29.10.2018


Interest Rates Keep Creeping Up

On Wednesday, the Bank of Canada (BoC) announced an increase in its overnight interest rate from 1.5% to 1.75%. The overnight rate refers to the interest on the exchange of money banks move amongst themselves in the short-term, meaning that with a rate hike, these transactions become more expensive for the banks. The banks then compensate by increasing their prime rate, which is the interest they charge their customers on loans. Usually, all of the major Canadian banks have the same prime rate. After this rate hike, the banks are sitting at 3.95%. However, this isn’t likely to last long – economists are predicting that the BoC is likely to continue incrementally raising the interest rate going forward to avoid inflation.

So, what does this mean for you? If you’re one of the millions of Canadians who has a mortgage, loan, or credit card debt, it’s going to take a little while longer to pay off those debts. And if you’re thinking about making a big purchase like buying a car, home, or taking out a loan for your education, you may want to consider the fact that while interest rates are still relatively low, they’re almost sure to keep rising.


Volatile Canadian Oil Prices Become the New Normal

According to a recent report, Canadian oil and gas companies are losing out on around $100 million a day because of the price differentials between Western Canada Select (WCS) oil and West Texas Intermediate (WTI) oil. For an industry that’s only just regaining its footing after the global oil price recession of 2014-15, the “record setting” price discount, currently hovering around US $50 per barrel, comes as yet another hurdle.

So why the discount? For one, WCS is a thicker, more viscous substance that takes a bit more energy to refine and more dilutent to transport. But that’s only a small factor in today’s discount. The main reason is that there is a backlog of oil in Canada that can’t reach refineries on the Gulf Coast because pipelines are completely full. Freight trains have become a stand-in for pipelines, but rail takes longer, is more expensive, and is considered less safe. Basically, Canadian oil is stuck in Alberta, with few options for getting to a refinery.

As global oil prices climb upwards with increasing demand, Canadian energy companies are expressing frustration in their inability to capture that demand.  Currently, Canada produces around 2.7 million barrels per day, a number that is expected to rise to 3.67 by 2030. That means you should expect to hear a lot more about oil transportation in the coming years – as if this year’s pipeline news cycle wasn’t dramatic enough.


Pollution in Canada now comes with a price

“Starting next Spring, it will no longer be free to pollute in Canada.”

The Prime Minister’s words might have a nice ring to them, but what does that actually mean?

A summer of forest fires, extreme heat warnings, and plans to evacuate coastal towns with rising tides are proof that Canada is already experiencing the effects of climate change.

So this week, the Government of Canada announced a nation-wide carbon tax; a fee on the production, distribution, or use of fossil fuels based on how much carbon their combustion emits.

The Federal Carbon Pollution Price (read: carbon tax) will start at $20 per tonne in 2019, increasing by $10 every year to a final price of $50 per tonne in 2022. But in true Canadian fashion, the federal government can’t make a unanimous decision without a little pushback from the provinces and territories.

In Saskatchewan, Manitoba, Ontario, and New Brunswick, the Yukon, and Nunavut the leaders have said that their pollution shall not be priced. In response, the Federal Government will not tax the people but rather the companies and those companies will in turn pass the tax along to you and me. A ‘backstop’, if you will.

What does this tax actually mean for you and your bank account as it stands right now?

Really, two things:

  1. You will be paying more to fill up your gas tank. Right now, the average price of gas in Canada is $1.43 per liter. By 2022, we will see an 8 per cent increase. You will also be getting a rebate, called the Climate Action Incentive, to make up for those increased energy bills. About 90% of the the revenue to be exact, will go right back to you.
  2. An anticipated 70 per cent of Canadian households will receive a rebate that’s higher than the increased energy costs. Because even though the word tax definitely doesn’t sound like something you want to do cartwheels over, the purpose of this tax is to combat climate change, not punish you.

And Canada isn’t alone. We’re actually one of forty other countries who are now putting a price on pollution.

But with an election coming up in less than a year and roughly 47 per cent of Canadians living in a province that doesn’t support the national carbon tax, it doesn’t much matter how many countries subscribe to the idea. It might be a bumpy road to greener grasses. This is a story we’ll have to follow!

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