The Globe and Mail - 08.04.2020

WEDNESDAY,APRIL8,2020 | THEGLOBEANDMAIL O REPORTONBUSINESS| B5

T

he world’s oil producers
are set to browbeat each
other this week into diall-
ing back the output that has
flooded markets at the worst
possible time.
Most of the attention is on the
Saudi Arabia-Russia-United
States triumvirate that makes up
more than 35 per cent of the
world’s production. After Russia
spurned Saudi Arabia’s call to re-
duce its production, both coun-
tries opened the taps over the
past month just as global econo-
mies ground to near halt because
of the COVID-19 contagion. As a
result, crude has tumbled to 18-
year lows.
The U.S. and its oil industry
have sustained collateral dam-

age in this battle for market

share, and are being pushed to

contribute to cuts as part of any

pact. Ditto Canada, whose petro-

leum industry is pumping out

more red ink than black oil, with

thousands of jobs at risk.

In this case, Canada – and spe-

cifically Alberta – can argue that

it is already doing its part to curb

the supply byboth government

decree and economic pressure.

Alberta has mandated con-

straints since early 2019 to deal

with a shortage of available pipe-

line capacity, and since the coro-

navirus crisis began companies

have cut hundreds of thousands

of barrels of daily output.

Alberta Premier Jason Kenney

correctly makes this point. He

has not ruled out more cuts, but

asserts that Canada’s ability to

influence global markets is limit-

ed because of the transport con-

straints that keep a lid on ex-

ports. Canada’s oil industry did

not start this whole global over-

supply mess that is now wreak-

ing widespread economic dam-

age, Mr. Kenney notes.

The question is, do Saudi Ara-

bia and Russia care to see his log-

ic?

They have demanded other

producers bite the bullet on out-

put before they agree to any-

thing. The main target, though,

is the U.S., whose shale oil revo-

lution in recent years rocketed it

to the top spot among global

producers, aided by a tidalwave

of financing from Wall Street.

Two key meetings are planned

for the end of the week. The Or-

ganization of Petroleum Export-

ing Countries (OPEC), along with

its OPEC+ allies, including Rus-

sia, Mexico and others, are slated

to talk Thursday. The Group of

20 developed countries, which

includes Saudi Arabia, will meet

Friday. These fractious gangs are

tasked with stabilizing global en-

ergy markets in the face of the

economic slowdown caused by

the COVID-19 contagion.

U.S. policy heading into the

talks is still unclear. Last week,

President Donald Trump sug-

gested that Saudi Arabia and

Russia were close to a deal to

take 10 million to 15 million bar-

rels a day off the market, though

neither has confirmed that. Even

at the high end it is well short of

loss of demand that has come as

aircraft sit on runways and cars

and trucks are parked around

the world.

Meanwhile, there is an inter-

nal struggle in the Lower 48

states about whether to impose

production cuts as part of an

agreement.

Shale producers Pioneer Nat-

ural Resources Co. and Parsley

Energy Inc. have led a charge to

persuade the Texas Railroad

Commission, the state’s energy

regulator, to mandate a cut of at

least 20 per cent. The American

Petroleum Institute, which rep-

resents the major oil producers,

opposes that, saying the market

should dictate production levels,

not government.

The U.S. Energy Information

Administration has said it ex-

pects U.S. output to drop this

year for the first time since 2016,

as American producers shut off

production and slash capital

spending on their own.

This all leaves the U.S. very

much a wild card and the energy

market to sway with speculation.

As The Globe and Mail has re-

ported, Canadian Natural Re-

sources Minister Seamus O’Re-

gan will hold a conference call

with his U.S. and Mexican coun-

terparts on Thursday to come up

with a game plan for the G20

talks. On that same day, Alberta

Energy Minister Sonya Savage

will take part in the OPEC+ dis-

cussions. Mr. Kenney has said Ms.

Savage will make the point that

Saudi Arabia’s and Russia’s surge

in output has been “grossly irre-

sponsible, has created chaos in

energy markets and jeopardizes

millions of jobs.”

This will not be the polite con-

tribution that OPEC’s leaders will

be looking for from a Canadian.

The numbers speak for them-

selves though.

RBC Dominion Securities has

forecast that 1.1 million to 1.7 mil-

lion barrels a day of Canadian

production could be shut off in

the next few weeks as storage

tanks at home and in the U.S.

Midwest fill up. This would rep-

resent as much as 11 per cent of

the 15-million-barrel-a-day cut

currently being considered by

world producers, more than

double Canada’s current percent-

age of world production.

It may not be by choice, but

the country is more than pulling

its weight. Hopefully the Saudis

and Russians will see it that way.

We’vealreadyslashed

production,butthat

maynotmattertothe

SaudisandRussians

WillCanada’soiloutputcutsbeappreciated?

