Western Expresso

[Stormer]

Originally Posted by Tacheguy

I've been thinking about the impact on Manitoba of the economic downturn in the oil patch. It bodes well for us I think on a couple of counts. First, Alberta and to a lesser extent Saskatchewan are going to raise taxes. This should put us at a bit less of a disadvantage that way. Second, more importantly, our interprovincial outmigration should be reduced. Population growth is an underrated metric for economic growth. All other things being equal I thing the glass here is more than half full. Their are downsides as well but they are more localized.. For example industrial suppliers perhaps losing customers in the patch. Would be interested to know how others see this playing out.

I understand your analysis, but I would suggest you are missing a lot of the downside:

1. Manitoba has had its own (smaller) oil boom in recent years with around 600 wells drilled per year. These are expensive, fracked horizontal wells costing $2 million+ each. That is a lot of economic activity that will probably be cut in half;
2. Manitobans are federal tax payers and will be impacted by Federal tax increases or perhaps slower tax decreases;
3. Federal transfers (especially equalization of $1.7 Billion, all of which comes from AB, SK and BC) will be cut.
4. I am not sure how much royalties taxes MB gets from the oil industry but I am guessing it is $100 million per year. This will be cut by >50%.
5. I would not be surprised if there are not 100s of Manitobans directly working in the oil patch in AB and SK, especially in Ft. Mac

[Tacheguy]

Good points. If our manufacturing can't rebound now with US housing growth and the low dollar then it never will. I thing we have the companies here that are going to create a lot of jobs due to those opportunities. I also expect aerospace to grow significantly.

Simplicity, I am a little more sanguine than you about the equalization impacts. Ontario should become a have province again, and Quebec should also see good export led growth. Overall it should be a wash for Manitoba if the national economy keeps growing. Anyways these should be interesting dynamics to keep an eye on..

[Riverman]

Manitoba does not get much for oil royalties because unlike Sask and Alta mineral rights are privately held in Manitoba.

[Stormer]

One other thing, MB now has 50,000 Bbls of oil per day production. If that was worth $2B per year, it is now only worth $1B. That comes right off of nominal GDP. You won't see that show up right away in the real GDP numbers that are typically published because real GDP does not take in to account commodity price changes. It does mean $1 billion less dollars sloshing around in the economy.

[Stormer]

Originally Posted by Riverman

Manitoba does not get much for oil royalties because unlike Sask and Alta mineral rights are privately held in Manitoba.

Sask also has plenty of freehold minerals on the east side of the province. Like Manitoba, they impose a freehold production tax on that. But you are correct, it is not as much as royalties where the Province is the owner.

Last year it was announced that the oil industry in MB is now bigger than the mining industry.

[Simplicity]

Originally Posted by Tacheguy

Good points. If our manufacturing can't rebound now with US housing growth and the low dollar then it never will. I thing we have the companies here that are going to create a lot of jobs due to those opportunities. I also expect aerospace to grow significantly.

Simplicity, I am a little more sanguine than you about the equalization impacts. Ontario should become a have province again, and Quebec should also see good export led growth. Overall it should be a wash for Manitoba if the national economy keeps growing. Anyways these should be interesting dynamics to keep an eye on..

Yeah, there's no doubt Ontario won't require as much, allowing a little more to go around, but that would be a hell of a rebound to go from receiving significant equalization to now producing it. In a short period, anyway. Bomberjet actually raised an interesting point a few posts back. I think what's probably being overlooked in a lot of this is that the dollar stayed so strong for so long that a lot of the structural capacity for manufacturing is just gone. The labour is still here, but the plants are gutted and the companies went elsewhere. I think there could be a small rebound, but the idea that manufacturing isn't a dying industry on the whole is probably misplaced. I'm not convinced anybody was waiting out the dollar. They moved their plant to a Southern US 'right-to-work' state or it was moved overseas.

If we're depending upon a low dollar to bring us manufacturing back, there's going to have to be a whole lot of union-busting before it happens.

