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Canada’s Election Could Impact the U.S. Economy

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To say that the outcome of the current Canadian federal election campaign could have a direct effect on the United States would be an understatement.

Under Prime Minister Stephen Harper’s minority Conservative government, Canada’s economy has endured the global economic crash with less damage and is recovering faster than any other G8/G20 nation.

But all of that could be for naught depending on the election outcome.

In a minority situation, the opposition parties have a larger number of combined seats than the sitting government, which makes it a tenuous situation. Harper deserves credit for keeping his party in power as long as he did – longer than any minority government in our nation’s history – given the fact the other three national parties are all on the political left.

So far, the campaign has been the usual list of promises and soundbites. Promises of more jobs, a stable economy, more money to health care and education fill the platforms of all parties involved.

There is one policy put forth by the left wing parties, however, that could potentially devastate the Canadian economy. It’s repercussions would spill over the border and leave it’s mark on our neighbor to the south.

I’m sure Americans are familiar with the concept of Cap and Trade. Both the small ‘l’ Liberals and the far-left socialist New Democrats have versions of it in their respective platforms.

Basically, it amounts to more and higher taxes on our energy sector by having the federal government assume greater control. It would directly impact the jewel of Canada’s oil industry: the Alberta oil sands.

At a time when the United States is looking for reliable sources of oil and natural gas that don’t involve dealing with terror-sponsoring nations, the enviroNazi-vilified oil sands is a sound and ethical source of black gold from America’s closest ally and neighbor.

When you cut through the Greenpeace hysteria and lies you will find the most safe, secure and abundant source of crude.

If Canadians decide to lean to the left, that well could dry up quickly. Not only would that put the U.S. in a position of having to continue its dealings with unsavory nations, but the economic ramifications of such a mistake would surely impact the entire North American economy.

The truth is, Canada has tried this before. In the late 1970’s, quasi-communist P.M. Pierre Trudeau believe the best way to deal with a floundering economy was to nationalize our oil industry with something called the National Energy Program. In reality, it was nothing more than a thinly-veiled attempt by Ottawa to raid Alberta’s economy. It was a program of wealth distribution, plain and simple.

Not only did the NEP turn out to be the expected failure, it destroyed the Albertan economy to the point that it took the oil-producing province more than a decade of tough cuts and rollbacks to recover. The negative impact hit other regions of Canada as well, as most of the nation’s revered social programs were funded by Western Canada’s oil revenues.

Fast forward to today, and we see the Liberals have not learned from their past mistakes and are proposing what amounts to be the NEP II. This time the left’s favorite excuse for everything they do, the environment, is the explanation.

May 2nd is election day. The failure of Canadians to return Stephen Harper’s Conservatives to power with a majority could very well signal the beginning of another disastrous attack on Alberta.

With the economies of our two nations so deeply intertwined, the shock-waves would reach all the way to Washington D.C.

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  • Boeke

    Same thing.

  • Cannonshop

    #24 Considering how the Soviets left the Baikal region, Glenn, I’d say it has not to do with “Corporate” profits, and everything to do with what you get when your corporation is run by the government, for the benefit of those IN the government.

  • zingzing

    don’t forget about “not in my back yard,” glenn.

  • Glenn Contrarian

    zing –

    Now you know very well that when there’s corporate profits to be made, the environment counts for nothing. Any conservative knows this.

  • zingzing

    stm: “Once shale oil producers can cover their production costs and make the raw profit (some are already doing it in developing nations, including Brazil, where production costs are lower although the amount now being extracted is very small compared to normal oil proudction), we have another source.”

    i don’t know too much about shale oil, but what kind of environmental damage is done by getting it out of the ground? is it worth it? or is it just like watching a heroin junkie getting off on methadone, except more expensive?

    independence from oil would be good for the entire earth. anyone who lives in a country without an oil-based market (i don’t know if that really excludes the us at this point… we certainly are oil-based, but that’s just who we are for some reason…) could agree to that.

    oil’s the new land, the new gold. when qatar has the highest gdp per capita and growth rate in the world, you know what the real goal is. time to invest in qatar. (see the world cup.)

  • S.T..M

    Once the price of gas/petrol reaches a certain level, shale oil deposits will come into play.

    The only reason they are not heavily exploited so far is that it costs more to make petrol/gas from shale oil than it does to get regular crude out of the ground in the mideast and elsewhere, ship it all over the world and refine it and sell it at the pump.

    There are vast deposits of shale oil around the world. We are a long way from peak oil. The big question is: How much are we prepared to pay for the stuff in the long run. Once the price is hitting $2 a litre at the pump (before tax), watch shale oil become the next catchcry.

    I hope experiments continue with hydrogen and electric fuel cells and these are turned into workable solutions so we don’t go down that path. Biut of course, we will.

    I believe the raw profit at the moment for a single barrel of oil selling, for say, $85 on the international market, is about 55 cents. So the Saudis, for instance, pulling it out of the ground, will only make 55 cents a barrel for the actual extraction of each barrel. Profit on the market, however, is a different ballgame.

    Once shale oil producers can cover their production costs and make the raw profit (some are already doing it in developing nations, including Brazil, where production costs are lower although the amount now being extracted is very small compared to normal oil proudction), we have another source. The US especially and Russia are full of the stuff, and Canada and Australia have large deposits. The second largest deposit is in the Congo. Let’s all watch as another African nation gets ripped off.

    And yes, Jordan, one of the reasons carbon taxes, or C&T, is absurd is that the largest polluters are actually compensated under most schemes while the average Joe and Joanne like us pays for the additional costs at every turn.

    It’s been conservatively estimated that under Australia’s proposed carbon tax, every Aussie household will fork out a minimum per year extra of about $900, depending on the size of the household.

    That includes spiralling electricity costs in a country that is one of the world’s largest producers of coal and whose domestic contribution to world greenhouse gas emmissions is miniscule (different story with the coal we sell to China, Japan, India and Korea).

    But it’s madness … and done to appease the looney left.

  • LynnfromBC

    Add to that: So we could buy at the highly inflated gas prices, and getting higher by the day.

  • LynnfromBC

    It reminds me of how the BC government paid everyone a Carbon Tax rebate just so we could fill our gas tanks.

    This is the same government that now pays each family, based upon income, a quarterly amount to off set our high carbon taxes. Who is buying who here?

    This much the same as a cap and trade in that the government put a cap on what they would pay out to us, only so we could trade those dollars for a carbon footprint that looks much smaller from an individual standpoint than it would if a single entity spent all those dollars on carbon emissions.

  • Jordan Richardson

    Yes we have, Stan. C&T is one of the more ludicrous ideas to come around in a long time. Not only are the changes associated with it far too modest to make a difference, it simply allows the biggest polluters to “market” their way out of any environmental responsibility. It’s a “scheme” (scam) that avoids the real change required to combat our climate issues.

  • Louis – google ‘National Energy Program – Canada’. Multiply by 100. That should answer your question.

  • Louis T.

    Cap and Trade has been a huge success at reducing sulphur emissions, and has almost eliminated acid rain. So what’s wrong with C&T?

    Carbon seems like a good thing to tax or regulate, so why not?

  • S.T..M

    Patrick: “it is a valid statement.”

    Possibly, but it could have benifted from an extra word or .. “and is among those recovering faster”.

    It might seem like a small thing, but if you’re arguing global economics, and making a definitive statement about it, it’s not.

    And yes, I agree: the UN has become near useless in many areas, but a global agreement on cutting pollution, instead of constant banging on about climate change and carbon taxes, would benefit everyone … except the legion of people employed to back up an argument that is looking more and more spurious.

    There’s no doubt, however, that pollution is going to do us in. Forget the US. It’s a major air polluter with a conscience but the developing economies like China and India have no such issues. Their industries rely on coal and they pollute heavily to catch up with the rest of the industrialised world. While people in the West are talking about swapping cars for bicycles, Indians and Chinese are abandoning pedal-power and getting into cars at an unseen rate of knots. And who can blame them?

    The whole climate-change movement is also creating a backlash against “greenwash”, not helped by governments using greenwash to appease Green or looney left (and I’m on the far right of the left) MPs who are using their influence in governments who depend on them for slim majorities in parliament.

    Which is why Australia is currently embroiled in a carbon-tax debate that threatens to undo the federal government entirely. So it should. It’s bullsh.t.

