Prepare yourself for a shock, but oil prices — the engine that's been driving Canadian economic growth for the better part of the last decade — have started to sag. And everyone from oil companies to governments are starting to feel the pinch.
We have reported on this story many times in recent weeks and the oil drop continued this week, as the price of crude was breaking its five-year lows on a seemingly daily basis.
Crude was set to close at around $58 US a barrel on Friday, well off the $105 that it touched as recently as June. It's showing no sign of stopping either, as the world is waking up to the new reality that we are simply producing far more oil than the global market needs.
"It's basically where oil prices are going to settle in for some time now," is how one analyst put it to Briar Stewart in one of our most popular stories this week.
That's going to have an impact on Canada's economy but not necessarily in an entirely bad way, one of Canada's biggest banks points out. After years of being petro-dependent, there's reason to believe that Canadian exports are going to expand next year, as businesses start shipping out a lot more things that aren't oil.
Great news for airlines
That's not the only good news to come from oil's slide. Fuel is the biggest single cost that cash-crunched airlines face, so a break on their energy costs is great news for the industry. That's exactly what IATA, the lobby group that governs the industry, says it's expecting.
Airline profits are set to soar to $25 billion around the world next year. That's an increase of more than 25 per cent, IATA said this week. The group credited cheaper jet fuel costs with the increase, as that's letting airlines spend less in expenses while still taking in the same amount in fares.
Indeed, they're actually taking in more, thanks to an uptick in demand from global travellers. The global economy is quietly doing better than you might think, which is giving people everywhere more reasons to want to fly somewhere. Increased ticket sales lead to healthier profits, which lead to further demand — it's what the financial world calls a "virtuous circle" of demand.
But it's not leading to lower prices — yet. "A lot of these carriers they hedge fuel," one airline analyst told us this week, "and a lot of those airlines locked in barrels at oil equivalent of a hundred bucks a barrel, so that's something that sorta has to filter through the system."
Cheaper fuel costs are bound to translate into cheaper tickets at some point. Unless of course it doesn't (in which case forget we ever said it.)
New worries on home prices
Stories about Canada's hot housing market are nothing new, but it still makes news when somebody new — and very important — starts to sound the alarm.
That's what came out of the Bank of Canada this week, when Stephen Poloz's biannual report on the health of the economy noted that, based on the bank's own numbers, Canadian house prices are somewhere between 10 and 30 per cent overvalued — and have been for a while.
The central bank governor didn't say inflated home prices are the biggest threat to our economy. And in a Q&A reporters, he was eager to turn the conversation away from the dreaded B word (bubble).
But when the head of our central bank is now one of the voices suggesting house values could be as much as a third overvalued by historical standards, people tend to listen. Or at least they should.
Food waste costing billions
Speaking of costly bombs, a report out of an international consultancy made headlines this week by suggesting that food waste is costing Canada as much as $31 billion a year.
Value Chain Management says that's the toll for all those mushy bananas and expired tubs of sour cream that you forgot were wasting away in the back of the fridge. But the total doesn't just include what individuals are wasting. Companies, retailers, farmers — and most egregiously, travel companies like airlines and cruises — are literally throwing billions of dollars of food away every year.
Indeed, if the total cost of things like labour, resources, machinery and transportation is included, the true toll is probably closer to $100 billion a year in this country.
Certainly food for thought.
Other stuff
Those were a few of our more popular stories this week. Be sure to check out our website often for more, and don't forget to follow us on Twitter here. In the meantime, here's a list of some of our most-read stories every day this week.
Monday
Tuesday
Wednesday
Thursday
Friday
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