[esquire]

Originally Posted by bomberjet

It is not Price. Another local company. And yeah Price just signed some deal for an expansion.

I forgot about that expansion... I heard some guys from Price last month talking about layoffs but I guess they weren't as broad as I thought.

[Tacheguy]

Just a few comments on manufacturing. The industry profile here is much different than the profile nationally. The companies here are about half the size on average, they tend to be privately owned and they have much lower rates of unionization. They are much more nimble and have used the high dollar period to acquire productivity improving equipment fro the U.S. and abroad. They cooperated with each other to an extraordinary degree to embrace lean manufacturing. They are in a terrific position right now to be rewarded for taking the long view. The hollowing out that has occurred nationally is much less pronounced here, in spite of the fact that there have been some casualties.

I have known academics who have looked at our little manufacturing sector and been tremendously impressed. There are a lot of historical and cultural reasons for it, but that is another discussion.

[Simplicity]

Originally Posted by Tacheguy

Just a few comments on manufacturing. The industry profile here is much different than the profile nationally. The companies here are about half the size on average, they tend to be privately owned and they have much lower rates of unionization. They are much more nimble and have used the high dollar period to acquire productivity improving equipment fro the U.S. and abroad. They cooperated with each other to an extraordinary degree to embrace lean manufacturing. They are in a terrific position right now to be rewarded for taking the long view. The hollowing out that has occurred nationally is much less pronounced here, in spite of the fact that there have been some casualties.

I have known academics who have looked at our little manufacturing sector and been tremendously impressed. There are a lot of historical and cultural reasons for it, but that is another discussion.

Yeah, it'll certainly be interesting to see what happens.

I just always think back to the doldrums of the late 80s through early 2000's where growth was weak nationally. Manitoba didn't fare much better than anybody else with the exception of the Maritimes. We lost quite a few people during those times. I'm hoping people took that as instructive.

I think it's interesting you call it our 'little' manufacturing sector because all of this talk is sort of lost on that. It hovers around 10% of our economy which really isn't so bad, but it's not great either. The issue for me is with unskilled and semi-skilled labour. If our construction sector (somewhere around 25% of the provincial economy) starts to wane - with most indications portending it will - that's a lot of wage pressure on the next best option leaving us not much better off in the aggregate.

Given there's an election on the horizon, I think lots of people are going to be paying attention to how well the province has been able to facilitate our provincial economy as it apparently comes to roost.

But very interesting points you're making. The insights from somebody who's been involved at the deeper levels will really welcome. By me, anyway!

[Stormer]

Back to equalization, I found this interesting graphic from the Fraser Institute:



You could put Quebec in this category as well. They won't allow fracking either. They are content on having the west do the dirty work and they will just take a cheque. I don't even view it as dirty work. Thousands of wells per year are fracked in Saskatchewan and I am not aware of even a single significant environmental issue,

[Riverman]

Great post Stormer. We need more info like this.

[rypinion]

Indeed, fracking is the solution to all the world's problems.

[djforsberg]

Originally Posted by rypinion

Indeed, fracking is the solution to all the world's problems.

Wow, someone sure missed the point...

[drew]

Originally Posted by Stormer

Back to equalization, I found this interesting graphic from the Fraser Institute:



You could put Quebec in this category as well. They won't allow fracking either. They are content on having the west do the dirty work and they will just take a cheque. I don't even view it as dirty work. Thousands of wells per year are fracked in Saskatchewan and I am not aware of even a single significant environmental issue,

I am no oil extraction expert, but it seems like this graphic is oversimplifying the process here. It says that Sask. is providing resource related $$ to Ottawa (obviously)- but how much of that from fracking related activity?

Leaving aside the issue of which provinces ban fracking - can you frack anywhere? Just because the oil is there, is it cost effective for the industry to just "start-up"? Hasn't the recent drop in oil prices effectively stopped the expansion of fracking extraction in any case?

