Commodities expert Patricia Mohr believes Canada could be missing out on massive economic opportunities if efforts to build pipelines and improve oil export capability fail.
The former vice-president of economics and a commodity market specialist at Scotiabank’s executive offices in Toronto gave her thoughts at the CanaData West Conference in Vancouver, B.C. this month.
"If the Kinder Morgan Trans Mountain Pipeline doesn’t go ahead, we will have a terrible economic loss in Canada and a crack in Canada’s Confederation, because Alberta and Saskatchewan will never get over it," said Mohr.
"We have a very crude oil-dominated economy and it has an enormous impact."
Even at the bottom of the oil price correction last year, crude oil generated by far the largest merchandise trade surplus for Canada at $32 billion, she explained.
"It is commercially risky to rely largely on one key export market — the United States," said Mohr. "The need to build greater oil export capability to the B.C. coast has as much to do with garnering competitive international prices as it has with the need to grow export volumes and tap the faster growing markets of Asia Pacific, including India."
She added she believes Canadian crude would be a hit in China and India as tanker costs from Vancouver to Asia have gone as low as US$4 a barrel.
"If you agree with pipeline expansion do let your elected reps know, let the public know. Don’t be the silent majority that sits back and says nothing," Mohr said.
"It’s becoming increasingly difficult to get through large resource projects like pipelines. In my view, the environmental permitting process has become way too lengthy in Canada and overly politicized and we are actually losing a lot of important economic opportunities, not only in B.C. but across the country. I find it very bothersome as an economist."
Mohr also talked about the global economy, noting that global commodity prices are on the road to recovery after several bumpy years.
She explained the market correction that happened from April 2011 to February 2016 was linked to austerity-led recession in the southern Euro Zone, slow growth, a fight for market share in oil and iron ore in a lacklustre global economy, an unwinding of grain prices due to large U.S. crops from 2013 to 2015 and the deflationary impact of a strong U.S. dollar.
"Around the middle of 2015 we got quite a shock," Mohr said, recalling August 2015, when commodity prices fell near a decade low.
"That happened in about one month and I was absolutely flabbergasted. It really worried me."
She said there was a big stock market correction in China that year and a lot of the hedge funds in New York and London thought China’s economy would have a hard landing. Many international investors asked if China was still a commodity growth story.
Mohr said commodity prices bottomed in February 2016 and have since rallied more than expected this year. She explained this was initially led by better-than-anticipated Chinese GDP growth and followed by recognition of stronger synchronized global growth, a decline in the trade-weighted U.S. dollar and tightening metal supplies.
"We have not seen this synchronized growth for about 20 years," said Mohr.
In addition to the good news for China, Brazil and Russia have lifted out of recession this year, southeast Asian economies have accelerated and world trade has picked up.