Saturday, March 14, 2020

Thinking Outside The Oil Box


Many Albertans -- and particularly its premier -- are in denial. Alan Freeman writes:

It’s over. The great Alberta oil bonanza, which has allowed the province to prosper for decades with a combination of high government spending and low taxes, has crashed and isn’t coming back anytime soon.
The coronavirus and the oil price war between Saudi Arabia and Russia are just the latest manifestations of what’s been going on for years. Climate change is forcing the world to review its addiction to oil and when it comes time to ditch that habit, Alberta is poorly placed to respond.
Rather than be fixated on building new oil-sands facilities and pipelines, attention is soon going to focus on whether existing operations can keep operating if prices stay at low levels.
If ever there was a time for Alberta to pivot away from its historic dependence on oil to fuel its economy and embark on a completely new path towards diversification and fiscal maturity, it would be now. (By fiscal maturity, I mean taxing Albertans for the services they receive rather than betting that resource revenues will be the Sugar-Daddy that saves them from a sales tax and the kind of provincial income taxes most of us pay.)

Unfortunately, Jason Kenney has no plan to pivot. He's following a familiar formula:

In a nutshell, it’s the same formula we’ve seen from Alberta governments for decades when boom inevitably turns to bust. Pray for higher oil prices. Cut spending. Blame Ottawa. Keep taxes low. Never save for a rainy day. And don’t ever tell Alberta voters the truth. 
That was the familiar, dumb formula set out in Finance Minister Travis Toews’s budget on Feb. 28, a budget that predicted increasing oil prices to an average of $58USD a barrel for 2020, which would miraculously hike the province’s stream of resources so much that the provincial budget deficit would disappear by 2022-23. Poof.
Toews claimed the projections were “credible” and “cautious.” They probably never were. Now, with oil prices at hovering around $33USD and a bit today, these projections are clearly a joke and Kenney, Toews and Co. should be looking for jobs as clowns with Cirque du Soleil. 

What should Kenney and Company be doing? Freeman has a few suggestions:

The federal government should propose establishment of an Alberta Tomorrow fund (perhaps Saskatchewan can join in too.) Ottawa could commit $10 billion to the fund over five years, conditional on matching contributions from the provincial government on a dollar-for-dollar basis. So a total of $20 billion over five years from the two governments, to be jointly managed. 
The fund should be dedicated to weaning Alberta off oil and gas through massive retraining of oil workers, investment in green technologies and building on the province’s high-performing universities. Not a single cent from this fund should go to shoring up oil and gas firms, pipelines or the petrochemical industry. The Trans Mountain expansion project is enough of a commitment for Canadian taxpayers. 
How does Alberta finance this new fund? Of course, that’s up to its government and legislature, but here’s an idea. A provincial sales tax would be a reasonable way to do so. Since Albertans seem allergic to the idea of taxation and think it’s some sort of eastern curse, call the tax a “levy” or something cute, like the Alberta Advantage Payment. Whatever. But you get the idea.
The tax can start small, at three or four per cent, and build up over time, to eventually reach the 6-per-cent provincial tax rate that’s in place in Saskatchewan. Still the lowest in the country. The federal government could agree to a sweetener as well, making a onetime contribution to the province for harmonization with the federal GST, using as precedent the $4.3 billion Ontario got from Ottawa for aligning the two taxes in 2008.

It's time to think outside the oil box.

Image: HRO Today


8 comments:

Lorne said...

Some eminently reasonable suggestions here, Owen. Expect Alberta to ignore all of them.

Owen Gray said...

Unfortunately, that's most likely what will happen, Lorne.

zoombats said...

When have they ever listened to the"eastern bums" or the "Maritimers on welfare"? I guess they are about to get a lesson.

Owen Gray said...

And it will be an exceedingly painful lesson, zoombats.

The Disaffected Lib said...

These ideas have been floated so many times but it never manages to pierce the sado-masochist mindset of Albertans whenever oil prices plummet.

That bumper sticker? Whoever came up with that one should have claimed copyright. He'd have made a fortune.

Owen Gray said...

Einstein may not have been the true source of the line, but repeating the same actions and expecting a different result truly is insane, Mound.

the salamander said...

.. last I looked, Alberta was finalizing its signature on sn agreement to become the majority owner of British Columbia's Coastal GasLink Pipeline.. just as the Wet'suwet'en Hereditary Chiefs were being seized & arrested then dragged by the RCMP across the bridge from their tribal lands. Did I imagine this ? Many people, including myself, were outraged by the travesty.. the astonishing insult. The 'facts' are well known.

A question (I am a veritable bloodhound today with my questions) What exactly is the connection.. or chain of connections involved here. How does it bear on your post ?

Well.. we have Jason Kenney, formerly from Ottawa, where he lived up till 5 years ago and owned his home..was a landowner. He is currently the Premier of Alberta, the province with a energy driven economy. We have a 100 % foreign owned & controlled consortium who have named LNG Canada as a new subsidiary to operate a liquifaction plant for natural gas from Northeast BC to Kitimat and export from a projected supertanker port for LNG. We have an energy and pipeline entity called TC Energy (Trans Canada) who is tasked by LNG Canada to deliver the natural gas via a pipeline they shall design, construct and operate.. under the name of a new subidiary called Coastal GasLink Pipeline.

The funds from Alberta are via their entity named AIMco which manages enormous public pensions ie 'funds'.. that appears to be totally under the control of Mr Kenney and his elected caucus members and any appointees Mr Kenney may desire. There is also a War Room to defend the energy industry with a per annum budget of 30 million $$. As your post suggests.. with the earlier descent of diluted Bitumen prices.. the shocking reality of an oil price war by Saudi Arabia against Russia.. and now the hammer blows of Covid-19 landing on world wide economies..

Oh.. my question !! Does this sound like a province determined to evolve its eggs in one basket economy ? A province whose economy is emblematic of one of their former MP's wet dreams.. Alberta as the driving force of a 'petro superpower country. This dream, was that of a man named Stephen Harper, who grew up in Toronto & became Prime Minister. Jason Kenney was of course once one of his underlings while they both lived in Ottawa. Oddly, both also never had a real consequential job in their entire life other than career politician

I predicted in writing.. Four Bitter Years For Albertans when Jason Kenney replicated Harper's power takeover of the Progressive Conservative Brand by doing the same Branding trick to create the UCP - United Conservative Party of Alberta. I had no idea just how bitter those four years were going to be.. and not just for Alberta.. but Canada wide. Jason Kenney has deservedly joined Donald Trump as contemporary losers.. not leaders.. and just like Donald Trump et al Inc, Jason Kenney et al Inc will blame everyone but themselves for their astonishing failures, willfulness and blindness.

Owen Gray said...

Those who enthusiastically embrace Folly always find an external enemy to justify their blind march over the cliff, sal.