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Why high oil prices aren't creating an economic boom in Canada – CBC News

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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.

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Canada first to sign off on Finland, Sweden joining NATO – CTV News

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Canada became the first country to ratify Finland and Sweden’s accession protocols to join the North Atlantic Treaty Organization (NATO), Prime Minister Justin Trudeau announced Tuesday.

The move follows NATO leaders officially inviting the two nations to join the alliance during a summit in Madrid last week, and brings the two countries a step closer to becoming full NATO members.

“Canada has full confidence in Finland and Sweden’s ability to integrate quickly and effectively into NATO and contribute to the Alliance’s collective defence,” Trudeau said in a statement.

“Their membership will make NATO stronger and we call on all NATO members to move swiftly to complete their ratification processes to limit opportunities for interference by adversaries.”

According to The Associated Press, all 30 NATO allies signed off on the accession protocols on Tuesday, sending the membership bids to each nation for legislative approval. Both Canada and Denmark were quick to turn around their ratification documents.

“Thank You Canada! Canada is the first country to deliver its instrument of ratification to the United States Department of State, the depository of the North Atlantic Treaty!” tweeted Sweden’s Ambassador to Canada Urban Ahlin.

In Canada, the federal government made moves domestically to move through the ratification quickly, Trudeau said. This included issuing orders-in-council authorizing Foreign Affairs Minister Melanie Joly to “take the actions necessary to ratify, on behalf of Canada.”

Ahead of Parliament adjourning for the summer, the House of Commons debated and voted on a motion signalling their support for Finland and Sweden joining NATO.

In May, the House Public Safety and National Security Committee adopted a motion expressing “strong support” for the two Scandanavian countries’ membership in the alliance. The motion also called on all NATO members to approve their applications as quickly as possible.

A debate was held on this motion on June 1, and it passed unanimously when put to a vote the following day.

“Russia’s war in Ukraine has actualized something that was once only theoretical. An authoritarian state led by an autocrat has attacked a democracy: It has demonstrated that it is willing and able to attack a democracy. It has made clear that democracies that stand alone and are not part of military alliances are most vulnerable,” said Conservative MP and foreign affairs critic Michael Chong during the House debate. “That is why it has become necessary to bring both Sweden and Finland into the NATO alliance. This is an urgent matter.”

Also taking part in the debate, NDP MP and foreign affairs critic Heather McPherson said she supports Finland and Sweden doing all they can to prevent their countries from being threatened further by Russia.

“Prior to the further invasion of Ukraine, support for NATO membership was around 20 to 30 per cent in Sweden and Finland. Now, 76 per cent of Finnish people support joining NATO. Very simply, Vladimir Putin and the aggression of the Russian Federation are responsible for escalating tensions in the region and leading Sweden and Finland to seek NATO membership,” McPherson said.

With NATO member countries having different processes for completing ratification, it could be some time still before the two nations formally become a part of the longstanding intergovernmental military alliance.

With files from Senior Political Correspondent for CTV News Channel Mike Le Couteur

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Canada Day Ottawa: 12 arrested, 50 charges laid – CTV News Ottawa

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Ottawa police say 50 criminal charges were laid over the Canada Day long weekend and 12 people were arrested.

Last Friday marked the first Canada Day in Ottawa with major in-person events since 2019. Thousands of tourists and residents came downtown to celebrate the holiday. In the mix were several hundred protesters associated with the “Freedom Convoy” movement that paralyzed downtown Ottawa in February.

Ottawa police were out in force starting June 29 with the implementation of the downtown vehicle control zone, which was meant to prevent another vehicle-based occupation of the city.

Police said they arrested a dozen people in downtown Ottawa between June 29 and July 3, including people who were not involved in Canada Day events or protests. On top of the 50 criminal charges, four charges under the Controlled Drugs and Substances Act were also laid.

One man was arrested on Parliament Hill June 29 for causing a disturbance. He was taken back to Toronto on an outstanding warrant.

On June 30, police charged one person with breach of release orders and Highway Traffic Act offences after a traffic stop on Highway 417 at Anderson Road.

Later that day, three people were arrested following an incident at the National War Memorial in which a police officer was allegedly choked. Charges include assaulting police, resisting arrest, causing a disturbance, and assault by choking. This incident came shortly after Canadian soldier James Topp, who is facing a court martial for criticizing the government’s COVID-19 vaccine rules in uniform, completed his cross-country walk protesting vaccine mandates. Hundreds of people had gathered at the War Memorial to hear Topp speak.

On Canada Day, one man was arrested and charged for allegedly pulling a knife on RCMP officers near LeBreton Flats after officers broke up a fight. Two more people were arrested and face several assault charges after an attack in the ByWard Market.

On July 2, police arrested two people in a vehicle and seized a handgun. Several gun and drug charges were laid. Patrol officers also seized a gun in Sandy Hill that afternoon and charged a man with drug and gun offences.

On July 3, police arrested a woman for public intoxication who allegedly spit in an officer’s face. She now also faces an assault charge.

Ottawa police did not name any of the accused.

Police are also investigating paint on public property in Strathcona Park and on Wellington Street. Protesters painted messages about convoy organizers Pat King and Tamara Lich on Wellington Street on Canada Day. Police also said earlier they laid 19 impaired driving charges over the long weekend.

Ottawa Bylaw towed 121 vehicles from the vehicle control zone between June 29 and July 3 and issued 513 parking tickets. 

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Foreign Affairs Minister Mélanie Joly to take part in G20 despite Russia’s presence

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OTTAWA — Canada’s Foreign Affairs Minister Mélanie Joly will take part in a G20 meeting in Bali, Indonesia, this week, even though Russia’s Foreign Minister Sergey Lavrov is also expected to attend.

In March, Joly joined many others in walking out of a United Nations meeting in Geneva when Lavrov, whom Canada had brought sanctions against days earlier, began speaking.

In April, Deputy Prime Minister Chrystia Freeland joined a walkout of a G20 meeting for finance ministers and central bank governors in Washington to protest Russia’s invasion of Ukraine.

In May, International Trade Minister Mary Ng joined her counterparts from the United States, Australia, Japan and New Zealand in leaving an APEC meeting in Bangkok when the Russian representative began to speak.

Last week, Prime Minister Justin Trudeau said Canada would take part in the G20 leaders’ meeting in November, even if President Vladimir Putin goes too, saying it is important to counteract the voice that Russia will have at that table.

Joly, who recently said it was unacceptable for a Canadian official to attend a reception hosted by the Russian Embassy in Ottawa, is expected to join other foreign ministers at the G20 meeting in opposing the ongoing war in Ukraine.

This report by The Canadian Press was first published July 5, 2022.

 

The Canadian Press

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