Dollar parity? You ain't seen nothing yet...

UPDATE: The Globe and Mail today has two interesting things on this. First, a blog by Jeff Rubin on the petro-dollar (which we think is better than his attack on low carbon fuel standards). And second, a story that essentially says that manufacturing is doing fine despite the rising dollar - although we'll apparently have to get used to fewer jobs...)


The Canadian dollar is once again on the cusp of parity with the U.S. dollar. On one level, this inspires a sense of national pride, of muscular loonies beating up on American eagles, until, that is, you look a little deeper.

The pin stripes on Bay Street make all that exchange rate stuff sound very complicated, and far be it for this environmentalist to want a cage match with a bunch of economists. But, then you look at a graph charting the price of oil and the Canadian dollar over the past year and you can't help but notice the similarity:



Turns out that because of rampant tar sands production we now have our very own petro-dollar, or "petro-loonie" that rises and falls with the price of oil.

This might not be so bad - cheaper vacations in Florida and all that - other than the fact that we can expect very soon lots of painful noises coming from our manufacturing sector about how they are being priced out of international markets and need to lay people off. This just in time for a fragile economic recovery. And, with ever more tar sands production being promised by our government and with the prospect of oil prices going even higher, how high will the loonie go?

For a fact sheet on the petro-loonie, visit here.

Matt Price
Policy Director
Environmental Defence