October 5, 2017

On Thursday the S&P 500 was up yet another 0.5%. Toronto was up 0.3%.

Ceapro was up 12 cents or 21%. I don’t see any news to explain that. And it was only on a relatively few trades later in the day. I would not read anything into that. This is a penny stock and they move around a lot in percentage terms.

Big news today was TransCanada’s official cancellation of the Energy East Pipeline. It’s not entirely clear if this was strictly due to regulatory barriers. One analyst on BNN claimed there won’t be enough oil to fill all the pipelines that were potentially in the works.

Certainly the regulatory climate is extremely difficult. I spent 13 years working for the utility regulator in Alberta. My view is that their process was becoming increasingly complex and suffocating over the years. The National Energy Board (NEB) I think suffered from the same massive information overload whereby it becomes almost impossible for any one human mind to read, much less comprehend and assimilate the massive amount of submissions. The scope of the proceedings has vastly mushroomed over the years. On top of this the NEB was more recently required to consider environmental impacts both of the project and then more recently of the end users of the oil. I think trying to determine if a pipeline is in the National Interest in that environment is almost impossible. A pipeline will always be very beneficial to a relatively small portion of the population. It might somewhat benefit a very large portion of the population. And there are some people who bitterly oppose pipelines. Whether it would contribute to pollution that harms the environment is perhaps impossible to know. It depends whether the oil in the pipe spurs new consumption or simply displaces oil produced elsewhere. And how exactly can one balance the harm and costs of pollution or possible spills against economic benefits? That’s an argument that could go on forever. There can never be a consensus on such matters. At some point, a regulator or government has to simply make a call on those matters. But governments seem less willing than ever to make calls which will be bitterly opposed by some.

The loss of this potential pipeline is certainly negative for Alberta.

Perhaps it is a positive for CN rail.

Statistics Canada reported that Canadian exports fell in August. Volumes decreased 1.9% in August, while prices were up 1.0%. This may be partly or largely due to the higher Canadian dollar. Products priced in Canadian dollars became less competitive. Perhaps we should wait to see if the volume decline is confirmed in the next month or two before reading too much into it. The price increase seems surprising but could be related to higher oil prices. It is volume rather than price which has the most impact on the economy and jobs.