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Global investment of more than $1 trillion in planned LNG plants at risk

Employees work next to tanks for liquefied natural gas at a factory in Xian, China in June. China is a prime customer in a worldwide LNG expansion. (Reuters)

There’s no question that when you burn it, methane, the main component of natural gas, is much cleaner than coal.

With that in mind, you might think a newly released report titled The New Gas Boom should be cause for celebration.

Instead, the fresh analysis from Global Energy Monitor, a group well known in energy circles for keeping track of coal plant construction in Asia, sounds a warning, not just for the climate but for investors in what it calculates as a risky $1.3 trillion US worth of global gas infrastructure.

Effectively, the report warns that rather than being an environment-friendly product that can help solve our climate problems, gas is the new coal.

The explosion in spending on planned new liquefied natural gas (LNG) facilities — the vast majority in the U.S. and Canada — combined with new calculations for leakage from the LNG supply chain called fugitive gas — means the world may soon turn against gas in the same way it turned against its solid fuel relative.

“New studies have shown there is significantly more fugitive gas than studies showed five years ago, and the gas is also a bigger contributor to climate change than was understood,” said James Browning, one of the report’s authors.

A 34,000-ton heavy lift vessel carries barges for LNG Canada completing pre-construction work at Kitimat, B.C., last fall to prepare the port for larger vessels once the new $40-billion natural gas export facility is constructed.(YouTube/LNG Canada)

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Foonie? As loonie turns 30, it’s time to think of a name for a $5 coin: Don Pittis

July 1, 2017

Foonie? As loonie turns 30, it’s time to think of a name for a $5 coin: Don Pittis

And while we’re at it, Canadians must lose their attachment to those pesky nickels

Canadian astronaut Chris Hadfield presents Bank of Canada Governor Stephen Poloz with the $5 bill he took into space. Maybe next time, it will be a coin. (Ryan Remiorz/Canadian Press)

Foonie doesn’t really work, so Canadians will have to put on their thinking caps to figure out a name for the $5 coin.

As the loonie turns 30 this week, painful though it may be, we must inevitably begin to prepare ourselves to say goodbye to our blue Wilfrids.

This is not an inside scoop from the Bank of Canada; officially there is no plan to kill the bill.

But there is evidence it is already on the minds of Canadians: The Royal Canadian Mint includes a query about a $5 coin in its list of frequently asked questions.

‘Cost-saving measure’

“The decision to issue a new circulation coin is the responsibility of the Canadian government,” says the mint’s answer to that FAQ. “There are currently no plans to make $5 coins or discontinue the $5 bill.”

However the final line of the FAQ could be taken as a hint: “The $2 coin was introduced as a cost-saving measure in 1996.”

In other words, it has been more that 20 years since the last time a bill was replaced by a money-saving coin.

You can see why the mint would want to soften us up in advance.

Canadian five from Bank of Canada website

Get ready to say goodbye to Wilfrid Laurier, Canada’s seventh prime minister, though the tough new polymer bills may give him more staying power than the paper ones and twos. (Bank of Canada)

As we witnessed during the long and divisive battle to be rid of a penny that had become absurdly valueless, families were divided for and against the copper-coloured coin. Evidently people have an odd attachment to their money.

…click on the above link to read the rest of the article…

World watching as Canada casts aside austerity and gambles on a fiscal surge

March 24, 2016

World watching as Canada casts aside austerity and gambles on a fiscal surge

A global economic debate plays out in Canada as our government goes from miser to spendthrift

Canada's Prime Minister Justin Trudeau and Finance Minister Bill Morneau are taking Canada into unknown waters, betting that spending will do what austerity has not.

Canada’s Prime Minister Justin Trudeau and Finance Minister Bill Morneau are taking Canada into unknown waters, betting that spending will do what austerity has not. (Reuters)

Canada has abruptly switched sides in one of the perennial political and economic battles over how to restart a sagging economy.

To put it in a way that would not please either side, it is the contest between the misers and the spendthrifts. After years of the penny-pinching approach, Canada has switched tack to become a big spender.

And despite some very strong feelings on either side, it is not absolutely clear which is the right path to prosperity. The world will be watching.

The clash over the best way to boost a moribund economy is by no means solely a Canadian argument. Nor is it just a modern debate.

