Does Canada need new energy partners?

(upbeat music) - We've got the essentials on the show today. Energy, food, and housing. Oh, and water. Can't forget that one. From American Public Media. This is Marketplace. (upbeat music) In Denver, I'm Amy Scott in Forkai, Rizdal. It is Monday, August 24th. Good to have you with us. President Trump threatened to impose more tariffs on Canadian imports today after trade talks fell apart over the weekend on Saturday. A 50% tax took effect on hundreds of Canadian imports, plywood, furniture, sports equipment. Yes, including hockey sticks. Canada promised dollar for dollar retaliation. And now the Trump administration says it will raise tariffs on Canadian cars, trucks, auto parts, and steel starting in January. All caught up? Well, one Canadian export that has so far stayed relatively out of the fray is oil. Millions of barrels of Canadian crude are sent to US refineries each day, a mutually beneficial relationship that may be starting to wear thin. Marketplace's Elizabeth Troval has more. The US depends heavily on Canadian crude oil. Much of it coming from Alberta's oil sands. Susan Bell is with Rice Dad Energy. The US imports, well, gosh, four million barrels a day of Canadian crude oil. And it comprises a very significant proportion of the heavy crude oil diet that the mid-continent refineries have gotten very used to. A lot of US refineries were actually specifically tailored to process the heavy crude that Canada produces as for Canadian oil producers. You've got to have a market to sell stuff in. Charles Mason is with the University of Wyoming. If they can secure contracts to deliver stuff to US refineries, that's a very useful market for them. Around 90% of their crude oil export market, these neighboring countries rely on each other, says Kevin Byrne with S&P Global Energy. The US providing Canada with security of demand. The US is the largest consumer of heavy sour crude oil in the world. And Canada, correspondingly providing security supply. But Canada's opinion of the US has taken a turn. And that's led to more support for Canada to find other buyers of its crude oil, says Joe Calnan, with the Canadian Global Affairs Institute. I think that this mutual dependence on energy and Canada's sense of vulnerability to the United States on energy has prompted proposals for a few major projects that are explicitly meant to diversify Canadian energy trade. He says there's a strong sense of anger and vulnerability that has shifted Canadian attitudes. There's been renewed interest and openness to pipeline and LNG expert projects, which is something that I never would have thought would happen. But is now in the cards potentially. While Canada and the US may continue to mutually benefit from trading billions of dollars in crude oil, Calnan says recent tensions are giving Canada motivation to build new energy relationships. I'm Elizabeth Troval from Marketplace. Elsewhere in geopolitics, the Treasury Department announced a new campaign to isolate Iran's economy with few specifics. Wall Street ended mixed. We'll have details when we do the numbers. [MUSIC PLAYING] Between trade wars and actual wars pushing up costs throughout the economy, not to mention climate change, grocery prices are up about 3% over the past year. But things look a bit different at the number one seller of groceries, Walmart. In its latest earnings call, the company says it's rolled back prices on 11,000 items, including many food and grocery products. Cutting prices in this economy, Marketplace's Kaley Wells explains. As grocery prices zig, Walmart zags. Makes perfect sense, says Mark Cohen, who served as the director of retail studies at Columbia University before he retired. They're taking advantage of a increasingly distressed consumer. Because everything's getting more expensive, the electric bill, gasoline, home insurance. So Cohen says more people from higher and higher income brackets are joining the search to save money. This is an opportunity for Walmart to capture consumers moving down market, because they have less disposable income. Walmart's also better positioned to cut prices than anyone else. For one thing, says Arun Sundaram with CFRI research, they got a massive windfall this year. They got, I think, nearly $3 billion of tariff refunds in Q2. Walmart said that they were going to at least use some of the tariff refunds that they were expected to get to lower prices. On top of that, Sundaram says it helps that Walmart sells more than just groceries. I call these like alternative revenue streams. These are very profitable high margin revenue streams for Walmart. And they can actually take some of those profits and subsidize their core grocery business if they wanted to do. Kroger can't exactly rely on apparel and houseware sales to lower grocery prices like Walmart can. Since Walmart's also the biggest grocer in the country, it's got the whole economy of scale thing going on. In addition to those operational efficiency, just a lower cost of transportation, procurement, marketing, and all the operations of the business. William Masters teaches food policy and economics at Tufts University. He says these price cuts won't last forever. He calls this a classic end of summer promotion. The temporary price cuts are hoped to bring in customers away