Saturday, April 30, 2016

A Very Old Lesson

Alberta isn't the only province caught between a rock and a hard place. Newfoundland is in the same boat -- and for the same reasons. Alan Freeman writes:

We’ve all heard about that special connection between Newfoundland and Alberta — stories of hard-working labourers from the island province flying out to Fort McMurray to make their fortunes in the oilsands.

Unfortunately, the east-west linkages went deeper. When politicians in Newfoundland hit their own gusher in offshore oilfields like Hibernia, they looked to Alberta for guidance. What to do with the billions in windfall royalty revenues that in 2008 turned Newfoundland and Labrador into a “have” province for the first time after decades of equalization payments from Ottawa?
Sock it away for a rainy day like those boring Norwegians? Hell no. We’ll have a big party like our buddies in Alberta.

And now that the price of oil has tanked, there is hell to pay -- literally:

Taxes have been raised across the board; the HST has been hiked to 15 per cent from 13 per cent, the gasoline tax is up 16.5 cents per litre and the province is introducing a highly regressive “deficit reduction” income tax levy that will cost $300 for a taxpayer earning $25,000 a year. Public servants will be laid off. Half the province’s libraries will close. Those $1,000 baby bonuses are long gone.

It's a repeat of the Alberta saga. There were other ways to deal with the boom. But they were paths less -- in fact, they are seldom -- taken. There is a very old lesson here.



Lorne said...

Just goes to show how little real political leadership exists in Canada, Owen.

Owen Gray said...

Wisdom really is in short supply these days, Lorne.

Toby said...

Remember when people used to save? I suppose saving was a hangover from the Depression and WWII. Whatever, almost everyone saved. Not now. Those who would have what is ours have taught us to spend, spend, spend. All this spending keeps the economy rolling along until it doesn't; then there is hell to pay.

Curiously, the 1% saves. They do it in dark places we can't reach, places that ensure we suffer without help from those who enthusiastically gobbled up our wealth.

Imagine what would happen if we all learned to save again.

Owen Gray said...

We have forgotten the wisdom of saving for a rainy day, Toby. For Alberta and Newfoundland, the rain is falling pretty hard.

The Mound of Sound said...

Why are we surprised at the predictable outcomes of petro-statehood. There are the Middle East producers and everyone else. If you're in Camp B, you exist in a state of petro-insecurity. When Camp A can produce conventional "sweet" crude oil at as low as $3 a barrel, they hold the whip hand. Those in Camp B, especially those dependent on revenue from high-cost/high-carbon unconventional heavy oil are forever at the mercy of Camp A's willingness to manipulate oil prices high enough for the underlings to pocket some profits. As margins narrow for the Camp B crowd (that would be us) we go to any lengths to cut corners in order to prop up an unviable industry. Why are those tailing ponds in Athabasca that threaten one of the world's greatest freshwater resources, the MacKenzie River watershed, not getting cleaned up? Why are Alberta and Saskatchewan unwilling to refine bitumen on site but instead insist on marketing hazmat dilbit through hazmat pipelines incapable of safely conveying the toxic sludge? That's corner cutting by externalizing all the risk, offloading it on other provinces and endangering their coastal ecology, essentially free of charge. The arrogance of those pricks in Edmonton and Saskatoon and Ottawa is beyond galling. It's a criminal act of reckless endangerment and we have every right to defend ourselves and what is ours.

Owen Gray said...

An accurate analysis of the way things work, Mound. But even Saudi Arabia is planning for a future where oil is not the prime source of revenue. We are still enthralled by the old model.