JEFFREY
JONES

OPINION

panies are still working out the

details of an agreement.

Gordon Food Service, a large

distributor operating in Canada

and the United States, is also pro-

viding added capacity to grocery

chains by warehousing the com-

pany’s inventory, loading the

products onto its own trucks and

delivering goods directly to

stores. “They’re asking us to man-

age a portion of the supply chain

for them,” said spokesman Mark

Schurman, adding that GFS ware-

house workers are already skilled

at operating forklifts and con-

veyor belts, and are simply mov-

ing product bound for the retail

sector rather than the food-ser-

vices industry. “We’re an addi-

tional point of capacity.”

Loblaw Cos. Ltd. is among the

major retailers that needs that

added capacity. In an e-mail, the

grocer said it has been working

with food-service companies in

recent weeks, including using the

distributors’ transportation net-

works and warehousing facilities.

One of its competitors – Sobeys

Inc. – is turning to the distributors

for inventory. The retailer recent-

ly bought a large shipment of

chickens originally meant for a

restaurant chain, and processed

the meat so it was in cuts familiar

to shoppers. The company has al-

so been buying medium-sized

eggs from Burnbrae Farms that

had been intended for food-ser-

vice clients. They come packed in

trays of 30, which Sobeys began

selling on Saturday at stores in

Ontario.

The company has also part-

nered with Sysco to source

ground beef, which is shipped in

clear vacuum packs; stores add

their own labels to the packages.

Mr. White declined to say which
retailers the company is support-
ing, but said Sysco Canada “got
connected with many grocers”
who are relying on the distribu-
tor’s trucking groups to help
move product into stores. He add-
ed that the company is moving
food into Indigenous communi-
ties that have seen their supply
chains disrupted.
Two other food-services dis-
tributors in Canada said they are
similarly playing a supporting
role for major retailers that nor-
mally handle their own ware-
housing and distribution. Dan La-
france, president of Ontario’s Fla-
nagan Foodservice Inc., said he
saw sales plummet as restaurants
were forced to limit their offerings
to takeout and delivery. The com-
pany had to pivot – fast. Flanagan
has three warehouses full of in-
ventory that would have typically
moved by now; instead, the com-
pany is sitting on upwards of 16
weeks worth of product.
“Fortunately, our counterparts
in the retail sector have been ex-
tremely helpful in reaching out to
us to help meet their needs,” Mr.
Lafrance said. “People are really
rallying together to try and get
through this.”
Flanagan is among the distrib-
utors that has managed to offload
some of its inventory to retailers,
even though the products are in
quantities that would never nor-
mally be sold at the grocery-store
level. The company, for example,
has sold 20-kilogram bags of flour
to a grocery chain that would typ-
ically stock 2.5-kg bags. The retail-
er initially wanted 40 bags, but
Flanagan convinced the company
to take a 50-bag pallet that could
be dropped onto the store floor,
eliminating the need to unpack
and shelve the unwieldy bags.
Flanagan typically has 650 per-
manent full-time employees, but
because of the economic fallout
of the novel coronavirus, the
company has had to temporarily
lay off more than 250 workers. Mr.
Lafrance said Flanagan is trying to
find employment for those fur-
loughed workers in nearby retail
warehouses, which need the la-
bour power. Ideally, Flanagan
would keep the employees on its
payroll and effectively loan the
workers to retailers, but the com-

In many cases, Sobeys had exist-

ing relationships with suppliers

that serve both grocery and food-

service clients, which eased dis-

cussions. The collaboration has

been very helpful “for both sides,”

spokeswoman Jacquelin Weath-

erbee said in an e-mail.

Such supply chain integration

is happening all across North

America. The International Food-

service Distributors Association

predicts that the industry will lose

$24-billion between March and

June in the U.S. alone. In a bid to

lessen the financial impact of the

pandemic, the association re-

leased a statement last month an-

nouncing a match-making part-

nership that connects distribu-

tors with food retailers and

wholesalers.

The association declined to

name participating companies,

but Sysco, which is traded on the

New York Stock Exchange, recent-

ly told investors it is working with

the Kroger Co. family of retail

stores to provide temporary work

for its employees at certain Krog-

er distribution centres for at least

30 days. The company said that

workers would remain employ-

ees of Sysco and would continue

to receive their usual benefits.

Stocks of both Sysco and Cola-

bor Group Inc., a major food-ser-

vice and retail distributor listed

on the Toronto Stock Exchange,

have fallen steeply since the onset

of the pandemic. Shares of both

traded up in the past two days,

but they are each down by more

than 45 per cent since the start of

the year.

