Alberta Premier Jason Kenney delivers a statement on the construction of the long-delayed 8 billion dollar Keystone XL crude oil pipeline project, in Calgary, Alberta, Canada March 31, 2020. A single talisman has defined Jason Kenney’s time as premier of Alberta: oil.
TODD KOROL/Reuters
A single talisman has defined Jason Kenney’s time as premier of Alberta: oil.
When he campaigned in last year’s election, he traversed Alberta in a blue pickup truck, like a roughneck heading out to work on a rig. His slogan was: “Jobs. Economy. Pipelines.” Pipelines were pitched as the foundation of it all. The province’s oil output had surged in recent years, leaving existing lines jammed.
Mr. Kenney was smart to pitch progress on pipelines as a measure of success, since that meant promising something that was already happening. The federal government had already bought Trans Mountain and is committed to getting it built. Another line, Enbridge’s Line 3, is making progress.
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And then there’s Keystone XL. The biggest of the three, it aims to nearly triple the flow of Alberta oil to refineries in Texas. That project, long delayed by American political and legal roadblocks, also looked to be moving ahead. TC Energy in January readied to start construction this year. What wasn’t known then was that the project had a new backer.
Last week, Mr. Kenney announced a surprise $7.5-billion investment in Keystone XL. With cash and loan guarantees, the province will effectively pay the majority of construction costs. The deal landed during the coronavirus pandemic and an oil price collapse, but Alberta said it had been in the works since last September. The Premier declared the investment “a solid bet” and called it Alberta’s “last chance” to get a big pipeline built.
All of which may turn out to be true. All that can be said with certainty today, however, is Albertans are taking on more risk than the Premier suggests.
The model for Mr. Kenney’s move is the Trudeau government’s $4.4-billion purchase of Trans Mountain. But that project’s risks were all domestic, and subject to Canadian law and regulations. Even so, with construction costs soaring to $12.6-billion, it is unclear whether Canadians will get all their money back.
Unlike Trans Mountain, Alberta is a bystander to any trouble ahead for Keystone XL. It has already been held up by a decade of political and legal challenges in the United States. The pipeline’s future is in American hands.
The bond-rating agency Moody’s says it faces further protests, continuing legal issues and the immediate challenge of construction during a pandemic. “Political risk,” according to Moody’s, “may ultimately lead to project cancellation.”
While TC Energy has long been working to clear the hurdles and get approval to build the pipeline, the company in February maintained the project was still too risky. Moody’s analyst Gavin MacFarlane said it is “highly unlikely” TC Energy would have forged ahead without Alberta’s money. Mr. Kenney made the same case. “Without this investment by Alberta, I don’t believe the pipeline would be built, at least any time in the foreseeable future.”
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TC Energy reduced its risk. Alberta taxpayers have assumed it.
As Mr. Kenney unveiled his investment, we couldn’t help but think of the fiasco at Muskrat Falls. Newfoundland and Labrador is currently in dire financial straits, saddled with a crippling debt. Much of it is attributable to a huge bet the small province made on the Muskrat Falls hydro project.
The relative level of failure at Muskrat Falls is far greater for Newfoundland than even a total loss on Keystone XL would be to Alberta. But the decision making is similar.
Newfoundland was convinced Muskrat Falls was a good idea from the start, and rejected criticisms and alternatives. A scathing review found the province overstated benefits and ignored pitfalls.
As for Mr. Kenney, there is no indication he weighed how else Alberta could invest $7.5-billion. In years past, Mr. Kenney regularly inveighed against using taxpayer dollars to anoint winners and losers. And it’s important to remember that Alberta taxpayers have not put up $7.5-billion to build a pipeline. Construction is the goal, not a certainty. The pipeline’s fate remains dependent on legal and political decisions made in another country.
If the project was a slam dunk, it would not need government money.
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The Keystone XL investment may yet pay off, and if it does, all Canadians should cheer. The province needs a break, as does the oil industry. But Albertans’ $7.5-billion is very much at risk. Mr. Kenney’s bet is just that.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
