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WorldView: Falling oil prices to turn Canada’s economy upside-down
BY JIM DONNELLY, TRANSCONTINENTAL MEDIA
The Nova Scotia Business Journal


OTTAWA – Export Development Canada said Thursday it expects oil prices to plummet in late 2008 and 2009, sending Canada's energy sector – and its exports – also crashing earthward. EDC projected oil prices, trading at almost US$150 a barrel just two weeks ago, to drop to around $100 by year's end and to less than $90 by early next year. The agency added speculation played a large role in the unprecented rise in oil prices this year.

"While the EDC recognizes that global supply and demand for crude is tight, we see signs that a large price correction is on the horizon," EDC chief economist Peter Hall said in a release. But while that might be good news for your gas tanks, it's anathema for Canadian exporters riding a wave of high-priced commodities. The agency forecasts Canadian exports to drop one percent in 2009, a seismic shift from the projected 4.2 per cent gain this year.

"The gain of four per cent in exports in 2008 is actually an energy price story," continued Hall. "When all price effects are removed, Canadian exports are actually on track to tumble by four per cent this year. "Since our spring global export forecast, there hasn't been much good news for Canadian exporters," he continued. "Losses due to the U.S. sub-prime crisis and its spill over effects into Canada continue to mount, the impact of soaring commodity prices upon consumers continues to increase, and proof of slowing global production is rampant."

Hall said demand for oil is likely to lessen somewhat as the world economy slows. He added that the Energy Information Administration, a section of the U.S. Department of Energy, has also forecast a doubling of OPEC's surplus capacity. – OBJ



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