Jan. 24, 2020

BANK OF CANADA DOWNGRADES ECONOMIC OUTLOOK

  • 2019 Q4 GDP growth expectations reduced to 0.3% due to strikes, pipeline shutdowns, weather and inventory adjustments. 2020 Q1 expected at 1.3%.
    • Job creation has slowed
    • Indication of consumer confidence and spending have been unexpectedly soft
  • Bank of Canada left interest rates unchanged but left the door open for an interest rate cut.

CORONAVIRUS

  • China has locked down 40 million people and has restricted tour packages.
  • 32 of China’s 34 provinces have cases of Coronavirus.
  • 800 confirmed cases but some individuals are not experiencing a fever.
  • Shanghai Disneyland, cinema theatres, part of the Great Wall of China are closed indefinitely.
  • Coronavirus has now been confirmed across Asia as well as two cases in the US.
  • Chinese tourists spent $130 billion overseas in 2018.

WHAT WOULD A WORLD WITHOUT OIL AND GAS LOOK LIKE?

  • Oil and gas is refined into petrochemicals as well as into fuel for transportation and industry.
  • Petrochemicals are used in many everyday items including but not limited to:
    • Nylon (used in clothes, bristles in a toothbrush or hairbrush)
    • Medicine (ie: penicillin, aspirin, cancer treatments, arthritis treatments)
    • Plastics (syringes for medical purposes, latex gloves, car components, water pipes, combs, storage containers, tubing, CPAP machines, IV bags)
    • Food (fertilizer, packaged foods, milk jugs, canned and jarred foods, food packaging)
    • Reusable grocery bags (many are made from polypropylene, a petrochemical)
    • Personal Hygiene (shampoo, detergent)
    • Casings for batteries, solar panels, phones, televisions, computers
    • Fibreglass (used in vehicles, wind turbines)
    • Rubber (tires for bicycles, cars, strollers, gaskets for everything from coffee makers to industrial machines)

COST OF PETROLEUM OUTPUT AS MEASURED BY SOCIAL PROGRESS INDEX

(Source: Natural Resources Canada, Tudor, Pickering, Holt & Co., EIA 2018e, Social Progress Imperative, Canoe Financial)

  • Canada, Denmark, Norway, Australia are topped 4 out of 60 social progress producing countries
    • US ranks #11, Russia 35th, China 41st
    • Yemen, Angola, and Chad are last

OIL AND GAS DRILLING

  • In 2010, the base decline rate for US shale liquids production was 15.6%; as of 2018, the base decline rate is 37%.
  • For US oil production to remain at current levels, they need to drill 13,000 wells per year.
  • Oil and gas company bankruptcies in Canada and the US rose 50% in 2019 Y/Y, bringing the total to 208 bankruptcy filings between 2015 and 2019.