    Do something real about pollution around the globe, not tax an entire nation whose people contribute a miniscule amount of greenhouse gas to the atmosphere.

    Like I say, it’s just going to be another part of tyhe big steal; once the money markets in New York and London get their heads around the notion of a price on carbon and how they can best make a quid out of it, we’re all buggered.

    You’ll have Wall Street selling carbon derivatives. And we know what happened last time they tried to flog off useless investments based on dodgy packages of debt parcelled up into little boxes of almost nothing and sprinkled with triple-A rated fairy dust.

  • S.T..M- when you consider such factors as where the two nations were at the beginning of the crash, lost actual and lost potential investment, the impact on trade, rate of recovery, and the expected growth (IMF says it is updating its forecast early May), it is a valid statement.

    We do share the same opinion on cap and trade, but I dispute the idea of a UN agreement on anything, let alone cutting global pollution. Admittedly, that plays more to my belief the U.N. has become a useless entity than it does to my thoughts on climate change.

  • S.T..M

    And I think we’ve had this conversation before, Jordan, in relation to “carbon taxes”, “emissions trading schemes” or cap and trade …

    Wall Street and the City of London will be just rubbing their hands with glee once enough developed economies beging putting a price on carbon.

  • S.T..M

    I do agree with him, however, in relation to cap and trade, or what the Australians are accurately calling a “carbon tax”.

    It’s ridiculous. It’s a burden on industry and adds to household bills an does nothing to alter the climate in the long run.

    A UN agreement to cut global pollution would be the first step to start, not individual countries whose greenhouse gas emissions are miniscule compared to other nations around the world introducing cap and trade and passing it off as “green”.

    It’s just “greenwash” dressed up as “green”, more accurately, and just another way for governments to make money.

    It also damages any real support among working families in western countries for actually doing something that really will help the planet, because they up being the poor bastards who are paying for it a time when every other household bill, including the cost of a simple basket of groceries and fuel at the pump, is rising.

  • S.T..M

    Ah, I thought it might have been something like that.

    How are you Jordo? I haven’t been around much lately. All good, I hope.

  • Jordan Richardson

    You can’t entirely blame Patrick, Stan. He’s just regurgitating our arrogant PM’s gleeful obfuscations.

  • S.T..M

    Further to your comment, I notice the IMF forecasts Canada’s growth rate at 2.8 per cent in 2011, and Australia’s at 3 per cent.

    It’s not that I disagree entirely with your premise, it’s that the opening statement wasn’t accurate, and then you suggest it’s I who should look at the IMF figures, when they also plainly show the same thing and back up why I say you are wrong.

  • S.T..M

    No need to cherrypick details from the IMF.

    The Wall Street Journal, that august journal of financial record, also tells me it is so.

    It tells me it was Australia, not Canada, that emerged almost unscathed from the GFC, and was the first to raise interest rates, or official cash rates.

    Canada may NOW be recovering as fast or faster, but it wasn’t doing as well as Oz at the time.

    Had that been so, it would have been able to raise official cash rates earlier – a point noted by the WSJ in realtaion to Oz.

    Canada has a much higher unemployment rate too as of March this year: 7.9 vs 4.9.

    Because it came out of the GST almost unscathed and while Canada suffered somewhat by its closeness to the United States, in 2010, the IMF described Australia and its economy as the developed nation furthest ahead of the pack, saying “Australia and the newly industrialized Asian economies are off to a strong start and will likely stay in the lead”…

    So, no, Patrick, I don’t have any beef with the IMF.

    It’s your facts I have a beef with.

    Especially you’re going to write a story about economics and then dismissively tell me my beef is with the IMF when your facts are wrong.

    The there’s the Aussie dollar … worth more than the Canadian. Only by a tad, but the market does find its own level and is a pretty accurate barometer most of the time, particularly after something as crippling as the GFC.

    And that’s after a string of natural disasters Down Under that have damaged some of its traditional export markets.

  • S.T.M.- your argument is with the IMF, then.

  • S.T..M

    Author: “Canada’s economy has endured the global economic crash with less damage and is recovering faster than any other G8/G20 nation”.

