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Economy

Greater oil and gas export capacity will boost Canadian dollar – and productivity

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5 minute read

From the Frontier Centre for Public Policy

By Ian Madsen

It may be overly optimistic to think that Canadian producers could reap CAD$10 in gross profit per GJ, let alone the full almost-$20 price differential.  However, even if it is just $5 per GJ, that generates $90 million per day, or almost $33 billion per year.

Canada’s productivity performance has been dismal, having not increased over the last nearly ten years. Economists calculate productivity as the value of output divided by hours worked to generate that output.  However, the numerator, being the value of the goods and services produced, has been either neglected, or, when it is actually addressed, is looked at from the perspective of new, ‘high tech’ products and services (information technology, artificial intelligence, or advanced equipment, materials and devices).  While all these industries are important, other sectors boost value, too.

Foremost among those sectors is energy – where Canada has outstanding competitive advantages, but still does not get full value for its output.  Canada’s oil exports now go entirely to the United States, mostly via pipelines from Alberta and Saskatchewan, with a small amount sent by ship from the Vancouver area to U.S. West Coast customers.   All Canadian natural gas exports go entirely to the U.S., which already has a surplus.

The situation severely harms Canadian producers’ bargaining power, which causes them to experience severe discounts on natural gas and oil (whether heavy oil sands, Western Canada Select, ‘bitumen’; or conventional crude oil).  Fortunately, the situation will change radically, either next year, or, possibly, later this year.

The reason: Canada LNG, the first of possibly several West Coast liquefied natural gas liquefaction export terminals, should soon commence shipments to foreign buyers (South Korean, Japanese utilities, and others in East Asia).  The export capacity of the Kitimat, BC, facility is 1.8 billion cubic feet daily, or 1.8 million Gigajoules, ‘GJ’.

Natural gas now sells for about $2.50/GJ Canadian in Alberta, whereas East Asian recent prices were US$16.70:  about CAD$22.25.  (It costs several dollars to liquify, load, transport and re-gasify at destination each GJ.)  Every dollar of after-cost price differential flows directly to producers, and Canada’s balance of payments.  The balance of payments determines our loonie’s value, and, thus, Canada’s standard of living (also, to some extent, inflation).

It may be overly optimistic to think that Canadian producers could reap CAD$10 in gross profit per GJ, let alone the full almost-$20 price differential.  However, even if it is just $5 per GJ, that generates $90 million per day, or almost $33 billion per year.  As total exports were $596.9 billion in 2022, this would constitute an increase of about 5.5%.  This amounts to roughly $1,610 per person in Canada’s current 20.5 million-strong labour force – a big productivity increase for ‘little’ extra work (as everything will have already been built).

Yet, that is not all.  There is also the TransMountain, ‘TMX’, pipeline expansion, scheduled for completion this year.   Its extra capacity of 590,000 barrels per day is all slated to be exported.  If ‘just’ $10 extra per barrel is garnered (the U.S. heavy oil differential exceeds that, typically), that would bring $5.9 million more per day:  $2.15 billion annually.

This would also contribute to a better balance of payments (perhaps becoming positive once more), a higher loonie, higher productivity, lower inflation, and a higher standard of living.  Australia, which now outperforms Canada, does not interfere with its own massive LNG exports.  If Canadian politicians can restrain themselves from blocking more oil or gas pipelines and LNG export terminals, a bright future awaits.

Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy

Watch Ian Madsen on Frontier Live on X here.

Economy

The White Pill: Big Government Can Be Defeated (Just Ask the Soviet Union)

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From StosselTV

People have been “black pilled” to think the world is doomed. Michael Malice says there’s hope.

In his book, “The White Pill,” he argues that tyrannical regimes, like the Soviet Union, can be toppled.

Today, media and universities distort history, and push socialism. It used to be worse. The New York Times once covered up Stalin’s famine, even as millions starved. Why? Malice says it’s because NYT star reporter Walter Duranty liked communism’s utopian promises, and status he got from his exclusive Stalin interviews.

Malice says the fall of the Soviet Union should give us hope that America can resist the universities and media’s brainwashing – or any tyranny that someone is “black pilled” about.

Our video explains Malice’s “white pill” and why you might want to take it.

