Canada's oil windfall may yet wipe out its losses from tariffs
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windfall → wipe → tariffs
Even as Trump tries to squeeze Canada, Iran war's oil industry impact sends billions to this country's coffers
Canadians are well aware of the damage U.S. President Donald Trump has inflicted on this country by signing off on tariffs targeting about $27.6 billion in Canadian products.
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Trump → try → products
But thanks to his unsuccessful management of the Iran war, Trump's other hand is effectively writing cheques to the Canadian economy, drawing on funds paid by U.S. consumers at the gas pump.
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hand → write → pump
In fact, the extra money now flowing into Canadian coffers — for context, Canada supplied the U.S. with more than 60 per cent of its crude oil imports last year — will go a long way to making up tariff losses, and could end up more than compensating for them.
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Canada → flow → them
Earlier this summer, as the missile exchanges in the Gulf died down and Trump signalled that peace was on the way, the price of oil began to fall from the $100-plus US range it hit in response to the initial U.S.-Israeli attack on Iran, and Iran's closure of the Strait of Hormuz.
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it → die → Hormuz
By the end of July, a barrel of Brent crude had dipped to $72 US.
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barrel → dip → US
But the resumption of hostilities has been followed by new successes for Iran's regional allies, and oil has returned to where it was at the height of the Hormuz crisis.
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it → follow → crisis
Brent crude hit nearly $110 US when trading opened on Friday morning.
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trading → hit → morning
While Canadians are also feeling the impact of fluctuating oil prices — both at the pump and as it gets absorbed into shipping costs — the windfall from those profits could boost the overall economy enough to offset the cost of Trump's tariffs, with some provincial governments even projecting a turnaround on their deficits.
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governments → feel → deficits
On Wednesday, the Houthis, Iran's Yemeni rebel allies, seized the port city of Mokha on the Red Sea Coast from Yemeni government control.
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Houthis → seize → control
The strategic Perim Island (also known as Mayun) fell to the Houthi army on Thursday.
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Island → know → Thursday
The losses potentially close one of the few safe maritime routes left for Saudi oil to reach the world.
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oil → close → world
The island sits across the Bab al-Mandab, the "Gate of Grief" that connects the Red Sea with the Indian Ocean.
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that → sit → Ocean
(Its name comes from its perils for mariners — now magnified by Houthi missiles.)
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name → come → missiles
Saudi jets pounded the Houthis' new positions as the week closed, but they had already consolidated their hold.
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they → pound → hold
Saudi and Yemeni officials expressed shock at their enemies' rapid gains.
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officials → express → gains
On Thursday, the Trump administration had refused urgent Saudi requests for direct U.S. strikes to slow the Houthis.
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administration → refuse → Houthis
Worse news was yet to come.
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news → come → ?
Saudi oil is concentrated in its Eastern Province, bordering the Persian Gulf.
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oil → concentrate → Gulf
The Saudis have responded by diverting oil from Persian Gulf ports some 1,200 kilometres across the country through the Petroline pipeline to Yanbu, on the country's western Red Sea coast, and loading it onto tankers there.
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Saudis → respond → tankers
From Yanbu, tankers could head south through the Bab al-Mandab into the Indian Ocean, which is what they did through much of the summer, carrying around three million barrels of oil a day.
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they → head → oil
But in August, Houthi missile attacks caused that traffic to slow dramatically.
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traffic → cause → August
Instead of heading south from Yanbu, tankers started going north through the Suez Canal into the Mediterranean.
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tankers → head → Mediterranean
That added time and expense, because the Suez Canal isn't deep enough to handle a modern fully-laden oil tanker.
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Canal → add → tanker
But at least the oil could move — as long as the Petroline kept bringing oil to Yanbu.
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Petroline → move → Yanbu
"The big thing for oil markets is that you have that relief valve of the Suez Canal," said Calgary-based Joe Calnan, vice-president of energy at the Canadian Global Affairs Institute.
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Calnan → have → Institute
"If the pipeline is destroyed and disrupted for a long period of time, then you're not going to have that relief valve at all."
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you → destroy → valve
On Thursday, Iran's allies — possibly Iraqi militias — scored direct drone hits on the Petroline, creating a plume of black smoke visible from space.
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allies → score → space
"That just bottles up seven million barrels per day,” Calnan told CBC News.
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Calnan → bottle → News
Now, no oil is reaching the Red Sea.
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oil → reach → Sea
Regardless of how long it takes to restart the pipeline, or whether the Houthis can truly close the strait, Iran's coalition is now in an even stronger position to threaten world oil supply than it was on Monday.
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it → take → Monday
Saudi Arabia's misfortune is Canada's windfall
When oil first shot past the $100 US per barrel mark in the spring, the Canadian oil industry experienced a bonanza.
Economist Jim Stanford, director of the Centre for Future Work in Vancouver, estimates that the second quarter after-tax profits of the whole industry, upstream and downstream, doubled those of its first quarter, to come in at about $23 billion.
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profits → shoot → billion
(Of course, while Americans paid for most of that windfall, Canadian consumers also had to pay more at the pump.)
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consumers → pay → pump
Oil is now back in the same price range, and should stay there for some time, according to Calnan.
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Oil → stay → Calnan
That means more money for the industry, but also for governments and for Canada's overall gross domestic product.
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That → mean → product
Alberta has already ridden the Iran war's oil bonanza to a complete reversal of its financial fortunes, moving from a projected $9.4-billion deficit to a $2-billion surplus.
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Alberta → ride → surplus
Newfoundland and Labrador was projecting a $668-million deficit this year.
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Newfoundland → project → deficit
This week, Finance Minister Craig Pardy told CBC News "we're looking at $500 million plus to our coffers as a result of the upswing in oil," bringing the province much closer to balance.
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we → tell → balance
Prices now look set to remain well above the province's budget estimate of $79 US per barrel for some time.
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Prices → set → time
The federal government stands to benefit, too, mostly through corporate and personal income taxes.
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government → stand → taxes
…and 24 more, not listed.