Historical debate

Countries from China and Japan, to Greece and Ireland have taken different views on the subject.

Historically, the dispute has arisen repeatedly — notably during the Great Depression, when the first response of austerity was blamed for making the problem worse. But when governments then altered strategy, new spending failed to lead to a miracle recovery.

Despite monetary stimulus and negative interest rates, Japan’s economy has lapsed into deflation and economic stagnation. (Reuters)

There is plenty of evidence on both sides. As I noted back in 2010, Japan and Ireland backed opposing strategies. But the countries’ circumstances are so different it is hard to declare a definitive winner.

China and Greece switched sides. Greece was driven by the ballot box toward bigger spending, then restrained by their stern European central bankers. China faced alternating worries, first cutting back on fears of overheating and then suddenly spurring new spending on fears of falling growth.

…click on the above link to read the rest of the article…

Canada’s job recovery will reflect growing divergence between resource and export sectors: Don Pittis

January 8, 2016

Canada’s job recovery will reflect growing divergence between resource and export sectors: Don Pittis

Bank of Canada governor Stephen Poloz says rebuilding Canadian economy might be a 5-year healing process

Bank of Canada governor Stephen Poloz says the country is on track for slow job growth. But also expect a growing divergence between a weakening resource sector and a slowly recovering export economy.

“The chart between oil and the Canadian dollar looks like a pair of train tracks,” said Bank of Canada governor Stephen Poloz in Ottawa Thursday.

As Poloz was speaking, fears of a meltdown in China, one of the world’s biggest resource consumers, was sending Canada’s commodities-heavy stock index to a bear market close.

The governor’s folksy description of oil and loonie plunging in perfect parallel was in sharp contrast to what he sees as the result of that plunge: a sharp divergence, not just between the U.S. and Canadian economies but between Canada’s shrinking oil and resources sector and a recovery in other parts of the economy.

That double divergence is expected to show up in the jobs market — and the recovery won’t be quick.

Despite the new gloom that accompanied the global market tumble, Poloz said, there is already evidence of what he called a “solid U.S. economic expansion.” This week, an independent payroll survey showed the private sector created 257,000 jobs in December, the most in 12 months.

Growing gap

U.S. economists are forecasting that Friday’s job numbers will show 200,000 new jobs created in December and are predicting unemployment will stay at a low five per cent — whereas Canada’s unemployment rate lingers around seven per cent.

…click on the above link to read the rest of the article…

Doomsayers are wrong (so far) as U.S. Fed raises rates: Don Pittis

December 17, 2015

Doomsayers are wrong (so far) as U.S. Fed raises rates: Don Pittis

Breaking the ice on frozen rates has calmed markets, not roiled them

U.S. Federal Reserve chair Janet Yellen oozed confidence as she announced a hike in interest rates yesterday. Markets responded in kind.

U.S. Federal Reserve chair Janet Yellen oozed confidence as she announced a hike in interest rates yesterday. Markets responded in kind. (Reuters)

“Remember, we have very low rates and we’ve made a very small move.”

With those words, U.S. Federal Reserve chair Janet Yellen meant to reassure ordinary Americans that yesterday’s quarter-point hike in interest rates, labelled “historic” after seven years near zero, was really nothing much to worry about.

With everyone from Harvard’s Larry Summers, to IMF boss Christine Lagarde to the Financial Times warning of the economic risk of raising rates, it appears that, so far at least, Yellen’s reassuring words were effective far beyond Main Street, extending to financial markets around the world.

If there are economists who think interest rates should stay at zero forever, I’ve never met them. So the issue was not whether rates should rise, but when.

With almost two years in the job as head of the world’s most powerful central bank, Yellen was able to present a calm and rational case for why the Fed did have to move now.

Calming effect

As some predicted earlier this year, the announcement of a rise in rates was far more soothing than the speculation and doomsaying that came before.

Challenged at yesterday’s news conference by a reporter who quipped central banks often kill off periods of economic growth by raising rates, Yellen had a confident response. She said the reason that sometimes happened was that central banks moved too late, allowing inflation to get out of control.

“At that point they’ve had to [raise interest rates] very abruptly and very substantially,” said Yellen. “And it has caused a downturn, and the downturn has served to lower inflation.”

