October 18, 2011
Transportation issues help reveal current concerns and long-term trends – Part 1
Chief Economist, CanaData
Some of the most interesting and revealing economic news these days has to do with transportation in one form or another — oil pipelines, shipping ports and airlines.
The issues encapsulate not only current concerns about the economy, but also long-term trends.
Conflict between jobs and the environment
For example, the proposed Keystone XL pipeline project highlights one key point of conflict — that which exists between the need for more jobs and the threat of damage to the environment.
U.S. regulatory agencies have already given approval to the project. The final say rests with President Obama. He is facing quite a dilemma.
The 2012 presidential election race is clearly going to be fought on the issue of job creation.
That provides a strong argument for proceeding with Keystone construction — as, of course, does lining up a friendly source of supply, but that’s a different matter.
In Canada, each one-billion-dollars-worth of construction leads to 5,000 man-years of direct employment — a figure derived by simply dividing the total value of construction by the total number of jobs in the industry, both figures supplied by Statistics Canada.
The multiplier effect is at least two- and maybe closer to three-times as much.
Included would be professionals whose practices are closely tied to construction — engineers and architects, realtors, property lawyers and some accountants — plus line workers who make building products.
Further indirect employment results from what all of the foregoing individuals spend on other goods and services, such as restaurant meals, haircuts, home furnishings and so on.
The figures in the U.S. are surely similar.
But there are also hard-core Democrats who believe one of the Party’s main platforms would be watered down by a too-easy approval for TransCanada’s pipeline to the Gulf Coast — the promise to protect the environment.
That’s wherein the debate rages.
What needs to be examined is the validity of the argument that there is a conflict.
Where are tomorrow’s jobs?
Where are tomorrow’s needed jobs going to come from? Where are the best opportunities to take a lead on the world stage?
It’s not in simply saying no to industrial development. It’s in striving our hardest to ensure capital projects take place in a manner that’s as environmentally responsible as possible.
Among a host of other opportunities, that means good scientific jobs in remediation research and administrative jobs in compliance monitoring.
Some unions in Canada are opposed to the Keystone project due to a different take on the employment question.
It’s their contention that too many jobs will end up being located in the U.S.
Value-added upgrading work will mostly take place south of the border. But that’s the reality when a market of 34 million lives next to one of 311 million. There are economies of scale.
The opposition of Canadian unions overlooks the difference between theoretical jobs and actual work firmly committed due to expansion of extraction sites and relatively modest (while still “mega”) plans for upgrading facilities.
Europe tries to make a point
Oil Sands capacity additions, which knowingly account for so much employment, are under threat from more jurisdictions than just the U.S.
They are also coming under fire in Europe. A proposal there would see our extracted oil labeled as “dirty”.
Attaching a higher carbon-content rating versus what is simply pumped out of the ground will potentially add to its cost. It would mean extra charges under European cap and trade provisions.
This seems to be a gratuitous slap in the face. No Alberta oil is actually sold in Europe.
Europe does buy “dirty” oil from Russia and Nigeria.
What’s the “beef” with Canadian oil?
Is this an effort to make Europeans feel better about the fact they are paying more for oil than in North America?
To no-one’s surprise, it appears politics is again playing a role in energy pricing.
Note: This will continue in Economy at a Glance Vol. 7, Issue 146.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com
