huge way.”
0:57 Why is trading halted on the U.S. and Canadian stock exchanges
Why is trading halted on the U.S. and Canadian stock exchanges
Alberta headed for recession?
“It’s bad news for the Alberta economy on the whole,” said Nick Falvo, a research associate at Carleton University. “With this recent drop, I think people will be starting to say the R-word and they would not be foolish in suggesting that.”
Canada’s energy sector felt the immediate effects of the drop in the price of crude oil. The stock prices of producers Suncor Energy Inc. and Canadian Natural Resources Ltd. were both down 20 to 25 per cent Monday morning.
For now, the impact on oil production in Alberta’s oil patch looks likely to be more contained than in the U.S. shale-oil fields, which account for 80 per cent of U.S. output growth, said Rene Santos, manager of North America supply analytics at S&P Global Platts.
While the lower oil prices could make a number of new U.S. shale-oil developments uneconomical, the impact on Alberta’s producers will be more limited, Santos predicted. That’s because the province doesn’t have many new projects slated to come online in the near term.
“What is good for Canada is that the oil sands have a very steady production,” Santos said.
Oil-price drops are more likely to affect new energy projects that are nearing completion. For existing projects in the oil sands, current production levels should continue for the most part, barring a further, steep drop in prices, Santos said.
Some analysts, however, are now forecasting just such a drop.
Investment giant Goldman Sachs slashed its forecast for crude prices, saying COVID-19 and the Russia-Saudi Arabia rift could send crude below levels seen in the 2014 market crash, which pushed crude prices below $30 a barrel by 2016.
Some believe the decline in oil prices will likely be severe and prolonged.
On Monday, Standard Chartered, a British financial service, cut its average 2020 Brent forecast to $35 per barrel from $64, and its average 2021 Brent forecast to $44 per barrel from $67.
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“With supply ramping up at the same time as coronavirus-related demand losses reach their maximum, the short-term floor to oil prices is extremely weak,” Standard Chartered said.
Alberta’s recent spring budget had forecast West Texas Intermediate will average $58 a barrel in the coming year.
Falvo said this should be a wake-up call for Alberta to move away from being reliant on oil revenues.
“The Kenney government should be thinking carefully about the advantages of investing in the public sector and the drawbacks of cutting in that sector,” he said. “Given that you can’t change the price of oil, you might want to think about what you can control.”
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Impact on the rest of Canada
While the last oil shock was painful for oil-producing provinces, “the rest of country pretty much drove on as if nothing really happened,” Porter said.
In general, low oil prices drag down both interest rates and the Canadian dollar, which stimulates economic activity, Porter noted. Lower interest rates mean cheaper borrowing, while a weak loonie helps boost exports.
This time, however, Canada is also coping with the economic implication of COVID-19, which had already put pressure on global oil prices amid factory shutdowns and reduced travel worldwide.
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On March 4, the Bank of Canada cut its trend-setting interest rate by half a percentage point to 1.25 per cent in an effort to soften the economic impact of the outbreak.
2:51 Bank of Canada governor addresses reasons behind interest rates cuts
Bank of Canada governor addresses reasons behind interest rates cuts
Now economists expect Ottawa to step in with fiscal measures.
Policymakers should be focused on ensuring the current turmoil “doesn’t morph into a broader downturn for the economy,” Porter said.
“That means standing ready and, in fact, doing some preemptive things to support consumer and business confidence, to make sure that everyone’s aware that the federal government will use its balance sheet as needed to support the economy.”
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Porter said federal coffers are in fairly good shape compared to other governments.
“I’m not particularly worried about a couple of years of big deficits, not when Ottawa can borrow for less than one per cent [interest rate],” Porter said.
The financial market rout has pushed borrowing costs to record lows for a number of governments, including Canada and the U.S., as investors in search of safer assets buy up government bonds.
Still, Ottawa should avoid getting locked into permanently higher spending levels, Porter warned.
What the economy needs is a focused, “surgical” intervention, he said.
TORONTO – Canada Goose Holdings Inc. says it has signed a deal that will result in the creation of its first eyewear collection.
The deal announced on Thursday by the Toronto-based luxury apparel company comes in the form of an exclusive, long-term global licensing agreement with Marchon Eyewear Inc.
The terms and value of the agreement were not disclosed, but Marchon produces eyewear for brands including Lacoste, Nike, Calvin Klein, Ferragamo, Longchamp and Zeiss.
Marchon plans to roll out both sunglasses and optical wear under the Canada Goose name next spring, starting in North America.
Canada Goose says the eyewear will be sold through optical retailers, department stores, Canada Goose shops and its website.
Canada Goose CEO Dani Reiss told The Canadian Press in August that he envisioned his company eventually expanding into eyewear and luggage.
This report by The Canadian Press was first published Sept. 19, 2024.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – TD Bank Group, which is mired in a money laundering scandal in the U.S., says chief executive Bharat Masrani will retire next year.
Masrani, who will retire officially on April 10, 2025, says the bank’s, “anti-money laundering challenges,” took place on his watch and he takes full responsibility.
The bank named Raymond Chun, TD’s group head, Canadian personal banking, as his successor.
As part of a transition plan, Chun will become chief operating officer on Nov. 1 before taking over the top job when Masrani steps down at the bank’s annual meeting next year.
TD also announced that Riaz Ahmed, group head, wholesale banking and president and CEO of TD Securities, will retire at the end of January 2025.
TD has taken billions in charges related to ongoing U.S. investigations into the failure of its anti-money laundering program.
This report by The Canadian Press was first published Sept. 19, 2024.
