Friday, July 25, 2008

Why expected lower oil prices could be good for the environment or not.

The EDC (Export Development Canada Agency) has just released a report forecasting that the value of exports will decline in 2009.

The reason for the expected decline will be the continuing drop in the price of oil.
The agency is projecting oil to drop to $100 a barrel by the end this year and further decline to $84 by this time next year.

The Canadian economy and the Canadian dollar have both been propped up by the high price of oil and the EDC is also projecting that the dollar will also decline to $0.94 against the US next year.
This is probably the most positive economic forecast we could receive.

Canada is an exporting country with one major trading partner. The parity with the US dollar has hurt all industries in Canada, everything from film production to the lumber industry.

Meanwhile any gains that we might have expected through lower cost of imports and an increase buying power was being negated by the higher fuel costs to manufacture and deliver the goods.

Although a lower forecast for the price of oil is a negative for Alberta, Saskatchewan, and Newfoundland, it is positive for the rest of the country and when combined with a shrinking dollar a boost to the other resource and commodity based industries.

The cold hard fact is that a lower price of oil only hurts the oil producing industries, for the rest of country it is positive.
The agency points out that high oil has not lifted all sectors, saying 2008 has been a terrible year for manufacturers in Central Canada. While the value of exports is rising this year, export volumes will actually shrink by four per cent, and next year won't be any better.
The lowering of oil prices might slow down our current expansion of greenhouse gases within the oil sector and also provide the impetus to finally introduce environmental plans that Canadians can afford and are now more willing to accept. 
Lower prices should start to reduce the urgency to expand the production of high cost oil reserves such as the tar sands and the pressure to rush into the development of new higher risk, higher cost Arctic reserves.

Thus giving the industry the time it needs to develop the technologies to reduce the resulting greenhouse gases and other major risks to the environment before rushing into expansion.
Additionally Canadians are currently going through a sticker shock at the gas pumps and the subtle increasing price of consumer goods (due to higher fuel costs).
We are now looking at ways to reduce our personal consumption, be it the next car we buy, how far we travel or what we set the thermostat at. We are getting more environmentally aware and are being constantly reminded every time we fill up our tank.
Although 2009 is still going to be a tough year as our economy re-adjusts, this is a great opportunity for a government or political party to implement environmental changes that will be less intrusive on a more environmentally conscious public.

Be it a Cap and Trade, Carbon Tax or combination of both.

Unfortunately it will be an opportunity lost with our existing government that bases it’s environmental plan on the protection and expansion of only one sector of our economy.

EDC references from Canadian Press here

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