…click on the above link to read the rest of the article…

Bombardier investment launches Quebec into battle with aerospace giants: Don Pittis

October 30, 2015

Bombardier investment launches Quebec into battle with aerospace giants: Don Pittis

Is challenging Boeing and Airbus a savvy investment or a waste of taxpayer cash?

Fred Cromer, president of Bombardier Commercial Aircraft, presents Swiss Airline's new Bombardier CS100 aircraft. But delays in readying the CSeries for passenger service allowed giant competitors Boeing and Airbus to get a head start in selling into the same niche.

Fred Cromer, president of Bombardier Commercial Aircraft, presents Swiss Airline’s new Bombardier CS100 aircraft. But delays in readying the CSeries for passenger service allowed giant competitors Boeing and Airbus to get a head start in selling into the same niche. (Reuters)

In some ways it feels like throwing good money after bad.

The same day that Canada’s leading transport manufacturer, Bombardier, announced $5 billion US in losses, Quebec taxpayers have invested more than $1 billion of their own in the company.

And despite a backlash from many Quebecers who think there are better things to do with a cool billion, the Quebec government may have made a smart investment in its future. But as Bombardier goes head to head with the world’s biggest aircraft makers, there’s no question it is a gamble.

In the short term it is a certainty that keeping Bombardier’s aircraft development program alive will be good for Quebec’s economy, specifically in terms of jobs.

“The government’s stepping in because there’s about 17,000 to 18,000 Bombardier jobs in Quebec,” says McGill University’s Bombardier-watcher Karl Moore. “When you look at the tier-two suppliers, there’s probably about 40,000 people in Quebec who make their living from Bombardier.”

Lots at stake

The CSeries is the biggest commercial airline Bombardier has made. It will have to go head to head with new aircraft just released by Boeing and Airbus that use the same quiet engine. (Bombardier )

But as usual with such investments, if it were merely a question of a few years’ worth of jobs, there might be a cheaper way to inject that money into the Quebec economy. There is much more at stake.

…click on the above link to read the rest of the article…

Central bankers must have the courage to act before a crisis: Don Pittis

October 14, 2015

Central bankers must have the courage to act before a crisis: Don Pittis

Are our bankers-in-chief always condemned to crisis management?

Are central bankers always destined to be too late?

This weekend, two of that august fraternity were strutting their stuff. Former U.S. Fed chairman Ben Bernanke was busy promoting his new book called The Courage to Act. Meanwhile, Bank of Canada governor Stephen Poloz was giving speeches titled Integrating Financial Stability into Monetary Policy.

And in different ways, the two tread the same ground: how difficult it is to rein in a housing boom before it turns into a crisis.

The title of Bernanke’s book has already been pilloried for its hubris.

Voices had been raised for years that U.S. interest rates were too low and that it was driving house prices too high, distorting the economy. But as Bernanke admitted in an interview that played Tuesday on CBC Radio’s The Current, he didn’t act until it was far too late.

Greater than housing

“It wasn’t until August of 2007 that we began to appreciate that the ramifications of the losses on sub-prime mortgages were going to be much greater than just the housing market,” Bernanke told The Current host Anna Maria Tremonti.

Of course by that time, there was really little the U.S. central bank could do to prevent the bubble from popping, setting off a global financial meltdown and necessitating a multibillion-dollar bailout of the banks that had contributed to the crisis.

Years of low interest rates had allowed consumers to borrow recklessly. After they had access to that money, they used it to overinflate the entire economy, buying consumer goodies and bidding up the price of real estate.

By then, it was too late to raise interest rates. It could have been done several years previously, slowing the boom before it became dangerous. So why didn’t Bernanke, or his predecessor Alan Greenspan, act then?

There may be clues from listening to our own central banker’s speech this week.

…click on the above link to read the rest of the article…

U.S. jobs and global gloom may mean more mortgage relief: Don Pittis

October 3, 2015

U.S. jobs and global gloom may mean more mortgage relief: Don Pittis

Interest rate hikes fade into the future as economic recovery appears to go flat

It seems a terrible thing to cheer about, but a new feeling of gloom may be good for Canadians weighed down by mortgage debt.

