The Round-Up: May 21st 2008

Gas price energizes Canadian inflation rate

Higher gas prices in April led to the first monthly increase in the inflation rate in half a year, Statistics Canada reported Wednesday. StatsCan's Consumer Price Index was 1.7% higher in April compared with the same month of 2007. That's up from a 1.4% year-over-year jump in March, and it's the first time inflation has risen since November, 2007. The CPI rose 0.8% in April from March.

An environmental quagmire

In the past year, a network of nongovernment organizations, on the ground and afar, has taken up the antioilsands cause, aiming at least to slow down development, at most to shut down altogether what has become the backbone of Canada's economy.

Tailings ponds sticky dilemma

Syncrude Canada Ltd. built the giant basin, which measures 21 kilo-metres in circumference, in the mid-1970s as part of the joint-venture's massive open-pit oilsands mine. Billions of litres of water are needed to separate bitumen, a thick, sticky form of crude oil, from the oilsands. The by-product of the extraction process is a toxic slurry of water, sand, clay and bitumen that is dumped into tailings ponds such as Mildred Lake to allow the sand and clay to settle out.

Oilpatch gears up for a comeback

Buoyed by surging natural gas and record oil prices, the western Canadian oilpatch is gearing up for a recovery in the second half of 2008. Industry observers say confidence is growing among small and intermediate-sized producers, with many having already tacked another 10 per cent to 20 per cent to 2008 capital spending plans, which were created last fall when natural gas prices were half today's levels.

Hey, thanks for the Canadian content Khebab. Is this going to be a regular gig for you?

I'll try with some help.

I just happened to veer on over to TOD:Canada for the first time in months for no apparent reason and it happens to be the same day a Drum Beat is posted? Bizarre!

Thanks for this, Khebab! I've missed the .ca-centric Drum Beats and I hope this marks the beginning of a revival.

On the inflation front, the local CTV station here in Halifax tonight lead with a story which was basically calling bullshit on the government inflation numbers (but politely, of course). It was good to see, even if they confused "stock markets" with commodity markets when explaining the rise. Baby steps - they used to just report the inflation number straight, now they are at least raising an eyebrow at it. Inflation, in the non-technical sense of higher prices (I realize inflation is often defined in other ways by economists, but that's the common understanding of it) on the basics for modern living such as gas, bread, milk, heat, hot water are starting to really kick the working poor in the teeth.

That was followed up with a brief story on how the federal government says it can't noticeably lower gas prices. This was balanced, of course, with a quote from the Canadian Tax Payers Federation (or some other generic name like that) whose ongoing message seems to be that if only no one paid any taxes at all, everything would be so much better. Sigh...I kinda' like laws, police, roads, courts, schools, health care, etc.

I get a laugh here on the gas tax issue, where the the opposition Liberals were just a few weeks ago wailing about how they would lower the tax 4 cents right away so everyone could get a break. Meanwhile since then, gas went up 5-6 cents/L, 10 cents for diesel. On a day when oil went up another 2.5% or so (our exchange rate improved today, so the 4.2% rise isn't as high here), it's increasingly obvious that attempts to stave off high gas prices through small tax cuts aren't going to amount to much, and there is little uproar for them to be enacted, at least that I've heard. People are starting to worry about gas prices, and complain about them.

Oh, and it's good to see TOD Canada resurrected. Thanks!

Official figures showed that UK inflation jumped from 2.5 to 3% this month - well below the actual figure of something like 7%. The Bank of England will likely have to raise interest rates to 10% to stem this hyper-inflationary spiral. Or maybe they will just continue to make believe.

Air Canada warns fuel cost will hurt demand

“We continue to see strong bookings, but the cost increases we're expecting are fairly significant and they need to eventually make their way into the market place,” Montie Brewer, Air Canada's president and CEO, said after the company's annual meeting yesterday.

“The severity of it will impact customer demand. We'll see how much the customer can absorb and still plan on travelling.”

The airline is closely monitoring the market to see how consumers are reacting to the high cost of flying and it will “respond accordingly,” Mr. Brewer said.

It's hard to figure the Canadian travelling public. We haven't lost the will to travel. Maybe we just want to travel while we still can. In response to lower retail prices, sales of cars in Canada are up a whopping 11% through the first four months of the year; even light truck sales are up 1%.

And thanks, Khebab.

In a big country with a mobile workforce people need to get around. Passenger rail in Canada is a joke, and because of the distances driving often isn't practical (or perhaps more accurately, airfares aren't yet high enough to make it seem like a viable alternative considering the inconvenience, including longer travel times and the cost of gas and lodging), so I'm not surprised that we have not yet seen more pronounced demand destruction for air travel.

You'll notice that even Air Canada's CEO is predicting that demand destruction will occur however, it's just a question of finding the price point at which the consumer will balk.

You also need to make some allowance for human psychology -humans are creatures of habit and tend to want to continue habituated behavior even if that behavior, judged on its own merits, appears increasingly irrational.

I was in Vancouver last week. They are going gangbusters in construction and building everywhere, leading up to the 2010 Olympics. The whole of Granville street has been dug down three levels to take the sky train. They are also about to connect the Richmond Airport into the system, billions have been spent.

When I mentioned peak-oil, and conservation to my kids they laughed and thought I was very funny.

All their single-passenger vehicles are 300 and 400 cub-inch engines. I tried the "Canada will follow the US by about 9 months" routine. Am I crazy or what??.

There are condos and commercial malls going up on every corner. My son's girlfriend is a carpenter at $22/hour my son is at nearly twice that.

How can we tell these people that the future may not be as good as they think. Maybe we are the crazy ones. Even if the US goes to hell quickly I think that Vancouver will stay robust until 2010+, the place is awash in Asian money.

I have a very small 900cc engined Suzuki pickup and spend only about $30 a month on gas. Maybe my kids and I are not genetically related after all.