Double edged sword
Canada may have invested beyond its means in an oil boom that has come to a crude halt. Sure, the cheaper pump price has a direct impact for consumers who will have more disposal income. But as a result are we spending this money on imported goods? If so, this may eventually lead to more of our hard earned dollars being shipped off shore in exchange for the perishing and disposable products we allow in.
In the short term, this drop in gas prices may directly be good for the consumer but why have prices for other goods and services not followed suit and also decreased? Or will they decrease and that will be the beginning of the deflation period for our country? We have already seen the loonie shrink in value. Will the cost of imported consumer goods increase as the dollar weakens?
Around 112,000 jobs are linked to the oil industry. With less oil production, less labour is required and this has a negative impact on spending overall. These mining workers can no longer afford the lifestyles they have been living, they stop spending and can no longer service their debt. The flow on effect continues. Consumers begin to think prices will continue to fall and delay their purchases but as we all know the growth of an economy relies upon consumers spending now.
As a result of the government spending more on employment insurance, tax revenues decreases or they could ask for more money from your pocket each week. Not such a big saving now is it?
With cheaper gas prices, will people use more of this fleeting resource? Will investment into renewable resources be crippled and take longer to develop? Will we become more reliant on oil as a result as this price crash?
Sure it is not all doom and gloom having a weaker dollar, we can market our destination to the US who is just down the road but do we have the infrastructure and tourism product to take advantage of our weak loonie now on the volume required to sustain our shrinking disposal incomes?
If saving at the pump is really that appealing to us then why have we not become less dependent on our vehicles?