A worse-than-expected U.S. jobs report and increasing fears for the state of developing world economies mean that U.S. central banker Janet Yellen may have to once again delay a hike in interest rates.

Fed chair Yellen has repeatedly warned that U.S. interest rates are on the way up. Last month, she delayed that rate rise once again while suggesting the increase could very likely come by the end of this year.

Now a growing number of analysts say a hike in U.S. interest rates will be delayed to 2016 or beyond.

Why U.S. rates matter in Canada

Before going on, I should insert a quick reminder of why U.S. interest rates matter to so many Canadian mortgage holders.

While short-term rates are set by the Bank of Canada, mortgage rates depend on the cost of borrowing money on international bond markets. Before lending long-term cash, Canadian banks like to make sure they can spread the load if rates begin to rise. That means they look to the bond market to set the price of the long-term cash they lend.

When the U.S. Fed rates begin to rise, international bond rates begin to rise as well, and banks must pass along those increased interest interest costs to their customers.

As recently as June, Yellen foresaw not just an autumn rate rise, but her advisers on the Federal Open Markets Committee also suggested that rates would continue to rise at about a whole percentage point each year. In other words, long-term rates that were four per cent this year would be five per cent next and six per cent the year after.

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Mark Carney wants business to calculate the fossil fuel future: Don Pittis

October 1, 2015

Mark Carney wants business to calculate the fossil fuel future: Don Pittis

Bank of England governor’s climate change warning puts the focus on the bottom line

No doubt Bank of England governor Mark Carney has personal views on whether or not climate change is a danger to his children’s future. Most thoughtful people do.

But when the former Bank of Canada governor spoke to a high-powered audience of insurance executives this week, unlike environmentalists such as Leonardo DiCaprio, he didn’t emphasize their moral obligation to future generations. Perhaps after the VW scandal, he realized there was a more direct way to a businessperson’s heart.

He appealed to their bottom line.

“Changes in policy, technology and physical risks could prompt a reassessment of the value of a large range of assets as costs and opportunities become apparent,” he told the group.

“Longer-term risks could have severe impacts on you and your policyholders.”

When New Democratic Party candidate Linda McQuaig raised some of the same issues in the current federal election campaign, saying part of Canada’s fossil fuel resources might have to be left in the ground, it played as a left-right issue.

Dwayne Roy checks an active well site near Lloydminster, Sask., this summer. Bank of England governor Mark Carney says investors must realize oil may have to be left in the ground. (Reuters)

“For the hundreds of thousands of people whose jobs are dependent on Canada’s energy sector, listen to what you just heard,” responded Conservative candidate Michelle Rempel.

Profit and loss, not left and right

But for Carney’s audience at a Lloyd’s of London black tie dinner, the issue is not a matter of left or right politics, but a matter of profit and loss.

Insurance companies often pay the bills when storms and flooding do their damage. Climate change is likely to make those insurable crises worse.

But perhaps more important, against those potential losses, insurance companies hold trillions of dollars in assets invested in all kinds of stocks and bonds. And Carney said those assets were threatened.

…click on the above link to read the rest of the article…

Interest rate cuts a two-edged sword for Bank of Canada: Don Pittis

September 8, 2015

Interest rate cuts a two-edged sword for Bank of Canada: Don Pittis

Another decrease could spur exports but would announce serious pessimism

Conjure up an image of Bank of Canada governor Stephen Poloz in Hamlet pantaloons, hand to brow, declaiming to the middle distance: “To cut or not to cut?”

A confusion of contradictory economic data means it may be a melancholy choice. If the Bank of Canada were to lower interest rates for a third time this year at this Wednesday’s meeting, the cut could spur exports and challenge other countries that have pushed their currencies lower.

But there is a danger that it may instead be taken as a warning.

A poll of 40 economists last week by Reuters didn’t rule out another cut in rates. The consensus was that there was a one in four chance of a cut this week, and a 40 per cent chance of another cut “at some point.” But the most likely result, said the economists, was a rate freeze till 2017.

Frozen

More than a year of rates frozen at 0.5 per cent is not a resounding vote of confidence in a Canadian recovery. But in the face of that steady-as-she-goes opinion from economists, another rate cut would be a two-edged sword.