from competitors and to have those customers stick. But the customers have to stick before Walmart starts raising prices again. Masters says Walmart strategy won't work if price comparison shopping is here to stay. I'm Kayleigh Wells for Marketplace. (upbeat music) (upbeat music) - What's known as a starter home in this country is going through a bit of an identity crisis. As of June this year and more than 200 cities in the US, an entry-level house cost a million dollars or more. One solution that's gaining some traction is manufactured housing, which costs a lot less to build. But hasn't always been welcome in many communities. Julie Wilde wrote about it for the Washington Post. Julie, great to have you on. - Thanks so much for having me. - People might have some outdated conceptions of manufactured housing. What do we mean when we talk about factory built housing today? - There are many different housing products that can all be described as factory built. The houses that I went to see most recently in Santa Rosa, California are what's called cross mods, where they're building the house in the factory and then they're shipping it on a truck across the state of California in this case in two halves. They send half the house with the kitchen and the refrigerator's already installed. The toilets are already in, the tiles on the walls, send them on a truck, lift them up on a crane, put them down on a foundation and then they actually do tie them down to a permanent foundation, which is what makes it that cross mod. There are other manufactured houses that are more movable, maybe they're on a permanent chassis, you can have a true mobile home. It's a wide variety of houses. What's common is they're built in a factory, they're not built on site. - And this is getting a new push because of affordability. How much cheaper is it to build half a house or two halves of a house in a factory and join them than traditional site builds or stick built housing as they call it? - It's much, much cheaper. It depends what you're building, of course. You can get into fancy finishes and get them to be pricier, but just looking at the average price of a manufactured home, it's shot up in 2021, 2022, just like all housing prices shot up, but that means nowadays it's somewhere in the neighborhood of 100 to $150,000 compared to the $400,000 it might cost to build a comparable site built home. - So, Advocates have been pushing for this for a long time, but it seems like as you report, some new developments are popping up that are exclusively factory built housing. Is that has something changed to make that more possible? - Yes, those developments are what's really very new. These standard suburban subdivisions, where you're gonna build the whole neighborhood in a factory, that's-- pretty new. The things that are changing are some changes that have made it slightly easier. It's still difficult, but slightly easier to get a mortgage for one of these houses, which is a huge barrier, and some zoning changes. Most communities in the country right now, you can't build manufactured housing on most lots, and that's starting to change. Virginia and Idaho passed laws this year that said, "Anywhere you can build a site-built house, you have the right to put a manufactured house, and more communities are starting to legally allow these things." Are these restrictions due to kind of the leftover stigma about manufactured housing? Where did that come from? Yeah, communities started banning them decades ago because they thought they were less safe, they thought they were less energy efficient, they thought that they were ugly, and in many cases, all of those things were true, and you could still get a manufactured house today where those things are true, but you can also get a very high-quality manufactured house today. The new federal legislation, bipartisan legislation, to promote home building also includes some provisions for manufactured housing? Yes. What is that likely to? There are quite a few provisions in that law related to manufactured housing. Congress definitely wanted to give this industry a boost. Perhaps the most interesting part of the law when it comes to manufactured housing is that they got rid of a federal requirement that a factory built home have a permanent chassis, that it's got the steel frame that you could always pick it up and put it on a truck. You don't have to have that anymore. Now, they could bring it in by truck, remove it from the chassis, and put it down where it's going to stay forever, presumably. That really opens up a lot of design options. It's much easier, for example, to build a two-story house if you don't have to keep this very heavy steel chassis attached. That federal requirement might actually really open up the design of these things. You talked to some developers. I understand there's a big development coming near me here in Denver, something like 8,000 houses. Do you see this really taking off in the next few years as a result of these policy changes? It's hard to say, honestly. If you look at how many manufactured homes have been built in recent years, it's held pretty steady at about 100,000 houses a year. There hasn't really been lift-off yet. The industry folks are definitely saying there's going to be. They're saying we're allowed to build in