Last week not a good one for Canadian business.
On Tuesday, Petronas, Malaysia's state-run oil company, announced it was abandoning its $36-billion liquid natural gas project in British Columbia, eliminating thousands of potential jobs. It joins other major global energy investors, such as ConocoPhillips and Royal Dutch Shell, that have recently scaled back or sold off their Canadian operations.
The same day, the Canadian Chamber of Commerce sent a letter to Prime Minister Justin Trudeau, detailing what it describes as the rising cost of doing business in this country. The chamber listed low labour productivity growth, new environmental rules, higher electricity prices and a regulatory system it says the World Bank ranked as fourth best in the world a decade ago, but now has in the 22nd spot.
Placed in the context of an American president who is slashing environmental regulations and pulling the United States out of the Paris climate change agreement – moves that really could make the U.S. a cheaper place to operate, at least for some types of businesses – there is no question that Canadians should worry about whether our governments are striking the right balance.
The stubbornly low prices of crude oil and natural gas are another cause for concern, given the industry's importance to the Canadian economy. Global prices are out of Canada's hands. But the domestic response is not.
For example, it wasn't long ago that the government of British Columbia was promising that the province was about to be showered in money, as result of becoming a natural gas-export superpower. Today, the province still has no major export facilities. The hoped-for industry has been waylaid by low prices, but also by a high level of political and regulatory uncertainty. Meanwhile, equivalent projects in Australia and the U.S. have gone forward.
Is Canada, with its ponderous approvals process for major resource-extraction projects and inter-provincial bickering over who can build a pipeline where, trapping itself in the corner of its own best intentions? Yes.
But last week was also a really good week for the Canadian economy. Statistics Canada reported that gross domestic product continues to grow faster than expected. Growth this year, previously expected to be around 2 per cent, is running closer to 3 per cent. The Canadian economy is on track to lead the G7 in 2017.
Our dollar is shooting higher, thanks in part to the Bank of Canada's decision to raise the interest rates for the first time in seven years – a move spurred by the healthy economy.
A higher dollar, however, tends to depress exports and reduce export earnings, and the Bank of Canada has been counting on a recovery in our export industries to take up some of the economic slack from a hoped-for slowdown in housing.
So, what exactly is the state of our economy? The answer, in the end, depends on which part of it you're talking about. And for the oil and gas sector in particular, these continue to be trying times.
Consistently low global prices have forced many extraction companies to slash their production costs and scale back their ambitions. They can't be relied on as the powerhouse job creators they once were.
As well, the imposition of carbon pricing – either as a straight tax or through cap and trade, depending on where you are in Canada – will reduce consumer demand for their products. That hurts, but it's a goal we strongly support. So does the Chamber of Commerce.
In fact, the first paragraph of its letter to Mr. Trudeau congratulates the government on taking steps to tackle global warming. It says it largely agrees with Ottawa's so-called Pan-Canadian Framework for Clean Growth and Climate Change – whose centrepiece is a carbon tax, or its equivalent, in every province.
But the Chamber, like us, is worried about the possibility that other government rules and regulations, related to reducing carbon emissions, will be misdirected and inefficient – doing little to lower pollution, while substantially raising the cost of doing business. That's a real concern.
For example, it's beginning to feel like it is becoming impossible for any new interprovincial pipelines to ever get built. The obstructionist games played by premiers and mayors, and the fact that a change in a provincial government can turn a green light into a red at times seem destined to limit the transport of this country's increasing oil output to (less efficient, less safe) rail.
Environmental benefit: Nil. Economic cost: High.
The Chamber also worries that the stalled regulatory process for reviewing major projects, such as pipelines, is about to become even more dysfunctional, resulting "in an unworkable system that would effectively end investment in Canada's natural resource sectors." Ottawa and the provinces must tread cautiously.