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How $40 oil would impact Canada’s provinces What does Canada’s economy look like with oil prices at $40 a barrel? Certainly it won’t be the energy superpower envisioned by Prime Minister Stephen Harper. If $40 a barrel still seems a ways off, consider that the benchmark price for oil sands crude is already trading in that price range. What’s more, if production from high-cost sources isn’t withdrawn from an oversupplied market, oil prices may soon be trading even lower. The first thing Canadians should recognize about the new world order for oil prices is that – contrary to what we’re being told by our federal government – the economy is no longer in dire need of any new pipelines. For that matter, it can live without the new rail terminals being built to move oil as well. Yesterday’s transportation bottlenecks aren’t relevant in today’s marketplace. At current prices there won’t be any massive expansion of oil sands production because those projects, which would produce some of the world’s most expensive crude, no longer make economic sense. The recent spate of project cancellations by global oil giants – Total’s Joslyn mine, Shell’s at Pierre River, and Statoil’s Corner oil sands venture – is only the beginning. As oil prices grind lower, we can expect to hear about tens of billions of dollars of proposed spending that will be cancelled or indefinitely postponed. Not long ago, the grand vision for the oil sands saw production doubling over the next 20 years. Now that dream is in the rear-view mirror. Rather than expanding production, the industry’s new economic imperative will be attempting to cut costs in a bid to maintain current output. With the exception of oil sands players themselves, no one will feel those project cancellations more acutely than new Alberta Premier Jim Prentice. His province’s budget is beholden to the gusher of bitumen royalties that will no longer be accruing as planned. He could choose to stay the course on spending, as former Premier Don Getty did when oil prices plunged in the 1980s, in hopes that a price recovery will materialize. That option, as Getty discovered, would soon see Alberta’s budget surplus morph into spiralling deficits. The province’s balance sheet wasn’t cleaned up until the axe-wielding Ralph Klein took over. In his first term, Klein slashed spending on social services by 30 per cent, cut the education budget by 16 per cent and lowered health care expenditures by nearly 20 per cent. Of course, falling oil prices are a concern for much more than just Alberta’s budget position. Real estate values also face more risk, particularly downtown Calgary office space. For oil sands operators, staying alive in a low price environment won’t just mean cancelling expansion plans and cutting jobs in the field. Head office positions are also destined for the chopping block, which is bad news for the shiny new towers going up in Calgary’s commercial core. If plunging oil prices are writing a boom-to-bust story in provinces such as Alberta, Saskatchewan and Newfoundland, the narrative will be much different in other parts of the country. Ontario’s long-depressed economy is already beginning to find a second wind, recently leading the country in economic growth. And the engine is just beginning to rev up. As the largest oil-consuming province in the country, lower oil prices put more money back into the pockets of Ontarians, while also juicing the buying power of its most important trading partner. Ontario’s trade leverage with the U.S. is set to become even more meaningful as the Canadian dollar continues to slide along with the country’s rapidly fading oil prospects. Just as the oil sands boom turned Canada’s currency into a petrodollar, pushing it above parity with the greenback, the loonie is already tumbling in the wake of lower oil prices. And it shouldn’t expect any help from the Bank of Canada, which continues to signal that it’s willing to live with a much lower exchange rate in the face of a strengthening U.S. dollar. A loonie at 75 cents means GM and Ford may once again consider Ontario an attractive place to make cars and trucks. Even if they don’t, you can bet others will. With the loonie’s value falling to three quarters of where it was only a few years ago, we’ll start seeing Ontario, as well as other regions of the country, start to regain some of the hundreds of thousands of manufacturing jobs that were lost in the last decade amid a severely overvalued currency. For the Canadian economy as a whole, much is about to change, while much will also remain the same. Once again, oil will largely define the fault lines that separate the haves from the have-nots (or at least the growing from the stagnating). But at $40 oil, it’s the consuming provinces that will drive economic growth. Rather than oil flowing east through new pipelines, jobs and investment will be heading in that direction instead. http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/how-40-oil-would-impact-canadas-provinces/article22288570/

APRIL 2, 2009, 7:57 AM Nissan Rolls On With Its Electric Car By BRADLEY BERMAN Nissan is using the Cube as a test mule for its electric drivetrain. The design for its electric car, due in 2010, will be original. SACRAMENTO, Calif. — President Obama’s auto task force cast doubt this week on the business case for the Chevrolet Volt, the extended-range electric vehicle from General Motors. The task force’s written assessment said big cost reductions were needed to make the vehicle “commercially viable.” Nissan, however, is gushing with confidence about the business case for its pure electric car, which goes on sale to fleets in 2010 and to retail customers in 2012. “This is not a test or demonstration,” Mark Perry, a product planner for Nissan said here on the second stop of a 12-city tour. “We’re ready for mass production.” The company won’t reveal the name of the electric car, and it won’t reveal what it will look like. For the company’s dog-and-pony show, it is using a Japanese-market Nissan Cube outfitted with the same electric drivetrain that will go into a newly designed electric car. The only similarity between the Cube and Nissan’s mystery electric car is the size — something similar to a four-door Nissan Sentra. Mr. Perry told me the car will have an “iconic electric vehicle” look, without being “Jetsons or Blade Runner.” Driving range will be 100 miles, with a full recharge time of four hours from a recommended 220-volt charger (and eight hours for 110v). My three-minute spin around the parking lot of the Cal Expo was completely unremarkable. And that is Nissan’s point — to prove that its E.V. is just like a normal car. To show that its E.V. is as a viable alternative to a gas-powered sedan, Nissan is pricing it just like one. The company is targeting a price of around $25,000-$30,000. A $7,500 federal tax credit for electric vehicles with at least l6 kilowatt-hours of energy storage — the Nissan EV will exceed that — could drop the cost below $20,000. The company said it believed the lower cost of electricity versus gasoline will create an instant payback for customers. “Batteries are a lot of the expense. But we’re moving to mass production as fast as we can to reach economies of scale,” Mr. Perry said. Nissan has a 51 percent share in the Automotive Energy Supply Corporation, a joint venture to produce batteries with Japan’s NEC Corporation. Nissan said this experience will help it reduce expenses. The lithium-ion battery for a $25,000 electric vehicle could cost $10,000 or more. “We’re confident in the battery, because it’s our battery,” Mr. Perry said. “Our engineers developed it.” Copyright 2009 The New York Times CompanyPrivacy PolicyNYTimes.com 620 Eighth Avenue New York, NY 10018 http://wheels.blogs.nytimes.com/2009/04/02/nissan-rolls-on-with-its-electric-car/?pagemode=print