Finding Those Economic Silver Bullets: Saskatchewan Shows Us How
Agricultural commodity prices have declined recently as sunshine and a general “lack of flooding” have taken the “froth” off the corn bubble we saw last month. Needless to say, oil is still sky high. I broke my world record the other day. That was $170 to fill up my Ford F-150.
For those of you positioned to gain in the current commodity boom more power to you. I wish we could be all oil barons, but sadly that seems to be a closed club. I cannot wait for that solar powered car to come along.
Needless to say there are some who have profited greatly by the run up in commodities. For instance as Canadians we all know about the Alberta oil boom. Many southwestern Ontario families have found their way out there. However, not so well known is the Saskaboom. That’s the current economic bonanza going on in Saskatchewan. As one Alberta car dealer told me last year, “You know the oil sands don’t end at the Saskatchewan border”.
And so it goes. Saskatchewan has turned from a have not province into a have. With a population only fluttering around 1 million there surely will be challenges. However, a Saskaboom there is. I’m sure we’ll soon hear of southwestern Ontario families leaving for places like Regina.
A symbol of Regina showed up in the news the other day and it is a symbol of good government foresight. The Saskatchewan government with its private partner Mosaic Co are about to sell the Saskferco Products Nitrogen plant outside of Regina. The price tag is $1.6 billion. Mosaic owns 50% of the plant with the Saskatchewan government having a minority share. The plant was built in partnership with Cargill back in the 1980′s as the Grant Devine government was looking to diversify Saskatchewan’s economy. With its abundance of natural gas, a nitrogen plant seemed a natural.
Needless to say, it looks very good now as the world has changed from the days that anything agricultural looked moribund. Nitrogen is one of the most important essential elements for agricultural production. With agricultural production currently expanding to meet increased world food demand, the Saskatchewan government found themselves sitting on a “gold mine.” Needless to say when Mosaic wanting to sell, the Saskatchewan government saw a way to make some big money for the people of Saskatchewan.
There are other examples. For instance the Potash Corporation of Canada has been one of the hottest companies in the world. Centred in Saskatchewan they almost have a monopoly on potash or K20, another essential plant element. Global food demand is making them rich.
It begs the question, how about public ventures in places like Ontario, which will be for the public good. Should Ontario own an oil company? Should Ontario own a gold mine? Should the Ontario government invest in ventures likes those in Saskatchewan? Or is it a Western Canadian phenomena built out of one horse historical economies?
For those of you historically challenged I do remember Ontario some 30 years ago thinking about getting into the oil business. We all know they are in the liquor and casino business. However, those things have much more to do with “controlling our vices” than investing Ontario dollars into future investment winners.
Critics would say we shouldn’t be putting public dollars into risky ventures to diversify an already diversified Ontario economy. We’ve got enough problems in our health care and education fields without sending public dollars elsewhere. However, that hasn’t precluded the Ontario Liberal government from spending $520 million up until 2017 on an ethanol strategy for Ontarians. So I guess, there will always be exceptions to any rule.
All of this must be extremely challenging for the likes of Bank of Canada governor Mark Carney and federal Finance minister Jim Flaherty. I’ve documented it several times before. On one side of the country you have a resource rich commodity driven boom west of Kenora and east you have an eastern Canadian manufacturing and automotive economy fracturing and shrinking. Of course the answer is not building a speedway westward through Kenora.
The answer is prosperity for everybody. That however will always prove elusive. Nonetheless, we shouldn’t discount public investments if good solid economic ideas like the Saskferco plant in Regina. In 2008 these ideas have turned into big money makers. My question is whatever happened to “Canada’s” investment in our national oil company PetroCanada? Something tells me a guy named Mulroney sold it off years ago.
The challenge ahead is finding those new economic silver bullets. If that means a government needs to invest, so be it. There are just too many examples coming out from Western Canada to ignore anymore.