more places now. People are finding it easier to pay for these. People are struggling to afford other homes. This is going to be our moment. But we haven't seen it yet. As cheap as these are to build, relatively speaking, I noted that the starter homes you looked at in California are still about $600,000. They are. It's a pretty expensive community. They're selling these in the 600,000s, which is quite a bit less than the comparable homes near them. It's Santa Rosa, California, just north of San Francisco. They actually, in the neighborhood, they have some variety where they're selling some of them as designated affordable homes below market rate. There's some modifications that they're saving some money on some of the houses. Julie, while we wrote about factory-built homes at the Washington Post, thanks so much for sharing your reporting. Thanks so much for having me. We either give you a smiley face or a neutral face. What, no frowny face? But first, let's do the numbers. The Dow Jones Industrial Average added 140 points about a quarter percent to finish a 53,417. The NASDAQ lost 200 points, 3/4% to close at 29,980. And the S&P 500 slid 21 points, 3/10% ending at 76.52. You heard Elizabeth Troval report on Canada's oil exports to the U.S. amid growing tensions between the two countries. Again, part of those tensions include President Trump's threat of 50% tariffs on all cars, trucks, and auto parts from our northern neighbors. Many popular car models like the Chevy Silverado and Dodge Charger are assembled in Canada and imported to the U.S. General Motors lost 1 and 1/10% on the news. Ford fell 3 and 4/10%, Stellantis dropped 3 and a half percent. Kaley Wells told us about Walmart, rolling back prices to lure customers from competitors. Walmart shares gained 2 and 7/10% but rivaled target price matched, also gaining 2 and 7/10%. Bond's rose, the yield on the 10-year keynote fell to 4.70%. You're listening to Marketplace. This is Marketplace, I'm Amy Scott. Today, for the first time in more than a year, live cattle crossed the border from Mexico into the U.S. Not the border story you're used to hearing? Well, we used to import more than a million head a year from Mexico until worries about the spread of the screw worm parasite shut that down. The border reopening comes just after the President announced last week without details that he would be ramping up tariff-free beef imports. Marketplace's Caitlin Tan looked into what these changes could mean for prices at the meat counter. There's a name for these cattle crossing from Mexico into the U.S. according to the University of Tennessee's Andrew Griffith. Beef on the hoof, right? I mean, we're talking about beef on the hoof. Beef cattle that'll eventually be meat we eat. Before the border closed, these cattle from Mexico provided about 4% of the U.S. supply, especially when you consider how small our national cattle herd has gotten, but it'll take a while to ramp back up to those import numbers and it'll take a while for the cattle coming in to go to slaughter. We bring what we call feeder cattle in for Mexico for the most part, so in that 440-700 range. Abby Grayman is with Ever Ag, a company that analyzes livestock supply chains. She says, once they're here, those cattle have to fatten up to within about three times that range. All told, you know, anywhere from maybe eight to 12 months from the time that that animal crosses the border to the time that they are actually going into the retail beef chain here in the U.S. That could eventually lower high beef prices, so could importing hundreds of millions of pounds of processed beef over the next three months, which is what the president seemed to be suggesting he'll do. That's a pretty short window, hard to know if it really happened, but if it were to, I guess, that would help lower beef prices. James Mitchell, the University of Arkansas, says unexpectedly pumping the supply chain with imported beef will likely reduce live cattle prices this fall, which is when U.S. ranchers are weaning and selling. And so if most producers are trying to sell their calves at a time of year when something like this gets thrown on them, it's just not great. It would mean lower profits for ranchers during a drought. So there wouldn't be much incentive to grow the national herd to bring beef prices down for consumers. I'm Caitlin Tan from Marketplace. It has been a hot, dry summer in much of the West, and that's further straining water supplies that were already depleted after the winter's record low snow pack throughout the region. Here in Denver, the local water utility has responded by restricting when and how often residents can water their lawns, and by setting up an online form for people to report violations. That's led to thousands of such reports from these citizen water cops. The goal was to cut consumption by 20% compared to the five-year average. And as of last week, the system had only hit about a 7% reduction. So we got Denver Waters Manager of Demand Planning, Greg Fisher on the line. Welcome to the show. Thanks for having me, Amy. I understand you have an economics background, which is interesting because there's a sort of behavioral economics story here, which is how do you convince people to conserve, especially if you're not necessarily strictly enforcing this? Are