After 40+ years of reporting, I now understand the importance of limited government and personal freedom.

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Libertarian journalist John Stossel created Stossel TV to explain liberty and free markets to young people.

Prior to Stossel TV he hosted a show on Fox Business and co-anchored ABC’s primetime newsmagazine show, 20/20.

Stossel’s economic programs have been adapted into teaching kits by a non-profit organization, “Stossel in the Classroom.” High school teachers in American public schools now use the videos to help educate their students on economics and economic freedom. They are seen by more than 12 million students every year.

Stossel has received 19 Emmy Awards and has been honored five times for excellence in consumer reporting by the National Press Club. Other honors include the George Polk Award for Outstanding Local Reporting and the George Foster Peabody Award.

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To get our new weekly video from Stossel TV, sign up here: https://www.johnstossel.com/#subscribe

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Alberta

Emissions cap threatens Indigenous communities with higher costs, fewer opportunities

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Dale Swampy, founder of the National Coalition of Chiefs. Photograph for Canadian Energy Centre

From the Canadian Energy Centre

By Deborah Jaremko

National Coalition of Chiefs founder Dale Swampy says Canada needs a more sustainable strategy for reducing emissions

The head of the National Coalition of Chiefs (NCC) says Ottawa’s proposed oil and gas emissions cap couldn’t come at a worse time for Indigenous communities.

Dale Swampy says the cap threatens the combined prospect of higher costs for fuel and groceries, along with fewer economic opportunities like jobs and revenues from involvement in energy projects.   

“Any small fluctuation in the economy is affected on our communities tenfold because we rely so much on basic necessities. And those are going to be the products that increase in price significantly because of this,” says Swampy, who founded the NCC in 2016 to fight poverty through partnerships with the natural resource sector.

He says that of particular concern is the price of fuel, which will skyrocket under the emissions cap because it will force reduced Canadian oil and gas production.

Analysis by S&P Global found that meeting the cap’s requirements would require a production cut of over one million barrels of oil equivalent per day (boe/d) in 2030, and 2.1 million boe/d in 2035.

“Production gets reduced, and the cost of fuel goes up,” Swampy says.

“Our concern is that everything that has to do with both fuel for transportation and fuel to heat our homes is amplified on First Nation communities because we live in rural Canada. We live in isolated communities, and it costs much more for us to operate our daily lives because we have to travel much further than anybody in a metropolitan area. So, it’s going to impact us greatly.”

Indigenous communities are already stretched financially, he says.

“What you could buy in 2019 terms of meat and produce is almost double now, and even though the inflation rate is trending downwards, we still haven’t gotten over the impact of what it costs for a bag of groceries these days,” Swampy says.

“In our communities, more than half are under the age of 21, so there’s a lot of bigger families out there struggling to just get food on the table.”

The frustrating timing of the cap is that it comes amid a rising tide of Indigenous involvement in Canadian oil and gas. Since 2022, more than 75 Indigenous communities in Alberta and B.C. have agreed to become part owners of energy projects.

Three major projects – the Trans Mountain Pipeline Expansion, Coastal GasLink Pipeline and LNG Canada export terminal – together have spent more than $11 billion with Indigenous and local businesses.

“We’re at a turning point right now. There’s a real drive towards getting us involved in equity opportunities, employment opportunities, and contracting opportunities,” Swampy says.

“Everybody who didn’t talk to us in the past is coming to our front door and saying, ‘Do you want to work with us?’ It couldn’t come at a worse time when we have this opportunity. The emissions cap is going to reduce the amount of activity, and it’s going to reduce the amount of investment,” he says.

“We’re part of that industry now. We’re entrenched in it now, and we have to support it in order to support our people that work in this industry.”

Economic growth, and more time, is needed to fund development of low emissions energy sources without ruining the economy, he says.

“I think we need more consultation. We’d like to see them go back to the table and try to incorporate more of a sustainable strategy for emission reductions,” Swampy says.

“We’re the only country in the world that’s actually incorporating this type of legislation. Do you think the rest of the world is going to do this type of thing? No, they’re going to eat our lunch. They’re going to replace the production that we give up, they’re going to excel in the economy because of it, and they won’t talk about significant emission reduction initiatives.”

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