EDC says oil prices will drop, predicts Canadian exports falling

Stumble Upon

del.icio.us

Digg

Facebook

Print

Email

Speak Up

OTTAWA - Oil prices are expected to fall as quickly as they rose, taking Canada's energy-fuelled exports on a downward spiral, says Export Development Canada.

The trade credit agency forecasts that Canadian exports will fall by one per cent overall in 2009, after a projected gain of 4.2 per cent this year.

That's because this year's apparent robust growth is based on sky-high prices for commodities, especially oil, rather than on real strength in the export sector.

"The gain of four per cent in exports in 2008 is actually an energy price story," EDC chief economist Peter Hall said yesterday.

"When all price effects are removed, Canadian exports are actually on track to tumble by four per cent this year."

The EDC's most dramatic forecast is that crude oil, which traded as high as US$147 a barrel two weeks ago, fall to the $100 level by the end of this year and to $84 in 2009.

"While the EDC recognizes that global supply and demand for crude is tight, we see signs that a large price correction is on the horizon," said Hall.

The EDC predicts continued weakness in the struggling forestry and auto sectors, and in consumer goods, as a result of slumping U.S. demand. But it forecasts that demands of Canadian grain and fertilizer will remain robust.