I ran across a chart this week that jumped out at me. No matter what your thoughts are on fossil fuels it appears we have a problem. The world economy is still not fully open and we are running out of spare oil capacity. According to J.P. Morgan, global oil and gas capital spending needs to rise an additional $750 billion by 2030 in order to meet demand.

 

As most of you know, very few companies are spending money on oil and gas production. Historically, high oil prices solve themselves because companies drill more oil and gas wells to increase the production to take advantage of the high prices. This new production in turn makes the price of oil come down because of the excess. Unfortunately this has not happened during this oil and gas recovery. Oil and gas companies are using record cash flows to buy back shares, pay down debt and increase dividends to shareholders. It is hard to fault the oil and gas companies for doing this. Between the backlash from institutional investors to keep costs down and the pushback from ESG requirements, it's hard to imagine them doing anything else. Now as a shareholder we think this is great, however, from an economic standpoint, and a consumer standpoint, this is quite concerning. If oil and gas companies do not increase capital expenditures soon, we are going to see our fuel and heating costs become much more expensive. This is not good for the consumer or the economy.

 

Note, we are overweight oil and gas in all our models.

 

Source The David L. Fingold Blog

 

I would also like to take this opportunity to introduce Fatima as the newest member of our team. Fatima has been with CIBC for 10 months and has a diploma in Accounting and Marketing from SAIT. We are excited to have her join Cacic Wealth Management.I would also like to take this opportunity to introduce Fatima as the newest member of our team. Fatima has been with CIBC for 10 months and has a diploma in Accounting and Marketing from SAIT. We are excited to have her join Cacic Wealth Management.

 

I would also like to remind you that the RRSP contribution deadline is March 1 for the 2021 tax year. The contribution limit for 2021 is the lower of $27,830 or 18% of your earned income in the previous year. The 2022 limit is $29,210.I would also like to remind you that the RRSP contribution deadline is March 1 for the 2021 tax year. The contribution limit for 2021 is the lower of $27,830 or 18% of your earned income in the previous year. The 2022 limit is $29,210.

 

I have also included a piece from our CIBC Economics Team entitled “ Capital spending: The more the merrier?".I have also included a piece from our CIBC Economics Team entitled “ Capital spending: The more the merrier?".

 

As always if you have any questions please feel free to give us a call at any time.

 

Have a great weekend.

 

Milan