Just a few quick comments on oil prices which have been starting to move upwards over the last little while. Initially this appears to be a great thing, but there are a couple hiccups. We trade barrels of oil in US dollars, so while it is good that oil has gone up in price, much of the goodness is taken away by our dollar increasing in value against the US dollar by a nickel during the same time period.
The repercussions of the US printing money to push into the economy is that over time they devalue their currency against the other foreign currencies out there. We are starting to see some of this effect currently and we have to look at big picture economics when we see our dollar rising. If we compare it only to the US it initially appears good, although it does affect manufacturing and exports as their costs rise. It’s when we see that the US dollar is actually decreasing in value when compared to the majority of other currencies that it becomes more of an issue.
So in the big picture, a higher Canadian dollar is great for importing items in and our purchasing power when traveling to the US or buying their goods. At the same time it eats away profits from oil exports, other products we export and the over all cost of manufacturing. Since the majority of our Eastern provinces are heavy manufacturing areas you can see this being a negative influence.
So does $58 oil help, yes it does, but only if the Canadian dollar doesn’t increase to much in value at the same time.
