When industry won’t, government must

The cyclical downturn in Alberta’s oil industry is once again plummeting many households into financial distress and the province back into a concerning deficit position.

Each oil slump has its unique extenuating circumstances, but the reason why slumps happen over and over is Alberta’s reliance on one industry for economic growth and prosperity.

We will blame Prime Minister Trudeau, but Ottawa’s $12 billion commitment to purchase, complete the Trans Mountain pipeline and then sell it back to the private sector when good times return, is a substantial national commitment whatever way it is spun by the opposition.

Ottawa’s decision to work with the court decision and re-do some of the consultation and environmental assessment rather than undertake a protracted lawsuit bodes well for the pipeline’s eventual completion.

Finance Minister Bill Morneau’s recent announcement to significantly shorten the time for capital cost write-downs immediately helps our beleaguered oil industry.

We will blame Premier Rachel Notley, but her stable hand during this season of crisis has thankfully not exasperated the financial anguish for families.

Previous administrations panicked — focused on the deficit and indiscriminately slashed education, health, social and infrastructure spending. All of which put Alberta in a big hole when the oil industry rebounded.

Notley and Trudeau are great scapegoats and the anger towards them might make us feel better, but it doesn’t change the facts.

The United States is the reason for much of our oil industry distress. Since the discovery of shale oil, the United States is self-sufficient. Their companies are producing oil at torrid rates, creating worldwide surpluses and low oil prices.

Their president’s bent to start trade wars has also had a negative impact on economic growth. Lower growth worldwide equals lower demand for oil and lower prices.

The midterm elections in the US played a part. The two pals, Saudi Arabia and the American leaders, agreed that OPEC would not tighten supply and push up oil prices before the election.

Higher oil prices would have a negative impact on America’s churning economy and potentially hurt the President’s candidates.

Alberta has done some things right. Today we have one refinery for bitumen—the North West Refinery near Fort Saskatchewan.

It was a controversial project under former Premier Ed Stelmach because it came with government loan guarantees, subsidies and huge capital overruns on construction.

Now a wholly-owned subsidiary of Canadian Natural Resources Limited, bitumen refined there earns an extra $23+ margin per barrel for producers than raw product shipped to the United States or China.

It must make Premier Notley’s head spin. If you listen to the recent commercials you’d think Notley and Trudeau were extreme socialists inflicting havoc on Albertans.

Yet today it’s the oil patch and Jason Kenney asking for the New Democrat government to legislate how much oil companies can produce and it’s the Calgary elite looking for Ottawa handouts.

That’s probably why it’s often said, a market-driven economy is actually privatized profits in good times, and socialized losses (government handouts) in bad times.

Yet in the end, the only long-term solution to Alberta’s yo-yo economy is to move away from our dependence on one industry and that will take government leadership.


B.P. Schimke

ECA Review

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ECA Review