Canadian imports turn costlier as oil price drops
The continuous oil price drop below $30 per barrel is taking a toll on Canadian imports. With falling oil price, Canadian currency too declined against the US dollar. This made imports costlier for Canada. Even vegetables prices increased by three folds. For instance, cauliflower is a luxury for Canadian consumers these days. The weaker Loonie reflects the state of Canadian economy.
Canadian economy is directly linked to oil. And price drop of oil and other commodities are lowering value of Canadian dollar Loonie. As a result, imports became expensive. Canada imports vegetables from the US.
Canadian dollar Loonie was CAD per 93 American cents two years ago. Now, one Canadian dollar is worth 69 American cents. This makes imports from the US expensive for Canada. During dark winter, Canada imports vegetables from the US mostly from California, which is suffering from drought now. This situation further worsens for Canada, as reported by The New York Times.
Canada grew along with commodities boom for few years. The robust Chinese economy, the major consumer of commodities, and encouraging oil price, potash, nickel and other resources helped Canadian economy grow further. With declining demand from Chinese market, commodity prices tumbled.
The oil production glut further hammered down the price. These factors are impacting Canadian economy in negative way. The cheaper oil lowered Loonie to below 70 American cents for the first time since 2003. Lower oil prices are leading manufacturing and non-energy export sector to new high, according to MACLEAN'S.
A cauliflower now costs C$8 at grocery stores and this shows the impact of falling oil price. The drought conditions in California and falling Loonie adding to the price rise for vegetables. Iceberg lettuce generally sells at 90 cents now available at C$3.
Jim McKeen, owner of McKeen Metro Glebe, a grocery store in downtown Ottawa, said: "We've gone through this cycle before with the dollar. But, there were issues on prices anyways because of supply in addition to this whole fiasco with the Canadian dollar. It's a perfect storm."
Canadian Loonie fell along with oil price. West Texas Intermediate (WTI), the North American benchmark, dropped 5.8 percent to $37.65 a barrel. This is the lowest price since February 2009, as per a report published on The Star. If oil price fall continues further, then it's negative situation for Canada economy and its currency Loonie.
The gross domestic product (GDP) of Canada rose just 0.6 percent during the third quarter of 2015. Before that Canada suffered negative growth for six months. From October onwards, Loonie started weakening against the US dollar. Though imports became expensive, Canada can cash it on exports as the US is the major foreign market for it.