How Would a Canadian Coalition Affect the Energy Sector?

by: FP Trading Desk December 02, 2008    

FP Trading Desk

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There is little substance upon which investors can base their expectations if the Liberal-NDP coalition comes to power but there are some early policy initiatives emerging for the energy sector.

Liberal Finance critic Scott Brison said there would be no roll back of corporate tax cuts, despite the possibility of a C$30-billion stimulus package being introduced. However, some concern will remain that the NDP’s criticism of these cuts as only benefiting the energy and banking sectors could produce changes, said FirstEnergy Capital analyst William J. Lacey.

What may be of greater concern to the oil and gas industry is the similarities between the platforms of the coalition parties in terms of their focus on green initiatives and a perceived biased against the sector, and the oil sands in particular, he said in a research note.

Mr. Lacey said:

With a potential change in government away from a government that is perceived to be ‘business friendly’ and towards a government that is more ‘socially biased’, we expect that investors will remain somewhat cautious until greater clarity is garnered regarding the fiscal plan.

If there is no change in government, the analyst expects that the NDP and Liberal party have heightened their influence on policy, which could lead to an increased bias towards environmental and social policy.

He also suggested that the Canadian dollar could be another casualty of the political instability. "That said, a weaker dollar has some potential upside as it results in higher realized commodity prices for the energy producers in our coverage universe.”

So while it is too early to tell what a change in government really means, it could be somewhat negative for oil sands producers and service companies, while it may be positive for green technology companies and trusts since Liberals were supportive of their structure.

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This article has 1 comment:

  •  
    Dec 02 04:27 PM
    Sad day for Canada when stuff like this happens.

    Too many things left unknown. Will they reduce corporate and personal income tax cuts that were already planned and budgeted for? These tax cuts add up to more than the $30 B stimulus they speak of... so if they rollback any of it, it is actually LESS stimulus than the Conservatives, not more.

    What will happen with Dion's Green Shift Plan to tax the hell out of the Oil Sands and the entire Alberta energy industry? This was a key part of his platform that he ran on just six weeks ago!
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