Fortunately for Canada, our first encounter with peak oil did not exact the same toll as it did in the U.S. or elsewhere. We can thank our oil resources, not our chartered banks, for that. Even so, unemployment jumped to over 9 per cent and in the process dramatically changed the fiscal landscape in the country.
But that oil blessing may soon become a double-edged sword. The very oil reserves that will soon make Canada an energy superpower are making the loonie a petro-currency. Already around parity with the greenback, the Canadian dollar will soar to unprecedented heights against the U.S. dollar as triple-digit oil prices pull more and more daily oil production from the tar sands. And a strong dollar means one thing to hockey fans: NHL franchises leaving Dixie and the desert, and moving to Canada.
Sounds great, until you start to do the math and realize that the more oil Canada produces, and the higher the loonie goes, the less steel, machinery and even cars the rest of the economy will produce. We'll see how Canadians come to like their economy being at the other end of Americans' gas nozzle.
Or maybe we shouldn't be speculating how "Canadians" will feel about the experience, since we will be thinking about it more as, say, Albertans and Ontarians, or Newfoundlanders and Quebeckers. Soaring oil prices and a muscular loonie won't be a problem for Alberta, since the U.S. will soon have to buy most of its oil imports from Canada no matter what the exchange rate. However, it could prove to be a tad more problematic for the manufacturing sector in the industrial heartland of Ontario and Quebec.
Albertans flush with oily money will be able to spend their powerful loonies to buy whatever they like, but good luck to anyone trying to export something other than oil, particularly if it is produced by skilled workers paid in a strong Canadian dollar. Whether it's cars or unpasteurized Quebec cheese, it's getting more expensive in the U.S. market every time the loonie gains ground on the greenback. And Maritimers, who will soon be paying triple-digit prices for the oil they import from Venezuela, aren't likely to be crazy about a big premium exchange rate either. When American tourists see their Visa bills from their Canadian vacations, chances are they won't be coming back, even if our beer does taste that much better. While a premium Canadian dollar will likely bring back some long-lost NHL franchises to Winnipeg, Quebec City and maybe even Hamilton, that's about all it will bring from the U.S.
A premium exchange, fuelled by ever-increasing oil production from the tar sands, will be Alberta's revenge for the National Energy Policy. Whereas the NEP allowed the federal government to steal billions of oil-derived dollars from Albertan coffers, the morphing of the loonie into a petro-currency will see the rest of Canada find it's their turn to sacrifice billions.
Forget English and French - the new "two solitudes" fall on either side of the energy divide. The low-carbon economies of British Columbia, Ontario and Quebec, for example, have more in common with each other than language or geography would suggest. Their efforts toward developing sophisticated modern export economies will be thwarted by the tar-sands projects that Alberta (and the federal Conservatives) will fight tooth-and-nail to keep churning out cash.
Excerpted from Why Your World is About to Get a Whole Lot Smaller . Copyright © 2010 Jeff Rubin. Published by Vintage Canada, an imprint of the Knopf Random Canada Publishing Group, which is a division of Random House of Canada Limited. Reproduced by arrangement with the publisher. All rights reserved.