There was something in the news last week about MB trying to start up some potash extraction in the province near the Sask border. Basically, the long and short of it was the global supply was too high, there is no potash industry presence in MB, and it was not valuable enough to have the industry bother starting it up in the near future. So a non-starter. Even though the industry has a heavy presence immediately to the west in Sask.

...just because no one is pumping oil or some other high value resource out of the ground in NS and NB, doesn't mean those Provinces aren't trying. You can't conjure up resources where they don't already exist, or where they don't exist is such a way that it is feasible to get at them (fracking).

[Stormer]

Originally Posted by drew

I am no oil extraction expert, but it seems like this graphic is oversimplifying the process here. It says that Sask. is providing resource related $$ to Ottawa (obviously)- but how much of that from fracking related activity?

Leaving aside the issue of which provinces ban fracking - can you frack anywhere? Just because the oil is there, is it cost effective for the industry to just "start-up"? Hasn't the recent drop in oil prices effectively stopped the expansion of fracking extraction in any case?

There was something in the news last week about MB trying to start up some potash extraction in the province near the Sask border. Basically, the long and short of it was the global supply was too high, there is no potash industry presence in MB, and it was not valuable enough to have the industry bother starting it up in the near future. So a non-starter. Even though the industry has a heavy presence immediately to the west in Sask.

...just because no one is pumping oil or some other high value resource out of the ground in NS and NB, doesn't mean those Provinces aren't trying. You can't conjure up resources where they don't already exist, or where they don't exist is such a way that it is feasible to get at them (fracking).

I liked the graphic so that was all I posted. Fracking bans are just an example of bad policies. Here is a more fulsome explanation from the Fraser Institute plus a link.

Canada’s federal equalization program is motivated by good intentions. However, the program has unintended consequences, and creates perverse incentives that have allowed at least two “have-not” provinces to shun sensible economic opportunities—and the subsequent jobs, incomes and government tax revenues.
Two examples: the ongoing ban on hydraulic fracturing or “fracking” in Nova Scotia and the just-imposed fracking moratorium in New Brunswick.
Natural resource development is a proven aid to prosperity—something that lower oil prices (unless they stay low forever) will slow but not hinder. It is impossible to gauge exactly the economic benefits of natural gas development through fracking in Nova Scotia and New Brunswick. However, research from a wide range of sources suggests that fracking may bring considerable economic gains to the region.

http://www.fraserinstitute.org/publi...terms=fracking

Apparently there is significant shale gas in NB, NS and PQ. Whether it is economic is an open question, but they may never find out as resource companies will stick with friendlier jurisdictions.

[esquire]

Originally Posted by Stormer

Apparently there is significant shale gas in NB, NS and PQ. Whether it is economic is an open question, but they may never find out as resource companies will stick with friendlier jurisdictions.

I wouldn't worry too much about it. Their hands will inevitably be forced on the issue... might not be for another 10, 20, 50 years, but it will happen.

[bomberjet]

Pallister says NDP manipulating seniors' votes
By: Bruce Owen
Posted: 12:21 PM

Opposition Leader Brian Pallister said today he’s not surprised than the rival NDP is dealing with accusations of voter interference and intimidation in the battle over who will lead the New Democrats into the next election.

The NDP's election of leader committee on Thursday set aside all the mail-in ballots from Swan River for delegate selection for the March 8 leadership contest after it confirmed up to half a dozen ballots had been improperly filled out. The committee’s decision will require all 220 NDP members in the Swan River constituency to vote again on their choices for delegates, a move that will delay by about one week knowing which of the three leadership candidates takes or splits the 22 delegates.

So does Pallister have a platform or anything of the sort, for the election? Or is it too early for that? The only thing you ever hear out of Pallister is him bashing the NDP. That's the only time he's in the news. Does he do anything else?

[Riverman]

He is not in government, he is the opposition leader. What do you expect him to do?

[1ajs]

so vids sitting at the pint right now

[HomeInMyShoes]

Mmmm....pints.

I wish I wasn't driving yesterday because I really needed to get a picture of the gorilla advertising electronic cigarettes on Broad Street yesterday.