Canadian NHL Expansion Doubtful
By Frank Walker
Sorry fans of Canadian NHL expansion, you may have a Middle Eastern cartel to blame for not getting the rebirth of the Nordiques.
Our story starts with large global economies like China and India growing as if they would never stop and oil producers producing oil as if they never would. This drove up the price of oil. Then the United States started producing oil because of the high price and Canada, always a strong oil producing nation, really started pumping it out. Then a funny thing happened. China and India’s economies stopped growing at the rate they were and now there was too much supply. The world eagerly anticipated OPEC, a group of nations in the Middle East that control much of the world’s oil production, announcing if they would make any changes to production to buoy the price of oil. OPEC shocked the world by announcing that production would stay at current levels.
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In the last few months, as anyone with a car would notice, the price of a barrel of oil has fallen to half of what it was just a few months ago. Where this really hurts the chances of another NHL team in Canada is that oil is one of Canada’s chief exports and plays a role in the relative value of the Canadian Dollar against the American Dollar. As of 1/30/2015 the Canadian Dollar is worth $0.79. (A more detailed analysis of that can be found here) So where as a Canadian team would half to pay it’s NHL expansion fee and player salaries in American dollars it would not be contributing as much to the league as a whole.
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Now a difference of twenty one cents doesn’t seem like a large one until you realize that the team would only be making $79 million in comparison with it’s American counterparts for every $100 million in revenue. Some may argue that there are seven teams that already are dealing with this so what is the problem? First of all the other teams don’t have to make up the initial investments in starting a franchise. Second, one of those teams, the Ottawa Senators, is already having a large problem with maintaining financial stability.
I am disappointed by this too as I would love to see the Quebec Nordiques make a triumphant return to the NHL. At this point though the Nordiques would be in one of the smallest markets in the league, and be generating revenue in a currency that in the best case scenario would put it at a 15% disadvantage against American clubs.
The only way NHL expansion into Canada would make any sense at this point would be a scenario many people don’t want to see, a second Ontario franchise. The reason most other Canadian teams are doing well even with the slide in currency is that they are parts of large metropolitan areas in which they are the primary focus of the sports scene. In Toronto there is the potential that another team would be a success, but it may also run up against the machine that is MLSE and remain a second class citizen for its entire existence.
It seems every time NHL expansion or relocation talk comes up some fans want to have as many Canadian teams as possible but looking at the realities of the situation that would be a bad idea.