    Apart from Australia, whose dollar, like the Canadian dollar, is now worth more than the US dollar (and about the same as Canada’s despite fluctuations on the currency markets; today, the Aussie is worth a few cents more), whose economy actually GREW slightly through the GFC, whose unemployment figures stayed level at about 5 per cent during the crisis, and which was the first G20 country to begin raising the official cash rate – now back to about 4.5 per cent Down Under – after the world tumbledown.

    Gotta get these things right Mr story author, especially when they are contained within your opening statement, because knowing it was wrong made me not want to read any further as I reasoned if the writer didn’t know that, then the rest of the story might be bunkum.

    It probably isn’t, but facts are important.

  • Jordan Richardson

    if Canadians want to sabotage their own economy to line the pockets of a Tennessee snake-oil-dealer named “Albert Gore Jr.”, that’s their business

    Cannonshop, I follow your point ideologically. But practically and realistically…well, it makes zero sense.

  • Boeke

    Cannonshop says:”The U.S. relies currently on imports to a degree that is both a threat to our economic, and national security.”

    Quite wrong, as near as I can see.

    By using other peoples oil we have spared our own oil, saving it for a rainy day or for hostile foreign environments

    But had we exploited all our own oil reserves we’d already be tapped out and be in the oil markets as beggars. We only mine about a third of the oil we use. As long as it’s underground it’s like money in the bank

    We’ve been getting a good deal for about 50years by buying other countries cheap oil.

    If we make more US oil available to international buyers (and all oil is available at the international fungible price) then about 80% of that oil will be sold to foreigners (Chinese and others) at todays bargain prices, which is a big disadvantage. The Chinese will buy our oil at todays cheap prices.

  • Cannonshop

    To expand further- the U.S. needs to get its own house in order about oil and energy-and stop relying on importation, because at any time, your trading partner selling you what you need could change their mind…and there is nothing you can (morally) do about that.

    The U.S. relies currently on imports to a degree that is both a threat to our economic, and national security. We really do NOT have a right to dictate to Canada (yes, Ian, I’m agreeing with you on that, no, it doesn’t mean you’re entirely right.)

    Geologically, this is a situation that is more than somewhat ridiculous-there are actually significant oil deposits in the U.S. owned portions of North America, and that’s before you even start looking off-shore. Some of those fields were plugged with concrete in the late 1970s at the EPA’s insistence. There’s still oil in those areas.

    Other sources have been locked away in ‘wilderness’ areas. Likewise, alternative sources have been largely suppressed by executive orders dating back to the Carter administration.

    There’s a lot we COULD do…if it were permitted, to ease the blow of an oil-trade partner suspending their exports.

    it’s only a matter of what portion of the dogma are you willing to sacrifice to DO them?

  • Cannonshop

    Eh, if Canadians want to sabotage their own economy to line the pockets of a Tennessee snake-oil-dealer named “Albert Gore Jr.”, that’s their business.

    It’s not a good idea, mind you-basing policy on bad science and manipulated numbers never is…but if that’s what the Canadian People want, well…it’s what they’re going to get.

  • Ian- Canada may be 10% the size of the U.S., but if the taps to the Alberta oil sands switch off, the impact in America will surely be felt. The point isn’t that Canadians should consider the U.S. when going to the polls, but of the danger of a Liberal-pushed Cap and Trade policy and what it would do to the North American economy.

  • Ian

    So you are saying that the Canadians should elect governments based on what is best for the States, and that the only real issue is a steady supply of cheap oil for America?

    Believe it or not, other sovereign nations have their own interests.

    Canada survived the economic crisis for the simple reason that it avoided the reckless and irresponsible policies of U.S. banks and corporations.

    The “socialist” government in Canada provides oversight of financial companies to a degree that wouldn’t be tolerated in America. It has also for decades provided health care and other state funded programs seen as Un-American south of the border.

    As to the election, Canada has done well under both Liberal and Conservative leadership, and will continue to do so, with or without Mr. Harper.

    As Canada has 10% of the population of America, and vastly less economic power, the “shock-wave” shouldn’t be too hard to take.

    When Canadians go to the polls on May 2, they probably won’t give much thought to America’s oil supply, but when did Americans ever consider the welfare of another country when casting their vote?