A global transformation?

With all that Maxime Bernier’s former girlfriend revealed this week it was easy to overlook another little document, one released by CIBC World Markets on Tuesday that painted a picture of how the price of oil is dramatically impacting international trade of heavy cargo.

Oil prices have sent transportation costs skyrocketing, so importers are looking for products and supplies closer to home, according to CIBC.

With the low-wage advantage of China and other Asian countries being eroded by the cost of transportation, CIBC suggested, one result could be that Mexico becomes a manufacturing centre for North America.

“Instead of finding cheap labour half-way around the world, the key will be to find the cheapest labour force within reasonable shipping distance to your market,” it was stated in the report.

CIBC found that the cost of oil today — $133 a barrel earlier this week — is the equivalent of a tariff rate of about nine per cent on goods coming into the United States. At $150 a barrel it’s the equivalent of an 11 per cent tariff.

While the price of oil drives up transportation costs and forces a major reorganization of global supply chains, the bigger danger is posed by inflation, according to the CIBC report.

Inflation was also the cover story in last week’s Economist magazine, although the Economist pointed out that inflation for developed countries with central banks is nothing like what developing countries are facing.

But back to our own little world, CIBC chief economist Jeff Rubin told the Globe and Mail the central banks in the United States and Canada will eventually have to begin raising lending rates dramatically. That will, of course, have an impact on people seeking mortgages — people like the buyers of the Cheakamus Crossing and Rainbow housing projects and the people who are fuelling Squamish’s growth.

The price of oil is obviously going to have an impact on travel and tourism, too. And it’s going to be felt just as British Columbia gears up for what should provide the biggest boost in international interest and awareness of the province ever, the 2010 Winter Olympics.

The CIBC’s Rubin predicts oil will be $150 a barrel by 2010 and $225 a barrel by 2012.

The immediate fallout of these continual increases in oil prices would seem to be people driving less, which would mean fewer people coming up the new and improved Sea to Sky Highway to play in Whistler.

(And bless those Washington state residents who came to Whistler for the week leading up to Memorial Day. On May 19 the AAA reported the average price of a gallon of gasoline in Washington state was $3.86. By the time they returned home on May 27 the average price was $4.03 a gallon — nine cents higher than the national average and up 32 cents in a month.)

For destination visitors who fly to Vancouver and take the bus to Whistler, things don’t look any rosier. The U.S. airlines, having just about exhausted all revenue sources — higher fares, fuel surcharges, extra charges on checked bags — are now looking at reducing seating capacity. The main reductions will come on domestic flights, but the point is airlines are scrambling to make ends meet and the price of international flights isn’t going to be dropping. And U.S. airlines aren’t going to be increasing service to Western Canada without some strong incentives.

At the same time as these substantial changes in the way people and goods move about the globe are taking place the provincial government has proposed to double the size of the tourism industry. The Campbell government’s primary strategy for achieving this, aside from hosting the Olympics, has been to encourage investment and development of new resorts, lodges and attractions. But if it’s getting more expensive to travel, and perhaps more difficult to fly, those new B.C. resorts and lodges are likely to be competing with the existing ones for smaller slices of a pie that is shrinking, rather than growing.

Part of the solution would seem to be to increase interest among British Columbians in vacationing in their home province. And given the trend in transportation costs that should be achievable.

But the largest area of growth in B.C.’s population of 4 million, according to the 2006 census, is immigration from countries and cultures that don’t have a history of skiing, snowboarding, mountain biking and mountaineering. China, Hong Kong, Taiwan, India and the Philippines are the countries of origin for most recent immigrants to B.C. Indeed, one quarter of B.C.’s population is visible minorities, most from south and south-east Asia.

These are challenging times around the globe, as Canada’s former foreign minister can attest, and we’re only starting to understand how difficult they may be.

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