Record petroleum exports out of the US in December contributed to the geopolitical superpower narrowing their trade deficit by more than 10 billion USD. This allowed them to record their trade deficit at what is now a three year low. As the US trimmed back their imports in the month, the decrease in their deficit was also attributed to exports surging by 2.13 percent. It’s time for Canada to determine whether it wants to continue to play a prominent role in the State’s energy production. Right now, however, it does not look like we are very proactive in expanding our energy exports anywhere in the world.
Canada’s December trade numbers were abysmal. It’s no surprise that in a month when US oil imports are at the lowest level since 1997 that our exports amount to a drag on our gross domestic product. Data from the last decade shows the opportunity Canada has had in exporting our oil to the US. In 2002, Canadian crude accounted for less than 16 percent of the all US crude imports. Estimates are that that number is as high as 28 percent in 2012, and that was during a period when the US faced a decline in oil imports. The ease and opportunity for the US to import oil from a sound Western government such as Canada has crowded out their imports from less politically stable countries.
For a western democracy, however, direct concerns of stability are more centered on our economy vis-à-vis the housing and financial markets. It is no surprise that the Canadian housing market has gathered international intention, especially following the British governments attempt to interrogate Governor-elect Mark Carney for his record at the Bank of Canada. But what we are witnessing in Canada is no different to what other nations such as the US, UK, and Spain have witnessed in the past. Each of the aforementioned countries followed the pattern of household debt levels increasing in tandem with house prices, and as a result eventually saw a price correction. As is apparent with the Canadian market, house prices are yet to correct.
It’s my opinion though, that instead of waiting for prices to correct, there lays an alternative option to bring our household imbalances into check; exploit our natural resources, which will present opportunities inclusive of job creation and thus economic prosperity. Without missing an opportunity to take a shot at President Obama, the Keystone XL pipeline should have been approved in his first term in office. If he was less worried about the Electoral College votes from the state of Nebraska and more concerned over US job creation, greater volumes of Tar Sands crude would already be heading to the Gulf of Mexico. For that matter, when the opportunity arises to sell crude or natural gas to Asia, we’d rather flip flop around the actual issues and glorify so called environmentalists.
Beyond Canada’s housing market’s relation to that of the US, UK, and Spain, we’re not that different from other small western nations that have witnessed both real estate prices increase and been hindered by an appreciating exchange rate. Countries like Switzerland, Sweden, New Zealand, and Singapore have all fought a stronger currency while attempting to grow their economies, and in turn their housing markets attracted capital. The real assets of these nations are what investors perceive to have value when there is global uncertainty in equity markets. That is why when people suggest we are amidst a recovery, that people start to question whether home prices are overvalued.
In very simple terms, Canadians on average are overleveraged. We are holding too much debt. Why then, when there are present opportunities to relieve household imbalances are we balking at the opportunity to prosper as a nation?