Why are Canadians paying such high gas prices June 2015?
If you’re wondering why gas prices are so high in Canada in June 2015 the reason is simple. First of all the Canadian dollar is low as of the date of this blog posts publication $1 CAD will get you $0.8019 USD. Canadians need to understand the price of Oil that we see on the television are priced in UNITED STATES DOLLARS(USD) not Canadian dollars(CAD). The second reason is because Canadians IMPORT Gasoline.
People may then ask the question well then what’s the point of Alberta? My personal response to that question is I don’t know either. In my personal opinion I think this arrangement happens because of the trade agreements Canada has with the United States which encourages stunting the growth of the local petroleum industries in Canada.
Canada’s economy especially right now is in a very strange place. The cost to live in Canada has always been high however now it’s heading into levels which inevitably will lead to financial instability. Although everyone is screaming crash I don’t think the Canadian economy is going to crash I just see stagnant growth. The federal reserve in the United States is being pushed into a corner to raise interest rates.
If the U.S raises interest rates even a little bit and the Bank of Canada does not also raise its interest rates the Canadian dollar will go even lower. The shock of America raising its interest rates is going to have a shock on the world that will force money managers to re-evaluate their portfolios. During this process the investors will look at the Canadian market with more scepticism which could lower the loonie to as low as $1 CAD for $0.69 USD.
Now lets say Canada does raise its interest rates when America raises theirs? I think that would be smart however how the banks interpret this is something entirely different. If the banks believe that rates will be going up and up less people will qualify for loans and mortgages or the banks will look for more protection and this is the real dilemma Canada faces raising interest rates in this financial climate. With cost of living, rent and house prices so high how do you qualify more people for loans and mortgages?
Also on the flip side lowering the loonie causes REAL INFLATION because America is our biggest trading partner. The thing I don’t Canadians seem to grasp with cost of living increases is for example a $10,000 CAD loan in Canada won’t buy you now what it would in the 90’s or even just a few years ago so although interest rates are low the money you’re being loaned is being eaten up by inflation.
If U.S federal reserve raises rates the global shock will be massive the difference in Canada compared to the rest of the world however is our debt levels. The debt levels in Canada are worse than they were in the U.S when they had their crash. However allow me to also point out that the types of debtors in Canada differ from those in the U.S.
Most of the Canadians in debt are middle classers not suckered into teaser rate interest only mortgages. So in truth they’ll service their loans but their purchasing power will go down with inflation which ultimately leads to people wanting Pay Increases and these factors alone will lead to stagnant growth in the Canadian economy unless we build a stronger manufacturing base or create a whole new industry where we produce as oppose to consume. Remember high paying jobs are leaving Canada at an alarming rate and right now with lower price of oil Alberta is really feeling the shock.
The worst part of all this is the expected timetable for the federal reserve to raise interest rates is September 2015. September is also the time when the real estate market starts it’s cooling process because people typically don’t like to move during the fall or the winter. How this relates to gas prices is that all of these factors will make gas prices even more expensive regardless of the price of oil at that time. Remember again that the price of oil that you see being blasted all over the news is in US Dollars not Canadian dollars.
Being that the Harper government is hell bent on Balancing the Budget indebted Canadians are going to face some tough times ahead. With that said the rest of you that aren’t in debt and prepared to capitalize from this mess may see the best of times ahead especially if you invest wisely and position yourself for where all the money will be going. A quote by the great one “I skate to where the puck is going to be, not where it has been”
Take a look at the current state of your country and ask yourself where the money is going to go… Furthermore if the Liberals or even the NDP take over you may want to look into what their agendas will be. I’ve always looked at liberals and the NPD as socialist and the problem with socialism is that although it makes sense in THEORY when put into practice the rich actually get richer and gain more control under a socialist government. Anybody remember the elder Trudeau’s government? Jean Chretien’s government? Where did all the money go? Again take a look at the current state of your country and ask yourself where the money is going to go…