October 7, 2019

On Monday, the S&P 500 was down 0.45% and Toronto was down 0.2%.

Dollarama was down 2.65%. 

Apparently, Alberta is about to announce that it has sold some of its crude-by-rial contract commitments to the private sector. I would have thought the government would have to pay the private sector to take those contracts. Why? Because to the private sector they are only profitable if there is a wide spread between the Alberta price and the American price. But, the more crude by rail that ships, the narrower the discount! Only the provincial government would have been in a position to do large crude by rail shipments at a narrow and unprofitable discount. The overall benefits to the economy would out weigh the losses on the shipments. 

Now the province is cleverly offering to relax its mandated production cuts if the extra production goes out by rail. Possibly this could mean the government will sell some of the contracts without a loss. But I am skeptical, I think if honestly accounted for the contracts will be sold at a loss becasue they are so much more risky in the hands of individual private companies than they were in the hands of the government. Again. this is because the government did not need to make a profit on crude by rail as the added volume and lower differential would have brought in huge revenues in taxes and royalties out weighing the loss in shipping. On top of that the general economic benefits that would be spread across the economy. A government can afford to spend money to support the wider economy. A private company can only afford to spend money to support its own profits. I explained my thinking on this more fully back in March

 

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