you essentially relying on neighbors telling on their neighbors if they're over-watering? Yeah, I think it really starts with communicating the conditions. And I think most people who live in the Western U.S. or the arid West already have an understanding of the scarcity of water. So really communicating that we are in a dry area. We are facing very dry conditions and we're responding appropriately. And for the most part, we see our customers accepting that and coming along with that. But it really will come down to you. to continuously educating people, reminding them what the rules are, and then just making sure that we back that up with warnings and fines when we need to. - I've read that some cities, including the neighboring city of Aurora, have turned to smart meters on every tap, basically, that alert the utility when people are using more than their share. Why hasn't Denver opted for the high tech route? - Yeah, that's a good question. We actually are using some tech, so we are able to pair aerial photography with customer accounts and we can communicate, we actually send in our customers' water bills, how well they're doing from an efficiency level, so they're getting a pretty good signal, but that's based on monthly water use in what Aurora and others that use that technology they can see daily use. It's a big investment, and particularly for our customers, we serve a quarter of the state's population, which is about 250,000 individual customers. That would be a big investment for us, so we rely on different types of technology to communicate that and really make sure that we are enforcing water use and helping our customers stay efficient. - It's interesting, I'm thinking about those signs on the side of the road that tell you if you're speeding, does that make a difference if you just let people know, hey, you're using a little more water than you could be? - It does, we actually were talking about this in the last couple of days, we got a big influx of calls into our call center when those letters went out and we either give you a smiley face or a neutral face, and those who got the neutral face are calling in that farm were frequently saying, what am I doing wrong? How can I change my water use? - So it really does work, we're getting a lot more response this year because we're in a drought, so people are really interested in how to save more water. - Well, there's also a business angle here, which is that Denver water is a non-profit, but you still need to make revenue when people are using less water, does that make it harder to run the business? - It does, this is kind of a hard recession when we get into a drought and we know that we're gonna make less revenue. So immediately, you have to just change some things and cut costs where you can. When you look at this from a long-term planning perspective, we know we have drought, so we really plan for times like this and we can, both from a financial and a water standpoint, we can weather these things, and that's why you see us and other utilities acting quickly to reduce, because the financial impacts and water impacts are going to a worse series of drought restrictions. The impacts are much greater, so that's really what we're trying to prevent. We're also trying to protect the investment everybody's made in their landscape, so the more we can do this up front and save, the better it is in the long-term for customers and the utility. - What are your longer-term strategies for conservation? Because at some point, just not watering your lawn isn't gonna be enough. - Yeah, great question, and that's one of the things we are actually poised to do this year until we got into the drought, but we're really looking to make that big shift back to more native plants and water-wise plants. So bluegrass takes a heck of a lot of water, so we're really gonna take a much closer look at getting rid of that, putting in more water-wise landscapes that really provide water savings and environmental benefits and water security. So that will be our focus in the future is removing and replacing those landscapes when they're not used and don't provide any community value. - All right, Greg Fisher is manager of demand, planning and efficiency at Denver Water. Thanks so much for your time. - Thank you, Amy. Nice to be here. - We're gonna have more about Western Water and the challenges we're all facing out here in the next few days. And you can hear more about solutions to a change in climate, including a whole series about water in the West on the Marketplace podcast How We Survive. (upbeat music) This final note on the way out today with a hat tip to business insider less than a month after LinkedIn introduced its new "Seems Like AI Slop" button. More than a million users have clicked it. And maybe it's working. The company's chief product officer, Hari Srinivasan, says, "Posts that the company "identifies a Slop are getting 40% less views "from just a few weeks ago, "which that button was available in a lot more places." You can see how it might be abused though, right? Amir Bibawi, Caitlin Esch, John Gordon, Noya Carr, Steve Mullis, and Stephanie Seek are the Marketplace editing staff. Kelly Silvera is the news director. I'm Amy Scott. Hope to see you back here tomorrow. (upbeat music) (upbeat music) - This is APN.