Cutting interest rates would help keep the Canadian property market strong. (Darren Calabrese/Canadian Press)

Lower rates would make it easier for Canadians to keep up their borrowing binge, helping retail sales and keeping house prices strong. More usefully, it would help secure lending for struggling or expanding businesses.

A byproduct of lower rates is a lower loonie. If, as many have said, our shrinking trade deficit can be credited to a low Canadian dollar, then a still lower loonie could be even better.

…click on the above link to read the rest of the article…

Friday job numbers may tell tales GDP missed: Don Pittis

September 3, 2015

Friday job numbers may tell tales GDP missed: Don Pittis

Stats could show if slump is over and whether there is a rebound outside the oil industry

Opponents in the battle over whether the Canadian economy is collapsing or clawing its way back to recovery will get more ammunition on Friday. That’s when we learn the latest figures on job creation and unemployment.

Statistics Canada’s GDP data that we got earlier in the week is useful, but in several ways, the labour force survey is even better.

“I’d personally put more weight on labour market figures than the GDP,” says Mike Veall, professor of economics at McMaster University. Veall’s specialty is econometrics, reading economics through math and statistics.

Two months late

One of the problems with gross domestic product is that it’s not a simple figure, he says. It is more of a statistical construct estimating the total activity of the entire Canadian economy.

The owner of a Nova Scotia roofing company says he is finally getting his choice of good employees as workers return from Alberta. He says returning oil patch workers have been well trained in safety. (CBC)

One result of that lack of simplicity is a lengthy delay getting a reading of the data. Another is month-to-month inaccuracy.

The long and technical process of gathering all the components that go into creating those GDP calculations takes time. That means we don’t get a reading on each month’s economic growth until months after it happened.

Even then, new data can alter the calculations, resulting in revised figures. This week, for example, Statistics Canada told us the economy had actually shrunk by 0.8 per cent in the first three months of the year after previously telling us it had shrunk only 0.6 per cent.

“The main advantage of jobs numbers is their currency,” says Veall. “They’re more up to date.”

…click on the above link to read the rest of the article…

Enjoy Canada’s low dollar while you can: Don Pittis

August 26, 2015

Enjoy Canada’s low dollar while you can: Don Pittis

There’s not much you can do about the low loonie, so just look on the bright side

The low Canadian dollar is hurting John Stiles at Calgary-based Planet Foods. His company distributes natural foods and healthy snacks across Canada.

The cost of his U.S. imports is going up, but he can’t even raise his prices. The large well-known chains he sells to, such as Mountain Equipment Co-op and SportChek, only allow price changes every four or six months.

Dollar dips below 75 cents for first time since 2004
China’s market problems could be Canada’s chance to ‘reset’ its economy
“Like with the dollar right now, we typically can’t do a price increase till January,” says Stiles, who is in charge of operations.

Waiting it out

According to Stiles, the only real answer is to wait it out. In the roughly 15 years Planet Foods has been operating he has seen three wild swings in the Canadian dollar.

“It’s going to take six months to a year to get that back to 90 cents,” he says.

Of course there are no guarantees that the loonie will bounce back so quickly. But Stiles offers us a useful reminder. The lower the loonie gets, the more likely it will climb back out of those lows.

While a rebound in Canada’s traditional industries may take years, the impact on tourism has been immediate with Banff “thriving.” (CBC)

The classic example of why the lower loonie helps the Canadian economy is that it is an advantage for Canadian exporters. But while we’re waiting, I thought it might be a good idea to imagine some other advantages, if just to make us feel better.

Unfortunately, there are signs a promised industrial rebound may be slow in coming. New export industries don’t grow overnight. There are some estimates that, like the effect of interest rate cuts, the wait for a currency-led change in the industrial economy must be measured in years.

Not so the tourism industry, where the rebound has been almost immediate.

…click on the above link to read the rest of the article…

Big oil that’s making a killing: Don Pittis

August 21, 2015

Big oil that’s making a killing: Don Pittis

Don’t weep for the “downstream” part of the oil business, it’s booming

In business lore there is no better advice than “buy low, sell high.”

As markets keep hitting new lows, that’s pretty hard for the average investor these days, but in parts of the oil business, it’s exactly what they’re doing.

