This past week was a rollercoaster ride. The US government signaled that they were going to apply 25% tariffs on Canada (10% on energy) and then struck a deal at the last minute to hold off for 30 days. As devastating as these tariffs would have been and could still be, one positive that came out of it appears to be some unity across the country with regards to pursuing alternative markets for our goods. In particular, it seems like the country might be more open to allowing our energy to reach other markets. Even premiers from Québec and British Columbia signaled that they may be open to finding more markets for our oil and gas products.

For years, our energy producers have been warning that Canada needed another market for our energy sales. The hurdles to build pipelines have been enormous (and apparently there was no business case for LNG...). With the new knowledge that our trading partner to the south might not always play by the book, we've come to realize that the loss of income from energy (the biggest income generator for Canada) would be devastating for all provinces. If all of the provinces and the federal government follow through on this newfound openness, this may be the beginning of a long-term energy uptrend for Canada.

For those who think that that oil and gas is a dying industry, please look at the chart below. Other than whale oil, every energy product that we've discovered has gone up in usage since the beginning of time. We use more wood, gas, nuclear, hydro, and [now] renewables then we ever have. I have used Newton's first law in my weekly notes many times, "an object in motion stays in motion until acted upon". This basic physics fundamental also applies to energy consumption. It's hard to imagine what would make fossil fuel consumption start declining now. Maybe, just maybe, we are starting to see some green shoots in the Canadian energy sector!

I have also included a note from our CIBC Economics team entitled “Watch the other House, not the White one”

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

Have a great weekend.

Milan