SASKATOON – Low crude oil prices could have a positive effect on Saskatchewan’s manufacturing industry, according to one University of Saskatchewan professor.
Rose Olfert, who specializes in regional economics, said the low price of oil drives down the worth of the Canadian dollar, making goods more competitive in foreign markers.
“We have a petro-dollar, because it follows the price of oil,” Olfert explained.
Crude oil has fallen sharply since the summer, marking a roughly four-year low, while the dollar has dropped around four cents since its highest point in July.
“Because the price of the Canadian dollar has gone down … agriculture products will be more competitive internationally than they otherwise would have been,” she added.
Morris Industries is one Saskatchewan-based company that produces agricultural equipment. Its president said the company exports to various parts of the world, including the United States, Australia and Eastern Europe.
“It gives us the ability to be a bit more price-competitive when we’re going out there, so overall, I think it’s a net positive,” said Casey Davis, Morris’ president and CEO.
Davis added that the Canadian dollar isn’t the only factor that can positively or negatively affect exports. He pointed to geo-political issues, especially in Eastern Europe, as having as much of an importance on exports as the price of currency.
Even though the lower price of oil could lead to a favorable currency for exporters, Olfert pointed out that most of Saskatchewan would not feel a positive effect. The provincial government states that Saskatchewan is Canada’s second largest oil producer and some of their budget is linked to oil revenues.
“Oil prices and oil revenues will be important to the province,” said Olfert.
“That will have a negative impact.”
@ 2014 Global Regina
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