The news has been filled with headlines about Canada’s suffering oil industry, which might leave you thinking everyone in the sector is on the verge of going broke.

But don’t weep for all of them. In certain sectors, business has never been so good.

Upstream vs. downstream

In oil lingo, although the principle applies to other sectors as well, the industry is divided, for practical purposes, into “upstream” and “downstream” portions.

In parts of southern Saskatchewan oil pumpjacks are thick along the roadside and crude is at six-year lows. That’s the upstream part of the business and it’s hurting.

The upstream part of the business is finding and gathering the resource — in this case, crude oil. Upstream includes the geologists using computer mapping and educated guesses about where oil might be. It includes seismic work where crews look deep underground for likely oil-producing rock formations.

It also includes oil drillers, bitumen miners and the smaller companies that support them with engineers, trucks, heavy equipment for making roads and berms, drilling mud, well testing, storage tanks and pumps. The upstream sector is huge and fragmented.

With oil now at a six-year low, it is this sector that has been devastated, because the dividing line between upstream and downstream is, give or take, crude oil.

…click on the above link to read the rest of the article…

Desperate move by China a worrying sign: Don Pittis

August 12, 2015

Desperate move by China a worrying sign: Don Pittis

Instead of boosting economy there is danger China’s sudden move will hurt confidence

The father of Western medicine, Hippocrates, had some advice in 400 BC that has been passed down to today: “Extreme remedies are very appropriate for extreme diseases.”

As the world responds to this week’s extreme andunexpected devaluation by the Chinese central bank, it sounds as if Beijing was taking the good doctor’s advice. And while the obvious intent was to snap the Chinese economy back to health, the frightening thing is that Beijing’s move smacks of desperation.

The modern equivalent of that Hippocratic maxim is: “Desperate times call for desperate measures.” As the Chinese currency and world markets took a dive, investors and trade partners around the world were asking themselves: “What does Beijing know that we don’t?”

Falling off a cliff. Chinese currency saw biggest one day decline in decades. (CBC news)

It’s not the first time this year that China has used strong government action to try to counteract inimical market forces. This spring, Beijing intervened, once to encourage stock markets to inflate, and then repeatedly in an attempt to stop the irresistible plunge when savvy traders realized stocks had become unrealistically high.

The trouble is that markets do not like wild swings. And an economy that requires repeated radical intervention is one, like Russia, where no one knows what the government might do next.

Until recently, the fact that China was willing to back its own economy made it seem like an giant island of stability in a volatile world. In the darkest days of the great recession after 2007, China pumped money into its economy by encouraging borrowing and keeping the renminbi undervalued.

…click on the above link to read the rest of the article…

Federal election 2015: Choosing the best negotiator for the Trans-Pacific Partnership

August 6, 2015

Federal election 2015: Choosing the best negotiator for the Trans-Pacific Partnership

As politicians score point with loaded sound bites, does it matter if they avoid details?

“You can’t have a debate on such a key issue as the modernization of social programs in 47 days,” Conservative Leader Kim Campbell said during her unsuccessful 1993 election campaign.

The quote, widely interpreted to mean elections are no time for serious issues, was ill-advised. But it seems obvious that Campbell was trying and failing to articulate an absolute truth: that in election campaigns, complexity is washed away in waves of superficial, and often misleading, sound bites.

That’s why in our current election, one of the most crucial issues facing Canadians — trade — is being reduced to caricature. The danger is that instead of a discussion of serious and complex issues, we will end up with a cartoon debate.

‘Oh, yeah?’

We don’t just want Daffy Duck and Bugs Bunny taking turns shouting “Oh, yeah?” at each other. But neither do we need to be dragged through the detail of the trade deal. Campbell was right.

Negotiations among 12 nations bordering the Pacific Ocean ended on Friday without a deal, but more meetings are scheduled.

As a regional radio news reporter in Saskatchewan in the 1980s, tasked with making the original Canada-U.S. trade deal comprehensible, I can attest to the fact that sparking interest in the details of a trade deal is a hard sell.

The fact is trade deals are complex, affecting us decades into the future, and not even experts can foresee exactly how. Some of the things that will affect us the most are so nuanced, not to say boring, to

…click on the above link to read the rest of the article…

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