Renowned Canadian energy economist Jeff Rubin is dropping his investments in the Toronto Stock Exchange (TSX), concluding that rapid tar sands/oil sands growth “just isn’t in the cards” and the TSX Composite Index is too dependent on fossil fuel stocks.
“After surveying the landscape, I’ve finally thrown in the towel on the TSX and switched my investing allegiance south of the border to the less oily S&P 500,” Rubin wrote in the Globe and Mail this week. “The more relevant issue facing oil sands investors at the moment isn’t about how production from northern Alberta might be expanded, but whether the industry’s current level of production is sustainable.”
High-cost oil producers now face a choice, Rubin writes: start shutting down production, or flood the market with discounted production and drive prices even lower. And the implications extend beyond fossil fuels to Canada’s wider economy.
“The oil sands is now a large component of Canada’s energy sector, which means it’s also an outsized part of the entire TSX Composite Index,” he explains. “That huge imprint on the TSX means that plunging oil prices are a problem for anyone who owns the broad Canadian market.” (h/t to The Energy Mix subscriber Alastaire Henderson for pointing us to this story)