Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
per week
for 24 weeks
// //

These are stories Report on Business is following Friday, Jan. 16, 2015.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Prospects dim
Bit by bit and day by day, the collapse in oil prices is taking a toll on Canada.

Story continues below advertisement

The oil patch is slashing jobs and spending, economists are revising their forecasts, and even the federal government is delaying its next budget to see how it all washes out.

And today, the International Energy Agency cut its forecasts for Canadian production.

"The recent oil market selloff, brought on by deep imbalances after years of record-high prices, will likely prove a milestone in the history of oil," the IEA said in its January outlook.

"However prices eventually evolve, markets may never be the same."

The IEA cut its 2015 output growth projections for Canada by 95,000 barrels a day and for the United States by 80,000. The report helped push up oil prices.

Some developments:

1. As The Globe and Mail's Carrie Tait reports, Canadian energy firms have already cut at least $5.2-billion from their 2015 spending plans. And Suncor Energy Inc. announced plans to slash 1,000 jobs. That's just for starters.

Story continues below advertisement

2. Late yesterday, Gasfrac Energy Services Inc. said it filed for court protection under the Companies' Credits Arrangement Act, the Canadian equivalent of Chapter 11 proceedings in the United States, citing "continuing negative operating results, limited access at the present time to capital markets for junior issuers such as the corporation, reduced industry activity resulting from depressed petroleum and natural gas commodity prices, and the inability of the corporation to obtain a suitable offer for the purchase of the corporation or its assets after a strategic alternative process."

3. This week alone, Bank of America Merrill Lynch cuts its forecast for Canadian growth to 2.1 per cent from 2.4 per cent. Separately, BMO Nesbitt Burns projected the oil plunge will cut economic growth this year by at least 0.3 of a percentage point, also to 2.1 per cent from last year's estimated 2.4 per cent

4. This will play out differently across the country, of course. The oil provinces of Alberta, Saskatchewan and Newfoundland and Labrador will suffer, while Ontario and Quebec should gain from lower energy costs and the weaker Canadian dollar. Said BMO: "Alberta will take the brunt of the hit from lower energy prices, slowing to a crawl in 2015 from over 3 per cent in 2014, and underperforming the nation for the first time since the recession."

5. The latest housing numbers may be a signal: Sales in Calgary fell 6.9 per cent in December from November, while new listings surged. Edmonton suffered a sales drop of almost 22 per cent, though new listings dipped. "Calgary's housing market is already showing signs of popping," said economists at Bank of Nova Scotia, adding that the sales drop and new listings are "a sign of panic in the local market as people rush to be the first to short the market."

6. The Canadian dollar has tumbled to below 84 cents U.S., and is expected to sink further. Today, it dipped as low as 83.05 cents.

7. Jim Prentice, premier of oil-rich Alberta, has instituted austerity measures, choosing not to wait as the province's fortunes dim.

Story continues below advertisement

Of course, there's both bad and good in the plunge in oil, though that may largely depend on where you live. For consumers, the plunge in pump prices is like a big tax cut. And for manufacturing provinces, the subsequent drop in the dollar should help boost exports.

"The dramatic collapse in crude has lines drawn between winners and losers," economists Benjamin Tal and Nick Exarhos said in a report this week.

"And though the nation's emergence as an energy powerhouse has the negatives coming into sharper focus, there will be spoils to be shared in Canada, a country which is still a relatively large energy consumer."

And for those juggling those fantastically high debts, there's a respite.

The Bank of Canada is now expected to hold its benchmark interest rate lower for longer, perhaps into next year. And some observers aren't ruling out a rate cut, though few actually see that happening.

This all has to do with the "hog cycle," as Bank of Canada deputy governor Timothy Lane put it this week.

Story continues below advertisement

"The basic forces at work are the same as in the hog cycle – a cycle that economists learned to analyze about 80 years ago," Mr. Lane said this week.

"When hog prices are high, producers rush to increase their herds," he said.

"As the pigs reach maturity, producers bring their increased supply to the market all at the same time, causing a glut. Prices fall, and producers cut back their production. This leads to a shortage. Prices start rising, and the cycle starts anew."

Brokers in trouble
The fallout from yesterday's decision by the Swiss National Bank is already widespread, beyond the initial turmoil in the markets.

Today, for example, currency broker Alpari said it was forced into insolvency after its clients were hit by losses as the franc surged in the wake of the central bank's decision to remove the cap against the euro.

"The recent move on the Swiss franc cause by the Swiss National Bank's unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity," Alpari said in a statement.

Story continues below advertisement

"This has resulted in the majority of clients sustaining losses which has exceeded their account equity," it added.

"Were a client cannot cover this loss, it is passed on to us."

Other firms have also been hurt.

"Aftershocks continue to be felt on Friday following the SNB-initiated earthquake rattled global markets on Thursday," said Adrian Miller, director of fixed income strategy at GMP Securities in New York.

"As one may suspect, the SNB's surprise move caught many on the wrong side of the trade, racking up serious losses to where Bloomberg is reporting several currency brokerage units globally are having capital issues due to significant losses by the clients."

Goldman slips
Goldman Sachs Group Inc. today posted a drop in fourth-quarter profit to $2.17-billion (U.S.), or $4.38 a share, from $2.33-billion or $4.60 a year earlier.

Story continues below advertisement

The profit figure topped the estimates of analysts.

"Looking ahead, we see evidence of a continued pick-up in momentum for the global economy that will improve the opportunity set for 2015," said chief executive officer Lloyd Blankfein.

The plunge in energy costs is helping to drive down consumer prices in the United States.

Prices fell 0.4 per cent in December, according to the U.S. Labor Department today, bringing annual inflation down to just 0.8 per cent, compared to November's 1.3 per cent.

The annual pace of so-called core inflation, which strips out volatile items, dipped to 1.6 per cent.

"The headline CPI is, not surprisingly, being hammered by slumping oil prices, but even core inflation remains under wraps despite strong economic growth, probably due to the strengthening U.S. dollar, which tends to cap import prices," said senior economist Krishen Rangasamy of National Bank.

Streetwise (for subscribers)

ROB Insight (for subscribers)

Business ticker

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies