Canada’s petro-currency

Canadian Economist Jeff Rubin (whose recent book I reviewed) argues that exploiting the oil sands drives up the value of the Canadian dollar, hurting exporters of other goods and services:

At triple-digit prices, the oil sands will produce three to four million barrels per day. In turn, the tandem of soaring oil prices and soaring oil production will propel the Canadian dollar to heights it’s never seen.

A soaring currency may bring long-lost NHL franchises back to Winnipeg, Quebec City and maybe even Hamilton from Dixie and the desert, but that’s about all the Canadian economy can expect from its major trading partner. Other than Canadian bitumen exports, American consumers won’t be buying much from their northern neighbor.

Quite possibly, this is another way in which Alberta’s economic interest is increasingly at odds with that of the rest of the world. As it becomes clearer that for the population in general, fossil fuels are a harmful and extremely dangerous addiction, places with economies dominated by their production and export will find themselves increasingly isolated from the rest of humanity, as far as their short- to medium-term economic interests go.

The oil and gas industry represents a massive investment of financial and intellectual resources. Given that it is ultimately an industry with no future, it makes sense for Canada and its provinces to consider applying those resources to the real problems of the future: how to reduce energy demand while simultaneously deploying more zero-carbon energy capacity, until all of our needs can be met in a carbon-neutral way.

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