MARRIOTT: Beware of bafflegab, follow the money (oil) instead

William D. Marriott is a retired economist who specialized in public policy analysis of the oil and gas industryThere has been much news recently about tariffs, tariffs, tariffs. Indeed there has been little else, to the point where regular folks have tuned out completely. This is because the subject matter is well beyond most people’s understanding of international economics and supply distribution networks. Plus, most regular folk are more focussed on making ends meet after their Christmas credit card bills arrive.At the same time, we are in the midst of two very large political campaigns, the most immediate is the leadership if the Liberal Party and secondarily we are in a federal election campaign even though the ‘writ’ has not yet dropped. The problem for most of us is that the tariff and election issues have somehow become married and we seem to have lost any ability to separate the bride and the groom. Here is an attempt to distinguish between the boy in a black tux and the girl in the white dress.On tariffs, it is clear from history that nobody wins an all out trade war. And they never last forever. So it is wise to ignore all of the massive estimates of Canada’s economic losses because they are based on permanent tariffs with no economic adaptation. This never happens in the real world. Canadian oil producers have extremely strong balance sheets which allow them to endure significant price reductions and still maintain their production volumes. And US refiners have few permanent options for heavy crude as Mexico and Venezuela cannot add production quickly. There will be lower prices for Western Canadian Select oil for a while, but it is not the end of the world.The other thing that must be kept in mind is that this is the sole issue — the really big ticket item here is oil and natural gas. Four million barrels per day is about 170 million US gallons or 640 million litres. Per day. That is not a typo.Talk of retaliation for oil and gas tariffs by targeting Jim Beam, Wild Turkey, Minute Maid and Tropicana orange juice just shows how clueless our Team Canada (sans AB) negotiators really are. Canadians don’t even like bourbon. And talking about shutting down our pipelines or electrical grid again shows a lack of basic understanding of how these distribution systems actually work. Or does it? Are our politicians really that clueless?No, they have been competently briefed by their officials. But what politicians are really depending on is what their focus groups and internal polling are telling them about Canadian’s knowledge on these issues and the immediate political implications of that lack of knowledge.Ontario Premier Doug Ford is really trying to figure out when to call a ‘snap’ election as he is worried that recent voting trends against incumbents may turn out badly for him. So for him to come out as Captain Canada complete with competing MAGA hat is a political gift that he must exploit. Whether it will work or not remains to be seen.For the Liberal leader front-runners Chrystia Freeland and Mark Carney this ‘crisis’ is also a gift even as they fall all over one another trying to distance themselves from Liberal policies that they designed, supported and promoted just last week. However, they can’t actually address the trade issues as lame-ostrich Justin Trudeau is still in charge. Trudeau is pulling a Joe/Jill Biden as he attempts to sabotage the Liberals in general and Freeland in particular. His rallying of the Liberal faithful around hating Alberta will give a slight bump in the Liberal poll numbers but even Toronto GTA isn’t buying that snake oil anymore.Danielle Smith can certainly be trusted when she says there will be no tariff carve-out for oil and gas, and her discussions with Trump must have been fascinating. Her follow-up meeting with him at Mar-a-Lago may have even had a bit of political mentoring. But at minimum, there was certainly an adult discussion by two politicians who are not campaigning, but have already won their respective elections. Smith’s strategy on this, to hit back harder against her real political opponents is straight out of Trump’s playbook. Pierre Poilievre didn’t take long to follow her lead on how to position himself. Even average Canadians, busy trying to balance their home budgets, can understand these arguments. And they will bear fruit.But the real question is why Trump still insists on placing tariffs on Canada and Mexico? This question has not been asked or answered by the millions of words of political reporting and commentary on the ‘crisis’ that we have had to endure in last few weeks. The answer is simple: Canada and Mexico did not do enough to solve the real border issues of a lax immigration and fentanyl manufacture and trafficking. For Trudeau this was intentional and Team Canada was too afraid to raise it as it would look like weakness in the face of the big bad bully Trump. But Justin and Pierre alike should pay attention to Trudeau père’s observation on having the US for a neighbour. “Living next to you is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt.”Oh and never play chicken with a guy driving a tank.William D. Marriott is a retired economist who specialized in public policy analysis of the oil and gas industry.

MARRIOTT: Beware of bafflegab, follow the money (oil) instead

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