What to look out for in 2015

A fresh New Year is ahead of us, but I'll avoid the temptation to make bold forecasts. Pundits and economists should probably show some humility after practically no one predicted something as big as 2014's massive collapse in oil prices.

A fresh New Year is ahead of us, but I’ll avoid the temptation to make bold forecasts. Pundits and economists should probably show some humility after practically no one predicted something as big as 2014’s massive collapse in oil prices.

Instead, here are a few things to keep on your radar screen for 2015. They will all have implications for Yukoners, whether you are a businessperson, taxpayer, homeowner or all of the above.

Oil prices are likely to stay in the headlines. Remarkably for a commodity that is so critical to the global economy, we really don’t know what is going to happen next. West Texas Intermediate was trading over US$100 per barrel in June, and fell to below US$60 before Christmas. A slowing global economy and sustained fracking in the U.S. could drive it even lower. Some are even talking about US$30 oil. Or a new crisis or OPEC deal could send it skyrocketing.

The Economist magazine tells us that a US$40 fall in the price of oil transfers a whopping US$1.3 trillion – yes, trillion – from oil companies to consumers’ wallets. That’s good news for consumers from the Yangtze to the Yukon.

But it’s bad news for people in Alberta and B.C. looking for work and Canadians with energy shares or broad-based mutual funds in their retirement funds. It’s also bad news for the federal government and some provinces. Saskatchewan says a C$10 drop costs it about C$200 million. The federal fiscal update in November estimated the impact could be $2.5 billion a year for the federal treasury if oil prices stay low.

Low energy prices could significantly affect economic activity in Western Canada, especially if a few megaprojects in Fort McMurray or Prince Rupert get put on hold.

Mineral prices will also be in the news. The International Monetary Fund’s metals index has been sliding pretty steadily, from around 250 at the beginning of 2011 to about 160 just before Christmas. That’s still above where it was in 2005, when it was just 100. But mining companies, workers and industry consultants in the Yukon will be watching what happens closely in 2015. And a key factor will be China.

China’s economy has been generating stories with an increasingly worried tone across the financial press. The politburo is struggling with keeping growth going. The Wall Street Journal recently cited a number of economists who think China could miss its 2014 growth target, which would be the first time that’s happened since the Asian financial crisis way back in the 20th century. China’s banks are also dealing with a growing amount of bad loans. Worryingly, it is very difficult for outside observers to tell how bad the loan problem really is.

One thing is for certain, however; if China has a banking crisis, it would have huge implications for all of us. Commodity prices would almost certainly plummet, which would be more bad news for the mining and energy industries. Global stock markets would likely take a nose-dive as they digested the implications for Western companies with operations in China. There would be broader economic contagion as companies and workers exporting to China were affected.

Closer to home, it’s worth watching the Canadian housing market and the closely related topic of Canadian personal debt. Killjoys at the Bank of Canada recently said their analysis suggests Canadian housing prices could be over-valued by as much as 30 per cent. If you look at a chart of household-debt-to-income ratios, it shows the Americans reducing their debt over the last few years while Canadians surge past them.

The Bank of Canada estimates 12 per cent of Canadian households are “heavily indebted” in the bank’s opinion, double the level in 2000. A big international financial crisis hitting interest rates, or some other shock, could hit these households and the rest of the economy hard.

Geopolitical risk will also be on the tip of market-watchers’ tongues in 2015. Eurasia Group, a political risk consultancy, recently flagged some global flashpoints that could make 2015 a little too interesting for most of us.

Russia’s belligerent foreign policy in and around Ukraine, as well as with its other neighbours, could turn even uglier. This could involve oil price volatility, trade and finance embargoes, cyber attacks and so on.

ISIS and the conflict in the Middle East could get worse. Remember, this is not a small band of terrorists setting off a few bombs. We are talking about a major war that straddles Syria and Iraq, and continues to draw in Iran, Turkey, Israel, Saudi Arabia and Western countries.

China’s foreign policy is also on Eurasia’s list. Tensions have been bubbling for years over territorial and other disputes with Japan, Taiwan, Korea, Vietnam, India and the Philippines. Any of these flashpoints could get hotter, especially if Chinese leaders feel the need to take a page from President Putin and distract citizens from a worsening economy with some patriotic adventures abroad.

Those are the big threats to keep on your radar screen. But don’t be entirely distracted by the negative. As these issues fill the headlines there are also some big world-changing things going on; many of them emanating from here on the West Coast (admittedly, more on the Seattle and Silicon Valley end rather than the Skagway part of the coast).

Companies like Google, Apple, Tesla, Facebook, Paypal and Amazon continue to invent things that will transform human life in coming decades. Keep an eye on those too. Having a few shares that go up by 1,000 per cent helps ease the pain of reading all those bad-news stories in the paper.


In my Dec. 5 column on fracking, I incorrectly stated U.S. oil production went from 4 million barrels a day in oil equivalent in 2010 to 12 million by September 2014. The numbers are correct, but refer only to the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica shale formations; not to all U.S. production. Thanks to a reader for pointing that out.

A question was also raised about future exports of tracked gas from North America. Interested readers may wish to look at the Office of Energy Projects report from Dec. 3, 2014 which shows 15 proposed LNG export terminals in the U.S. and also three Canadian proposals.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or

Twitter @hallidaykeith

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