Will Canadians pay higher price for gas to support Ukraine?

How deep is our support for Ukraine? Are Canadians willing to pay a even more for gasoline at the pumps or is it all talk?

Vancouver gas price: image: reddit

Germany has made its choice clear. They will pay much more for natural gas after by refusing certification of the Nord Stream 2 gas line from Russia.

It’s a sacrifice that Germans are willing to make. Germany’s Foreign Minister said: “For us as the German government, it was important to show that for a free and democratic Ukraine, we are willing also to accept consequences for our national economy. Peace and freedom in Europe don’t have a price tag.”

As of now, Canadian support is tepid. In a recent poll by the Angus Reid Institute, the pollster characterizes Canadian’s support for Ukraine as being at an “arms length.”

Two thirds of respondents to the poll said they would be willing to send humanitarian aid (medicine, food, medical personnel) but only 13 per cent would see Canadian troops fighting alongside Ukrainians.

A disappointing twenty per cent want nothing to do with the invasion; they want to stay out of it completely. They have obviously forgotten how quickly a megalomaniac’s conquests can come close to home.

Now, as in the beginning of the Second World War, the conflict is seen as “over there.” Older Canadians understand how toxic that attitude can be as Hitler marched into country after to country.

Russia’s invasion of Ukraine sent oil prices above US$100 a barrel for the first time in almost eight years.

Russia produces around 17 per cent of the world’s oil, and 13 per cent of its natural gas.

Oil was already in short supply before the invasion as we recovered from the pandemic-induced slowdowns. Rising oil prices have fueled inflation to multi-decade highs.

That’s a far cry from the early COVID-19 lockdowns in March and April of 2020. As cars and planes were parked, demand for fuel plummeted. At one point, West Texas Intermediate oil futures went negative.

With inventories tight, oil and gas sanctions of 4.3 million barrels a day from the third-largest producing country would exact a toll on everyone. But the toll of doing nothing to stop naked aggression would be greater.

Oil and gas exports account for nearly 60 per cent of Russian exports, so pinching off energy shipments would inflict the more damage to Russia than the West.

If Canada supported sanctions against Russian oil, inflation will increase: everything will cost more. Every US$10 increase in oil prices pushes up inflation by around 0.4 percentage points according to Bank of Montreal economists.

Canada has cut off Russian oil but that’s largely symbolic because imports from Russia only amount to 2.5 per cent of our total imports.

What will hurt the Russian warmongers the most is if all global supplies from Russia are cut off. Regrettably that will push the cost of gasoline even higher.

On the positive side, it would help wean us away from fossil fuels.

Canadians are willing to show support for Ukraine but how deep is that support for our fellow Canadians –Canada has the largest number of citizens of Ukrainian origin in the world, outside Russia.

Would support include a hit to the pocketbook or are we just talk?

Phrase of the year: Supply Chain

I’m picking supply chain as phrase of the year. While there were other strong candidates, the stark frailty of supply chains and its psychological backlash came as a complete surprise. Other contenders were: climate emergency, atmospheric river, and heat dome.

image: Global Supply Chain Institute -University of Tennessee

Supply chains were on Canadian’s minds even before the atmospheric river hit.  Google Trends shows “supply chain” peaking from October 17 to 23 as we worried about goods being stranded in ports and shelves being empty for Christmas.

After the torrential rains began falling, shoppers went on a panic shopping spree and emptied grocery stores of produce, milk, eggs, meat, and in echoes of the pandemic panic, even toilet paper.

After the rains, Google Trends showed “supply chain” reaching another peak from November 14 to 20.

The panic over supply chains was more visceral than rational. The real supply chains remained as Kamloops’ grocers are supplied from the East and South as well as from the lower mainland.

B.C. is exterior-centric. When I moved to Kamloops from Calgary, it struck me odd that I was moving to some place called “the interior.” It was obviously named by those from the coast who like to call the place where they live the “mainland.” We Interiorians would never name this place so.

The supply chains of our minds are more tenuous. The sense of being cut off from the mainland was part of the panic. The memories we have of before B.C. was a province are part of our cultural heritage. In the 1800s, we were dependent on the flow of goods from the ports on the coast. It’s imprinted in our collective psyches.

So, when supply chains from the coast were threatened, it seemed like we were doomed. But contrary to the perception, groceries quickly appeared on shelves even though routes from the coast were still cut off.

Who is cut off from whom is a matter of perspective. The Trans Mountain pipeline was shut down because of potential damage from the washouts. Gas was rationed on the coast while plentiful here. This prompted Kamloops Mayor Ken Christian to quip: “We are not cut off from the coast; the coast is cut off from us.”

If you live where food is produced, or where there are lots of groceries, supply chains present a different dilemma.

When water flowed into the Sumas Prairie, which is not really a prairie but a lake-bed only one metre above sea level, the family-run Lepp Farm Market in Abbotsford, was open and fully stocked. Shiny mandarin oranges sat in wooden crates. There was milk and eggs in the coolers. A chalkboard sign announced the soup of the day: cabbage beef borscht.

The problem for the Lepp’s was not a shortage of food but that they now lived on an island. Charlotte Lepp mused: “We have food, but people can’t get to us.”

Supply chains will continue to occupy our conscious and subconscious minds in the New Year.

Real supply chains carry the bounty of globalization and the fragility of a network exposed by the climate emergency. Our mental supply chains carry our hopes of prosperity and the fears of our vulnerability.

When the frailty of real and mental supply chains meet, panic sets in.