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The Economic Impact of New Markets

Blog by Kevin Kurjata | March 23rd, 2011

Imagine you’re running a lemonade stand. You’ve been running this lemonade stand profitably for a few decades now. In fact whatever you’ve been able to make you’ve been able to sell. This is because you have one amazing client who can’t get enough lemonade. He’s buying at least 50 lemonade’s per day as he walks past your house.

Every once in a while he grinds you on the price of your lemonade. He feels that since he’s buying 50 lemonades a day, you should give him a better price. There are a couple of other places that he could get lemonade when he needs extra and he may, in fact start buying more from them if you don’t cooperate. So what do you do? You comply of course. He’s your only customer after all!

Unfortunately, you customer gets diabetes. He can still drink some lemonade, but he can’t drink quite a much. He’s also found a lemon tree in his own back yard so he’s making some for himself. You’re profits suffer as a result. If only you could find some other customers to buy your lemonade…..

One day while you are out riding your bike around your city, you find a group of people that want lemonade. They can get it from a few lemonade stands in their neighbourhood, but none of these lemonade stands are very reliable. They take days off, sometimes they run out of lemons, sometimes there are huge battles over who is going to be running the lemonade stand – violent battles that are frowned upon by the community in general, but what can the community do? They want lemonade, so now they have to begrudgingly buy it off of these despotic lemonade stand runners. The people that live in this particular neighbourhood don’t have bikes to get to other parts of the city, so they pay what they must. At the same time, lemonade is really taking off as the beverage of choice among the population. More and more of these people want lemonade and they are willing to pay for it.

So you have a thought…..What if you brought your lemonade to these people? Your lemonade business is way better than these other lemonade stands! You deliver your lemonade on time, you rarely run out and there are no bully’s in your neighbourhood who could disrupt your ability to supply lemonade on your terms. You’ve also recently found a new lemon tree in your back yard that is producing the most amazing lemons! In fact, you’re making more lemonade than your only customer can buy! So who can you sell that to?

Obviously, the next thing you do is figure out an efficient way to get your lemonade to the other neighbourhood. You manage to do this with the support of some of the influential people in this other neighbourhood. They help you to design the ultimate lemonade delivery bike. They even put up some of the money for the research and development of the bike and help you to build it too!

Now you can deliver your lemonade to this other neighbourhood. They are happy to buy your lemonade and they even pay you three times what your only customer was formerly paying you! Your new customers are so happy to have reliable and stable source of lemonade it’s all you can do to get enough to the neighbourhood every day. Since you have found this new group of people, your reliance on your only customer has gone way down and you’re profits have gone through the roof! You now have 10 employees to help keep up with the demand for your lemonade!

The opening of the Kitimat LNG plant will essentially have the same effect on the local energy industry as the design of the new lemonade bike had on your lemonade business. It opens up new markets so that we are less dependent on the US as the only buyer for our resources. There is insatiable and growing demand for what is produced in our region throughout the world. We can provide a predictable and stable supply of natural gas to these fast emerging markets. Petro China, GasKo and Sasol have put their money where their mouth is. Apache and EOG have been championing the terminal and most recently Encana, the largest gas producer in the Canada and the second largest in the world has hopped on board. They now have a target shipping date for 2015.

Opening up new markets strengthens the long term economic prospects for our region significantly. People will be moving here for the high paying jobs and those people will need places to live. This is great news for our real estate market.