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12.03.2010

Canada's Two New Solitudes

By Jeff Rubin
www.theglobeandmail.ca

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.

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