Shopkeepers in the U.S. have been smiling more radiantly than in Canada over the past year.

In June, U.S. total retail sales were +5.7% year over year, according to the Census Bureau. In Canada, the latest comparable result (but for May rather than June) was +1.9%, according to Statistics Canada.

The greater enthusiasm for spending on the part of U.S. consumers is explained by the significant improvement in their fortunes. After sinking to the bottom in the recession and then burrowing deeper halfway into 2012, U.S. home prices are now moving rapidly higher.

The National Association of Realtors (NAR) has calculated a hefty 13.5% climb year over for median prices (i.e., that level at which half of transactions occurred at a higher level and half lower) in June’s existing homes market. 

The Federal Housing Finance Agency (FHFA) says that in May there was a 7.3% year-to-year price increase for homes with mortgages owned or guaranteed by Fannie Mae and Freddie Mac.

(The FHFA index is now at about the same level as in January 2005, which makes it 11.2% below its April 2007 peak. Keep in mind, however, that much of 2006 and 2007 was characterized by rampant speculation. Home prices at their zenith were unrealistically high.) 

And in the new homes market, the median price for single-family dwellings was +7.4% year over year in June while the average was +8.5%, according to a joint press release from the Census Bureau and Department of Housing and Urban Development. (The average is usually biased upwards by “outrageous” extremes in luxury homes.)

The home price increases are allowing U.S. householders to breathe easier. Their debt loads are being covered by plumper cushions.

Also, the tech-heavier stock market indices in the U.S. have been outperforming the Toronto Stock Exchange’s largely resource-based yardstick in recent times. Hence, U.S. mutual funds and pension plans have been receiving a more vigorous boost.

No wonder Americans appear to be feeling more affluent these days than we are.

There’s a sub-category of retail sales – gasoline – that I’d like to discuss in more detail in the remainder of this article. It’s a good launching pad for analyzing the market for all refined petroleum products in Canada.

Total retail sales by gasoline stations in Canada in May were +1.4% month to month and -0.3% year over year. We know from Statistics Canada’s report that sales at the pump are 12.2% of the retail total.

Statistics Canada also publishes a monthly report entitled, The Supply and Disposition of Refined Petroleum Products in Canada. This contains information important to the construction industry both in terms of energy inputs into the building process and with respect to the demand for various fossil fuel products, which drives major investments in Oil Sands projects, pipelines and refineries.

In 2012, total domestic sales of refined petroleum products in Canada were 105.2 million cubic metres.

Sales of motor gasoline accounted for 40.6% of the total, dominated by the retail or gas station segment (36.2% of the grand total).

Spurred on by the high volume of truck and bus traffic in the country, the second largest slice of the pie was taken diesel fuel, 26.8%.

The next three most important product types all had much smaller shares: aviation fuel, 6.4%; petro-chemical feedstocks, 5.0%; and asphalt, 2.9%.

Analysts often talk about the positive benefits that will accrue as the U.S. weans itself from dependence on some unstable foreign sources of oil.

Little mention is ever made of the situation in Canada. That’s about to change. Oil distribution in this country displays a glaringly unusual pattern. 

Technically, Canada is self-sufficient in energy, but the practical logistics are not what one might expect. Vast quantities of Western Oil Sands and Newfoundland offshore oil are shipped south to the United States while a similar volume is imported into Eastern Canada mainly from overseas.

Lately, Washington has been dithering about whether or not it wants more of our oil. This is best illustrated by the indecision surrounding the XL Pipeline expansion.

If the U.S. ceases to be a “sure thing” for our oil exports, then Canada must consider redressing the imbalances between our own Western and Eastern sources of supply.

Let’s take this a step further. Clearer and better prospects for our oil and gas sector will also greatly help the shares of energy companies listed on our major stock exchange (the TSX), thereby raising the wealth estimations of consumers within our own borders. The whole economy will benefit.

In 2012, crude oil imports accounted for 41.3% of total Canadian refinery feedstock.

Almost all of the imports went to facilities in the Atlantic Region (51.4%) and Quebec (44.5%). Ontario welcomed the remaining 4.1%.

The two leading sources of imported oil – at nearly two-thirds of the total – were OPEC (53.4%) and the North Sea (10.3%).

Among OPEC nations, the shares provided by individual countries were a bit of an eye-opener.  Algeria (19.7% of the grand total) was the leader, followed by Iraq (11.5%), Saudi Arabia (9.3%), Nigeria (7.2%) and Angola (4.4%). The two primary North Sea suppliers were Norway (6.9%) and the United Kingdom (3.4%).

TransCanada Corporation is proposing an Energy East pipeline to supply Quebec and the deep-water port of Saint John, New Brunswick, with oil from Alberta. The benefits to Canada as a whole are obvious.

This is what a country is supposed to be about: (1) achieving energy security within its own borders, if possible; (2) demonstrating that different regions can make a joint effort for the greater good, not just to pursue parochial interests; and (3), promoting the ties that bind, both physical (i.e., infrastructure) and emotional.

There are already indications, that an application to the Energy Board to build the Energy East pipeline will meet stiff opposition from the environmental faction in Quebec. But pipelines have been operating with nearly 100% safety and efficiency for more than a half century in this country.

One alternative is train transport and the disastrous accident at Lac Mégantic highlights the dangers inherent in a too great reliance on rail tanker cars to move crude.

Quebec is already sparring mightily with Newfoundland over supplies of hydroelectric power from present and upcoming projects on the Churchill River in Labrador.

Does it really want energy skirmishes with Alberta and New Brunswick as well, especially when its own refinery sector will benefit from a secure new source of oil supply?

Alex Carrick

Find Canadian construction-related economic articles in Canadian Construction Market News and in the Economic Outlook section of Daily Commercial News…. Join Alex Carrick and other expert speakers at CanaData’s 28th annual Construction Industry Forecasts Conference in Toronto on Thursday, September 26, 2013.