Dalton McGuinty has come out and said what a lot of people are thinking, that the oil industry is hurting Canada's overall economy.
Mr. McGuinty rejected that assertion, saying the harm caused by the high Canadian dollar relative to the U.S. greenback far outweighs any spin-off benefits Ontario might derive from Alberta’s oil and gas sector. A study by the Organization for Economic Cooperation and Development supports his stance. It says Canada has entered into a form of the dreaded “Dutch disease,” whereby the increase in exploitation of natural resources is leading to a decline in manufacturing.
Mr. McGuinty said the Canadian dollar, which has soared to over $1 from just 67 cents in 2003, is making goods produced in Ontario more expensive for buyers outside the country. The “petro dollar,” he said, has been driven by global demand for oil and gas from Western Canada.
“That has knocked the wind out of Ontario exporters and manufacturing in particular,” Mr. McGuinty told reporters. “So if I had my preferences as to whether we had a rapidly growing oil and gas sector in the west or a lower dollar, I’ll tell you where I stand: with the lower dollar.”
If we had sane government in either Ottawa or Alberta, huge amounts of revenue from the oil industry would be diverted into a sovereign wealth fund denominated in foreign currency to ensure that this non-renewable resource benefits Canadians from all regions over the long term.
And if we had a sane government in Ottawa, our equalization program would be treating provincial revenues from oil royalties that don't go into a sovereign wealth fund the same as other sources of provincial income.