In the October issue of 50plus.com, Gordon Pape, one of Canada's leading financial reporters, has written an important article entitled, The Quiet Superpower. In this article, Mr. Pape outlines the significant inpact that Canada''s oil industry will have on Canadians in the coming years. For those of you who have not red the piece, it is must reading. Here are some of the key themes and the impact of the changes that are taking place on the trucking industry.

The Turning Point

Mr. Pape highlights that Canada was a second tier oil producer until the price of crude oil hit US$40 a barrel and stayed there. At that point the the production of crude oil from the Alberta Oil Sands became profitable enough to warrant the investment of hundreds of billions of dollars in development.

Canada ranks Number 2 and is on its way to becoming Number 1

Canada apparently possesses the world's second-largest oil reserves with only Saudi Arabia ahead of it. According to one expert, Canada controls 56% of the world's investable oil resources. Once the Arctic opens up to serious exploration, which with global warming is becoming easier by the day, we may become number one. This certainly explains the tremendous interest in the region in recent months.
As Mr. Pope points out, a number of countries discourage foreign investment. As the price of oil rises and the process of extracting oil from the tar sands becomes more efficient, more multi-billion dollar projects are going to emerge. Canada's oil production could increase from one million barrels a day to four million barrels a day by 2020.

Canada and the United States - a symbiotic relationship

Canada is clearly becoming more important to the United States on a daily basis. Our close proximity and stable democratic government make our energy reserves very desirable to the United States. As Mr. Pape points out, the demand for our oil has had a major impact on the speedy rise of the Canadian dollar in recent months. While many experts predicted parity with the United States dollar, very few people expected it to happen so quickly.

Future Energy Prices

Jeff Rubin at CIBC World Markets has predicted that the price of crude oil will hit US$90 a barrel in 2008 and end the year at US$100, barring any unforseen event such as an act of terrorism, a production problem or a recession. Taking a longer term view, Canada's oil reserves are expected to last between 35 and 50 years, depending on the level of production. Mr. Pape makes the comment that Canada is just now entering its oil superpower status.

Financial Implications

Most Canadians will feel the effects of this oil superpower status for the rest of their lives. While the loonie will continue to ebb and flow, it will maintain its upward trajectory against the $US, even as the US recovers from its current housing crisis and economic downturn. Even the esteemed investor Warren Buffet has stated that he expects the Canadian dollar to be worth more than the $US for the next five years.

Implications for Shippers and the Canadian Trucking Industry

The most obvious impacts are that the Oil Sands area will continue to be a hot area for the next several decades and there will be great demands for drivers and trucking services in Alberta. With the increase in fuel costs, this will continue to place upward pressure on fuel surcharges and as a byproduct, the cost of moving freight. Of course, as the Canadian dollar increases in value against the $US, this will make US imports cheaper to Canadians and US exports more costly to Americans. In other words, the north - sourth balance of trade will shift and the movement of freight which has been in flux since the dollar hit a botton of $0.62 US and began to rise will shift along with it. Every shipper involved in cross-border trade and every trucking company engaged in cross-border trucking will have to be aware of these new realities and take appropriate action.