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Canadian Oil: As goes the oil, so goes the dollar

Posted January 31, 2008

"From Yellowknife, Regina and Ottawa, they've spread out to the world with pockets full of loonies earned in northern Alberta's heavy-oil tar sands. Six months of intense work and enough money to pay for college and a trek through Asia? That's not a bad financial scenario." — Sam Hopkins

by Sam Hopkins, Wealth Daily

Baltimore – (TFN):  Oil is back up, and so is the world's hottest resource currency, the Canadian dollar. So what's with the US-traded Canadian energy ETF?

Some of the oil industry's biggest figures seem to have sipped from the reality fountain lately, as Shell and Total CEOs are flat-out saying easy oil is coming to an end.

Jeroen Van der Veer, chairman of Royal Dutch Shell, said in a speech published last week, "We are experiencing a step-change in the growth rate of energy demand due to rising population and economic development," continuing to forecast, "after 2015, easily accessible supplies of oil and gas probably will no longer keep up with demand."

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Fellow European fossil fuel titan Christophe de Margerie, head of France's Total SA, is known for his willingness to state that supply and demand will squeeze "easy oil" supplies in the coming years, but he says he's not as heterodox among his peers as you may think.

"We all think the same," he said in a recent issue of the Economist, "it's just a matter of whether we say it."

Cambridge Energy Research Associates says production is declining around the world, at a rate of 4.5% a year.

Canadian Oil: Expensive oil and strong dollars

For Canada, it's no question. In my travels, I've met twentysomething Canadians in Shanghai, Santiago (Chile), and Scotland. From Yellowknife, Regina and Ottawa, they've spread out to the world with pockets full of loonies earned in northern Alberta's heavy-oil tar sands.

Six months of intense work and enough money to pay for college and a trek through Asia? That's not a bad financial scenario.

The favorable budget balance that Canada has been able to cultivate with its oil production (it is both #7 in imports and exports worldwide, though not an OPEC member) has helped the currency, even though the heavy, sour oil produced around the boomtown of Fort McMurray fetches less than West Texas Intermediate because it costs more to process.

With a stronger (Canadian) dollar comes more purchasing power internationally, and Toronto's Globe and Mail reports that car prices have dropped by the most in 43 years as Canadian lots struggle to keep prices on par with dealers down south. Canada has also kept the worldwide inflation scourge at bay, with the country's core (ex-fuel and volatile food items like fruit) inflation coming in at half the average for developed countries.

Hey Americans, remember what it's like to have extra money? Read on for technical analysis of Canada's strongest currency and oil ETFs.

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Posted by Sam Hopkins · Filed Under Oil and Energy 

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