So what happens now that oil has fallen to $40? A (very) simple model of the elasticity of energy exports with respect to a one quarter lag of the price of crude oil (I know we export more than oil, but I already told you the model was simple) suggests that energy exports are about to fall off a cliff.
Look out below!
4 comments:
Does the red dotted line show the predicted volume of oil exports, or the predicted value of that volume?
If volume, then what we need is value, and it would be (wouldn't it?) easy to calculate value from volume. But then the resulting predictions of value wouldn't match the actual value very well (I think).
The lines are value - from statscan's balance of payments Q3:
http://www.statcan.gc.ca/pub/67-001-x/67-001-x2008003-eng.pdf
I would guess that exports may fall both in value due to price and perhaps in volume due to lower demand in the United States.
OK. Both lines are value (one predicted, and one actual). That makes sense. Thanks.
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