In addition to collaborating

with food-services distributors to

speed up the flow of goods, retail-

ers are also looking internally at

their own systems. Michael Me-

dline, chief executive of Sobeys

parent company Empire Co. Ltd.,

said in a recent interview that the

pandemic has prompted the re-

tailer to re-evaluate its distribu-

tion tactics. The company has tak-

en steps to shorten its supply

chain, including bypassing the re-

tailer’s distribution centre and

employing more direct-to-store

shipments. Such changes may

stick, even after the acute phase of

the pandemic is over. “While

we’re in the moment,” Mr. Me-

dline said, “we’re also looking at

what’s going to happen as we start

to emerge from this.”

WorkersloadcannedgoodsatanAssociatedFoodsStoresdistributionwarehouseinFarrWest,Utah,
lastmonth.Supply-chainintegrationishappeningallacrossthecontinent.RICKBOWMER/ASSOCIATEDPRESS

Distribution:Globalassociationexpectsindustry

willlose$24-billionbetweenMarch,JuneinU.S.

FROMB1

Ourcounterpartsinthe

retailsectorhavebeen

extremelyhelpfulin

reachingouttousto

helpmeettheirneeds.

Peoplearereallyrallying

togethertotryandget

throughthis.

DANLAFRANCE

PRESIDENT,

LANAGANOODSERVICEINC

Natural Resources Minister Seamus O’Regan will hold a

conference call on Thursday with his U.S. and Mexican

counterparts in advance of the G20 energy ministers meet-

ing on Friday.

“A meeting of G20 energy ministers is being planned for

Friday. Canada will participate, and has been actively con-

sulting with provinces, Canadian companies, and workers,

ahead of this meeting,” Mr. O’Regan’s communications di-

rector Carlene Variyan said in a statement.

The North American energy ministers are meeting to

work out a game plan for the Group of 20 talks in response

to demands from Saudi Arabia and Russia for the United

States and Canada to cut production to help prop up oil

prices.

The trilateral discussions will take place on Thursday, at

the same time that Alberta will be joining OPEC talks also

being held in advance of the G20 meeting.

A senior government official, who was not authorized to

speak publicly about the discussions, played down any sug-

gestion that Canada would go along with further produc-

tion cuts. The federal said that Alberta had faced produc-

tion curtailment of 300,000 barrels a day, but that has now

fallen to 80,000 b/d. However, the official added that Alber-

ta has the jurisdiction to order a curtailment of production

but there has been no indication from Premier Jason Ken-

ney that he would propose further cuts.

NorthAmericanenergy

ministerstoholdconference

callaheadofG20meeting

ROBERTFIFE

OTTA:ABUREAUCHIEF

The case asks for a declaration that the video-conference

process she used to witness the wills of a married couple in

their 80s is valid.

Mr. Downey said in an interview Tuesday that the new

order requires at least one of the two witnesses to be licens-

ed by the Law Society of Ontario as either a lawyer or

paralegal.

“[That was] one of the things we built in as a safeguard to

make sure that we had the same standard that we had

before and that people aren’t being taken advantage of, that

there’s no undue influence.”

Mr. Downey was a lawyer before entering politics and

worked on a number of wills while in private practice. He

said when the pandemic situation began to unfold, he knew

in-person witnessing rules would be a challenge for people

engaged in more urgent estate planning.

“It’s a time where people reflect and want to make sure

they have everything in order.”

Sebastian Schmoranz, managing partner of McGregor,

Sims, Schmoranz Law Office, where he practises what he

calls “cradle to grave” law in the small town of Kingsville,

Ont., said he has been receiving daily phone calls from

people who want to make a will or a power of attorney.

“The reality is people are really concerned about these

issues. ... The problem is, unless you want to breach your

social distancing guidelines, it’s pretty much impossible for

you to make these documents.”

Mr. Schmoranz got in touch with the Ontario govern-

ment early on in the COVID crisis to propose video-witness-

ing as a simple solution, and joined about a dozen other

estates law lawyers and academics on a video-conference

call over Zoom with Mr. Downey early last week.

Ian Hull, co-founder of Hull & Hull LLP in Toronto, who

was also on the Zoom call, said the participants discussed

various ways to meet the legislative requirement that wills

be witnessed “in the presence” of two in-person witnesses

in the same room at the same time.

“What we realized was we needed to capture the actual

event of signature. And you can do that by video. You can

have a three-way link and record it if you can and that

solves the ‘in the presence of’ problem,” he said.

The emergency order applies to typed wills. It does not

prevent people from making “holograph” wills, which are

entirely handwritten and do not require a witness. Tues-

day’s order is temporary, but Mr. Hull says this issue high-

lights a need for longer-term reforms to parts of the legal

system that should be considered after the pandemic has

run its course.

“If we can thoughtfully put together a process that allows

for a broader base of society to do wills, with or without

lawyers, through this kind of technology, I think it’s going to

have to be seriously revisited.”

Wills:Issuehighlights

needforlonger-term

reforms,expertsays

FROMB1