Consequences of government inaction

It never ceases to amaze me that governments with all the expertise and resources they have available cannot predict what would be the result of bad policy.

We are now seeing the lowest price for Alberta oil that we have seen since the Don Getty days, as little as $10 per barrel.

This has happened as the result of the short-sighted policies that were implemented by a left-wing federal liberal government and a provincial socialist government.

At the moment, Alberta is producing more oil than it can store, use or sell.

On Dec. 2, 2018, Rachel Notley announced that oil producers would be required to reduce the production of oil by 325,000 barrels per day or 8.7 per cent until there is more capacity to move more of it to market.

How did we get into this mess? We got into this mess because these two governments decided that Canada needed to save the planet by reducing C02 emissions.

You do that by prohibiting pipeline expansion and implementing a carbon tax.

Reduce the amount of oil produced and bingo, you reduce C02 emissions.

It does not seem to have occurred to them that it would not change world demand.

If we do not produce the oil somebody else will, so no change in emissions.

If you take a good look at this ludicrous situation it is enough to make your head spin.

In 2016, Canada imported about 760,000 barrels of oil, about one half from the USA into Eastern Canada and paid world price for it.

Right now, the price of Saudi oil is $59.27, US oil is about $50 and Alberta oil before the government intervened was between $10 and $15 per barrel.

Why in the world would a government agree to import oil at world price and sell ours for a fifth of that price?

This is because of the stupid ideology that Canada must set an example for the rest of the world on curbing C02 emissions.

Had the Trudeau government not put unreasonable environmental assessment roadblocks on the Energy East Pipeline, Eastern Canada could soon be consuming Alberta oil at world price instead of oil from countries with severe human rights records.

As a result of the situation, I think the Alberta Government had no choice but to intervene and curtail some production.

To do nothing would have resulted in mass layoffs and small business bankruptcies.

Jason Kenney, leader of the United Conservative Party (UCP), recommended a similar solution.

The recommendation has created some controversy as many within the party and the oil industry felt the market should determine the volume and price of the product.

That would be fine and dandy if governments had allowed the market to decide when and where to build pipelines.

Governments are responsible for creating the fire sale price of oil, so I guess it was up to the government to solve the problem for now at least.

I noticed that almost immediately after Notley made her announcement the Canadian price of oil increased by over 77 per cent from $15 per barrel up to about $32.

You can bet that she will try to make political hay out of that. The NDP will be trying to convince the public that she is the financial saviour of Alberta.

There will be no mention of the fact that she, in cooperation with Justin Trudeau, was the cause of the problem in the first place.

Jason Kenney’s job will be to inform the public about the real facts of this situation.

Stay tuned. I think the politics are going to get real interesting in the next few months with both governments up for election next year.

 

by Herman Schwenk

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