A dose of pessimistic reality: There's a storm on the horizon

Even if you don't own a vehicle or a home, relentlessly rising oil and gas prices are hammering your budget. That's because energy costs are internalized in almost everything you buy and everything you do.

Parents are seeing increases in the cost of Huggies diapers, bakers are paying more for plastic packaging, homemakers are paying more for detergents, cosmetics and drugs. Even that polyester fleece you'll need to ward off the chill after lowering the thermostat next winter will be more expensive, all because petrochemical companies who manufacture the resin for these and myriad other products have raised prices by 50 per cent.

Food prices are going up, not only because corn, grain and edible oils are being foolishly diverted to bio-fuels, but also because fertilizer is manufactured from natural gas.

Air travellers have become all too familiar with ever rising "temporary" fuel surcharges, but now these surcharges are sprouting up everywhere. Fuel surcharges are being added to ship, rail and trucking rates. That bill from your plumber may well include a fuel surcharge. Here in Victoria, the practice has even been extended to pizza deliveries.

And don't expect the world's workshop whose escalating demand is the driving force behind skyrocketing prices of oil, gas and coal as well as steel, copper nickel and other raw materials to save us by keeping the price of manufactured consumer goods down. Chinese manufacturers are feeling the heat from higher oil costs now that Beijing has finally stopped subsidizing prices, and the cost of shipping everything is going up.

Except for the front-of-the-line victims in the auto sector, Canada's employers are weathering the storm ... right? Well mostly ... so far, but to quote that great baseball-playing philosopher Yogi Berra, "It ain't over till it's over." And most believe we are only in the early innings.

I don't know if oil is going to $200 (U.S.) a barrel, but I do know that the only thing that will lower prices is a big reduction in worldwide consumption, and that can only happen if there is a worldwide recession. So it seems that we're damned if oil prices keep rising and we're damned if world economies go into decline.

Canada faces a particularly worrying economic prospect because the country responsible for 80 per cent of our international trade is in real trouble. Employment growth in the world's biggest oil importer was a healthy 2 per cent a couple of years ago when oil prices were around $60 a barrel. The combined impact of the "Made in the U.S.A." credit meltdown and escalating oil prices has seen U.S. employment growth drop close to zero.

The ironic twist for Canadians is the American economic slowdown and burgeoning energy trade deficit are collapsing the value of the greenback at the same time as Canada's resource rich economy and much smaller subprime problems are keeping the loonie strong, making Canadian goods more expensive south of the border. Making matters worse is the prospect of a protectionist Democrat administration fuelling the fires against commerce with its long-time best trading partner.

Reading these worrying viewpoints will surprise friends who consider me a perennial optimist. But optimism for the future must be built upon realistic foundation. So, what are the realities facing Canadians?

Given enough time, most people can reduce personal energy consumption with more efficient autos, better public transit, upgrading home energy systems and moving closer to work. But for most Canadians, the rise in fuel prices has been way too much and too fast for these longer-term adjustments.

Rising oil and gas prices increase the cost of virtually everything else, unleashing a huge second wave of inflation that is washing away disposable incomes. People on lower incomes, as well as those whose location or job leaves little room for short-term changes, are being hurt the most.

Businesses unable to fully pass along this second wave of rising indirect energy costs may not survive. Employees of those that can may still face layoffs as a result of reduced consumer demand.

Canada's largest trading partner is under great economic duress and the dropping greenback makes visiting Canada and buying Canadian goods more expensive. The prospect of a protectionist White House and Congress adds more downside.

The first foreboding winds of a great storm are now wafting across our country. Canadians need leadership with the vision to recognize the dangers on the horizon and the clear thinking needed to reduce the damage and foster resilience. Much of the danger lies in the ubiquitous impact of energy costs that have risen beyond the wildest predictions.

Yet, incredibly, current indications are that the next Federal election will be a battle over different schemes to increase energy costs. For the sake of our country, let's hope the realities of the impending storm hit home and we shore up the ramparts before our economic prosperity is blown away.

Gwyn Morgan is the retired founding CEO of EnCana Corp.