The Oil Drum: Canada

The developing credit crunch is looking less contained by the day, despite the recent bounce in the equity markets. The interconnectedness of global markets really becomes apparent when contagion threatens to spread.

Following on from the Montebello SPP summit, Naomi Klein brings us an interesting twist on the right of protestors to be heard - surveillance as the new participatory democracy.

More commentators are weighing in on the question of Newfoundland oil royalties, while a pipeline capacity shortage looms in Alberta and potential conflict brews in BC over coal bed methane.

Top 25 Quotes on the Credit Crisis of 'O7

The U.S. economy, once the envy of the world, is now viewed across the globe with suspicion. America has become shackled by an immovable mountain of debt that endangers its prosperity and threatens to bring the rest of the world economy crashing down with it. The ongoing sub-prime mortgage crisis, a result of irresponsible lending policies designed to generate commissions for unscrupulous brokers, presages far deeper problems in a U.S. economy that is beginning to resemble a giant smoke-and-mirrors Ponzi scheme. And this has not been lost on the rest of the world. - Hamid Varzi, International Tribune

The following applies not just to housing, but in many ways to credit bubbles in general. IMO we should expect to see graphs like the one below across a wide range of asset classes in the not too distant future.

Houses Should Not Be a Commodity

There are technical reasons for a market crash (foreclosures, credit tightening, etc.) and I have discussed those in great detail in earlier analysis posts; however, market psychology plays a large roll in how and why it all plays out. The technical factors cause shifts in psychology among the market participants which exacerbate market moves. Today I will examine the psychology of market bubbles drawing parallels between the commodity futures market and the real estate market. In this post want to clearly illustrate how and why the psychology of market participants will facilitate the ongoing price crash.

N.S. premier urges revolt against federal budget

The 2005 Atlantic Accord, a deal signed by the then-Liberal government between the governments of Nova Scotia and Newfoundland and Labrador, protects those two provinces from having their offshore oil and gas royalties clawed back under the federal equalization plan.

However, to accept an enriched equalization deal, they have to abandon the accord.

Billions at risk from wheat super-blight

An infection is coming, and almost no one has heard about it. This infection isn't going to give you flu, or TB. In fact, it isn't interested in you at all. It is after the wheat plants that feed more people than any other single food source on the planet. And because of cutbacks in international research, we aren't prepared. The famines that were banished by the advent of disease-resistant crops in the Green Revolution of the 1960s could return, Borlaug told New Scientist.

The disease is Ug99, a virulent strain of black stem rust fungus (Puccinia graminis), discovered in Uganda in 1999. Since the Green Revolution, farmers everywhere have grown wheat varieties that resist stem rust, but Ug99 has evolved to take advantage of those varieties, and almost no wheat crops anywhere are resistant to it....

....What's more, Ug99 will find agriculture has changed to its liking in the decades stem rust has been away. "Forty years ago most wheat wasn't irrigated and heavily fertilised," says Borlaug. Now, thanks to the Green Revolution he helped bring about, it is. That means modern wheat fields are a damper, denser thicket of stems, where dew can linger till noon - just right for fungus.

Another worry is that travel has exploded in the past 40 years. There have now been several documented cases of travellers carrying rust spores on their clothing. Some fear Ug99 will hitchhike as much as it flies - and its spread need not be innocent. New Scientist has learned that the US Department of Homeland Security met in March to discuss the possibility that someone could transport Ug99 deliberately.

Trust bounty slips away

Most income trusts that have sold themselves -- since Ottawa decided to increase taxes on these investments to stem tax leakage -- have ended up in the hands of entities that don't pay Canadian taxes.

Twelve income trust deals with a total enterprise value of $7.3-billion, including yesterday's proposed sale of KCP Income Fund, are pending or have closed since the end of October. Nine of these transactions, worth $5.76-billion, are set to end up in the hands of foreign private equity shops, foreign corporations, Canadian private equity or Canadian pension funds -- all outfits that don't pay taxes into Ottawa's coffers. The findings were made by Chris Rankin, an analyst at Canaccord Adams....

...."We're seeing cash flow moving from taxable Canadian investors' hands to offshore investors and non-taxable hands," said Sandy McIntyre, a fund manager at Sentry Select Capital Corp.

Canadian rebirth for wind power

Inside an unremarkable office building on the outskirts of Vancouver, a small team of engineers and marketers is building a technology that will tame the wind.

It is a high-tech battery that looks like a pair of hot-water tanks linked by a twisting network of plastic piping. Each tank is filled with vanadium, an element named after a Norse fertility goddess that could give birth to new possibilities in alternative energy by making wind turbines nearly as reliable as coal-fired electric plants.

First designed by NASA and developed by Vancouver-based VRB Power Systems Inc., the vanadium battery took a major step toward commercial success yesterday after the Irish government released a study showing it could substantially boost profitability at wind farms when the Emerald Isle is looking to inject some of its famous green into its power supply.

Arctic Gas projects put on ice

New cost estimates that pushed up the price of the Mackenzie gas pipeline to $16.2- billion make Canada's Arctic natural gas among the most expensive on the continent, top explorers in the area said yesterday.

Executives at Devon Canada Corp. and Apache Canada Ltd. said they're putting exploration plans on ice until the project becomes a reality.

"When I see the welders show up and start welding pipe, that's when exploration will ramp up again," said Chris Seasons, president of Devon Canada, a subsidiary of Oklahoma City-based Devon Energy Corp., which spent more than $300-million looking for natural gas in the North this decade. "Certainly the delay to 2014, assuming the project goes ahead, is not helpful, and while we haven't seen any tolls on the mainline, just looking at the costs, it's going to make it amongst the most expensive gas in North America," he said.

Shortage of diesel fuel now 'critical'

Two major fuel suppliers are sounding the alarm for Ontario's trucking industry amid "critical" shortages of diesel fuel in the province.

The fuel shortage, which has seen motorists inconvenienced for more than a week as gas pumps intermittently run dry, has forced Ultramar to suspend diesel deliveries to four Toronto-area service centres and three other Ontario cities - Hamilton, Cambridge and London.

"These sites will remain open only while the product currently in the storage tanks lasts," Ultramar said Thursday in a notice to customers....

...."The last thing you want to have is a situation where your gas stations may be closed but, worse, our truckers cannot get the product from A to B," he said.

McTeague said the Energy Supplies Emergency Act allows the federal government to take action if shortages cause social or economic problems.

Mackenzie Valley more valuable if left undeveloped: study

The Mackenzie River region in the Northwest Territories is worth 10 times more in its natural state than the value industrial development would bring, says a Canadian Boreal Initiative study released in Ottawa on Wednesday.

Entitled The Real Wealth of the Mackenzie Region, the study calculated the region's ecological goods and services to be worth $448 billion if left undisturbed.

In comparison, it estimated the wealth generated by industrial development such as the proposed Mackenzie Valley gas pipeline and related resource extraction to be $41 billion.

The report is the first watershed-based natural capital review ever conducted in Canada.