FINDING THE PERFECT BALANCE
The price of oil and the Canadian dollar are now inextricably linked, which means neither can please everyone
The price of oil and the Canadian dollar are now inextricably linked, which means neither can please everyone.
SAtriking the perfect balance is one of life’s most enduring pursuits. It is central to many of the world’s great religions and plays an integral part in the daily decisions we make and the relationships we form. Even our folk tales and fables are often about its achievement, but while Goldilocks found a suitable meal and comfortable bed quickly enough in her story, finding equilibrium in the real world can prove to be a far harder task.
Canadians have learned that lesson all too well so far this decade, particularly those with a vested interest in the economy and its growing dependence on the interplay between oil prices and the loonie. Both have dropped in dramatic lockstep over the past year, but just how bad the fall has been largely depends on whom you ask.
Folks in Alberta are rightly anxious about crude’s 50% descent to a low of US$43 a barrel in March from above US$100 last June. At the latter price, the province’s economy was humming along just fine, but even at current levels closer to US$58, oil-sands producers are barely breaking even and the fallout from capital-spending cutbacks and job losses is already being felt by the province’s economy.
Residents in provinces that are more reliant on manufacturing and tourism, however, have fewer qualms about plummeting oil prices and a less-than-sparkling loonie. Following a few years of complaining about the Canadian dollar being near or at par with the U.S. dollar, they are likely relieved by the swoon in the loonie to a recent low of US78¢ because it makes goods manufactured in the country more attractive on the export market, and turns Canada into a more enticing destination for foreign travellers.
Clearly, the ebb and flow of oil prices and our petrocurrency helps create imbalances across the country, which begs some questions: What level for each would create a better balanced economy? And, even more importantly, are those levels even achievable?