1964 was a harbinger of the future we now inhabit, but no one knew it at the time. It was the year of the Free Speech Movement (FSM) at the University of California Berkeley, the first stirrings of the cultural revolution to come. FSM epitomized the fear of a world dehumanized by mainframe computers controlled by corporations. Yet that same year Marshall McLuhan also first articulated his famous concepts of “the medium is the message,” and his vision of a “global village.”
Regrettably, this week’s events in the oil market, provide further evidence of the dire consequences ahead for the Canadian oil economy. Oil industry bulls who have been betting on a quick rebound in oil prices are likely to get severely burned, and the prospects for the local tourism based economy are only worsening.
The growing downturn in the fossil fuels industry has extraordinary implications globally. While some are proposing theories that this downturn will be short-lived, there simply isn’t much evidence to support an optimistic forecast. Saudi Arabia is openly executing a long term strategy to squeeze “high cost oil producers,” using its unquestioned leverage and the lowest production costs in the World. Europe is facing potential deflation, and the current European recession is forcing the European Central Bank to begin “quantitative easing,” beginning this week, essentially printing money. The Russian economy is in shambles as the ruble weakens, something Putin did not plan on occurring. The Chinese economy has weakened sharply and will likely remain weak into the near foreseeable future. Meanwhile Canada is at the mercy of these global forces, with little in the way of economic reserves to defend its economy, having bet the entire Canadian economy on oil.
UPDATE: May 21, 2015. Goldman Sachs has just released an oil price forecast suggesting that North…
The Canadian media (CBC, Globe & Mail, Canadian Business) have been buzzing with analyses of Alberta Premier Alison Redford’s pronouncement last month that the “Bitumen Bubble,” is now crashing down on the Alberta economy, and potentially the entire Canadian economy. The Alberta budget released last Thursday, March 7, acknowledged a $6.2 Billion deficit from this year, and “even larger declines in the next several years,” due to forecasts for significant price decreases for “Western Canada Select” (WCS), the market term for Alberta oil sands oil. Canadian Finance Minister Jim Flaherty echoed the impact of reduced oil sands revenue on the federal budget, by warning of significant cutbacks in federal spending as well. The impact of this sudden change in the prospects for the Canadian petroleum industry and for government oil tax revenues, will likely also have serious implications for the BC economy, jobs growth, business investment, consumer spending: essentially the Canadian economy as a whole will suffer.