In this week’s The Seven… 

• A whole new world - Canada enters the global LNG game
• Emerging - New sources of energy capital spending
• Guess who’s back? Tourists
• Next week - June jobs data
• Interesting Fact: About nuclear energy
• Chart of the Week: Yahoo! Stampede visitors arrive at the Calgary Airport

"This is the summer of George!"

George Costanza (Seinfeld, Season 8, Episode 22, aired May 15, 1997)

In this classic Seinfeld episode, George Costanza gets a severance package from the Yankees and promises to do great things for himself—read a book and play frisbee golf. But he ends up doing nothing.

Let’s hope it’s not a ‘Summer of George’ for policymakers.

PM Mark Carney and President Donald Trump have until July 21 to land a new trade ‘deal’. Discussions resumed following the removal of Canada’s Digital Services Tax on Sunday.  More broadly, the 90-day pause on the escalating ‘liberation day’ tariffs expires July 9.  By our count, we’ve only seen ‘deals’ with the U.K., Vietnam (announced yesterday) and a climb down from higher tariffs in China.

Canada hit a major milestone this week. The first liquefied natural gas (LNG) shipment from LNG Canada’s new facility departed the B.C. coast for Asia. It’s a step towards energy export diversification, and better pricing for Canada’s natural gas—in the pursuit of becoming an energy superpower.

All this seems ripe for celebration as the Stampede kicks off today in Canada’s energy capital of Calgary. Could we see a record year of attendance? We make the case below—find out why.

A whole new world - LNG opens doors, supports prices

What happens when energy producers can’t access international markets? They are forced to sell their product at a discount. This problem has plagued the oil patch for years, translating into less revenue staying in Canada (along with lower tax/royalty revenue).

Remember late 2018? Massive discounts on Canadian oil due to acute pipeline constraints led to mandatory curtailment of production. The Trans Mountain Expansion, in service since May 2024, has narrowed the price gap by giving producers more access to alternative markets in Asia.

Natural gas has faced the same market access challenges. Landlocked, the price for Alberta natural gas has been heavily discounted relative to global benchmarks. With Canada entering the global LNG game and domestic demand for gas increasing, we expect Canadian natural gas prices to improve.

In our latest forecast (released last week), we see AECO prices rising from only $1.5/MMBtu in 2024 to $3.3/MMBtu in 2026.  

Diversification - Inside the energy sector

Staying on the energy theme, the Alberta Energy Regulator expects production of geothermal, hydrogen, lithium and helium to continue to rise, with capital spending in these emerging resources hitting $1 billion this year according to their June outlook.

The diversification talk in Alberta often centers around growth outside of energy. I like to think about it more broadly. There is also diversification within Alberta’s existing industries, and this includes energy.  

Tariff whiplash - Wild swings in the trade data

Anyone questioning whether tariffs impact trade patterns should look at the Canadian trade data.

In the lead up to U.S. tariffs, Canadian exports surged. That’s because U.S. importers were trying to ‘get ahead’ of tariffs by front-loading their purchases.

In recent months, we’ve seen a complete reversal. Exports to the U.S. have plummeted, and Canada's share of merchandise exports to the U.S. fell to 68.3%—one of the lowest proportions on record outside of the pandemic years.

This trend is playing out in Alberta. Non-energy exports to the U.S. from Alberta plunged to their lowest levels in April and May since December 2021 after hitting an all time high in March. Energy exports were also down, reflecting lower oil prices and production due to wildfire and maintenance disruptions. Meanwhile, exports to non-U.S. markets are up sharply this year (a big part of this is energy shipments to Asia with TMX online).

Despite the trade turmoil, the U.S. by far remains Alberta’s largest export market. In May, the share of Alberta’s merchandise exports to the U.S. was 86%. Outside the pandemic period (when energy prices plunged), that’s the lowest U.S. share we’ve seen in the month of May since 2016.  

A new record for Stampede attendance? Why not

Last year Calgary Stampede attendance hit a record. There is a strong case to be made that this year could be even higher. Here’s our case:

• More staycations, or ‘elbows up’ tourism. Since the trade war started, the number of Canadians traveling to the U.S. has plummeted. In April (latest data), there was a 11.6% decline in Canadian travellers returning from the U.S. via Alberta compared to the same time last year. With more Canadians avoiding travel to the U.S., we expect more travelling inside the country—and that likely includes more people soaking up the fun at the Stampede.
• International tourists are still coming. In April (latest data), non-resident visits (overnight) to Alberta rose 9.4% year-over-year (y/y), including a 18.2% y/y increase among U.S. residents. 

• Leading auction indicator. One informal leading indicator of Stampede interest is the Chuckwagen Canvas Auction held in April, which garnered the highest average bid ever at more than $142,000.
• Promising weather forecast. A popular joke is that meteorologists were put on Earth to make economists look good. Still, if you look at the 2 week forecast for Calgary, it looks pretty great. 
• More inclined to spend?  There’s lots to be worried about in the economy. We are in the middle of a trade war, afterall, and consumer confidence has taken a hit. Unemployment remains elevated. But with interest rates falling and cautious optimism in the energy sector, there is also reason to believe that many businesses and tourists will spend more than last year. After a lull in 2024, a hangover from a bout of higher interest rates and inflation, Albertans have ramped up their spending at restaurants and pubs this year. 

Interesting Fact: The journey of uranium fuel

This week our ATB Economics summer intern Carol Kamel talked about the future of small modular reactors. Today, she offers the following interesting fact about nuclear energy:  One uranium fuel pellet, about the size of your fingertip, contains as much energy as 17,000 cubic feet of natural gas, 149 gallons of oil, and one ton of coal.

Before uranium goes into a nuclear reactor, it has to undergo a number of major processing steps to convert its raw state to usable nuclear fuel. First, uranium is mined and milled. Then, it is refined and converted into a usable form to prepare it for enrichment. The final step is fuel fabrication, the enriched uranium is converted into a powder and pressed into fuel pellets. The fuel fabricator loads these pellets into fuel assemblies, which are used in nuclear reactors.

Chart of the Week: Airport visits during Stampede week

If you were at the Calgary International Airport this week, you probably noticed larger crowds and perhaps a few folks in western attire.

Our Chart of the Week shows overnight international (non-Canadian resident) visitors arriving at the Calgary International Airport. Not surprisingly, the number of non-resident visitors ratchets up in the days leading up to and during the Stampede.

Not convinced that the spike is a Stampede effect?  A skeptic would (correctly) note that airport visits normally rise in July anyway.

To find out, we looked at similar data for Edmonton. For the Edmonton International Airport, there is a rise in non-resident arrivals over summer, but not specifically before and during the Stampede period. The national data (excluding Calgary) also shows a July jump, but nothing particularly special about the Stampede period itself.

Why does this matter? The largest economic impact comes from visitors coming from outside Calgary, as this is new money injected into the local economy. The Stampede estimates that nearly 30% of visitors were from out of town. Indeed, last July, Calgary’s hotel occupancy rate was 83.3%.

As for locals, some of this may be ‘new’ money spent in Calgary, especially if they forgo travel elsewhere to catch the Stampede.  But it may also be re-directing their spending away from other uses (i.e. skip the movie theatre, head to the Stampede), without a meaningful impact on overall spending.

Answer to the previous trivia question: The 4th of July was declared a national holiday in the U.S. in 1870.

Today’s trivia question: Before it was associated with liquefied natural gas, for what other natural resource product was Kitimat, B.C. known?