Around The World In 100 Words

NOVEMBER, 2018; Week 45

Question: What you can get for a little over $13?
Answer: An artery-clogging trip to McDonald’s for a couple of Big Macs -or a single barrel of Alberta Oil. 

Yep, 2 burgers or 1 barrel of oil, your pick. And while
the cost of the Golden Arches signature offering has stayed pretty-well-much the same (adjusted for inflation) over the past decade, the same can’t be said for the heavy, black stuff that’s dug up and shipped by pipeline and rail to US refineries. A decade ago -not that long ago really, Western Canadian oil commanded almost ten times that amount, with prices approaching $130 a barrel. Since then (see chart in G&M Link), prices have fluctuated wildly, with the trend moving down sharply to a decade-low $13.46.

The reason for this of course, is that the supply of Alberta oil exceeds the capacity of current pipelines to transport it to US markets. The result is that our oil, our single largest export, trades at less than a quarter of the price of a similar barrel produced in the US. This differential is costing both the Alberta and Canadian economy $Billions every year.

Absent of any near-term solution (where the Federal government takes decisive action to advance pipeline construction), we have taken the necessary step of either avoiding the Oil & Gas sector altogether, or re-balancing our clients out of their Energy positions found in sector-specific funds. This is consistent with our position that better investment opportunities can be found outside of Canada -and definitely outside of the Canadian Energy markets.

So our clients are invested in Global Balanced funds, where any investment returns can always be re-patriated to Canada anytime ...to buy yourself a Big Mac!