Follow this blog by Email

Friday, November 28, 2014

Alberta’s Oil

You have seen it and you have probably been very pleased with it: Your gas bill is getting lower every day. And indeed, the price for crude oil has plummeted like a rock with over 30% since the warm days of summer. Are we feeling that something is wrong? We sure do. It’s just not normal that oil prices are going low and with it our gas bill. So everybody should be happy with it right?

Wrong.

Now we are complaining that oil is going too low and that it can potentially hurt our economy. At least that’s the buzz if you have been listening to the news. Oil companies operating offshore outside of Newfoundland have already put on their financial brakes. And here, on the other side of the country, Alberta is starting to talk about “serious consequences” for next years budgeting.

Royalties from oil and gas plus taxes paid to the Alberta Government are in danger to shrink like fresh fallen snow in the rising spring sun.

The consequences will be cut-offs on important parts of social welfare. After all, that’s what all conservative governments would do. But it will also cool off the red-hot Alberta Real Estate market which could be quite healthy.

If push comes to shove it will also cause a new migration of workers – this time back to their home provinces where unemployment is waiting for them. So could the low oil price lead to a wide-spread economic crises?
Absolutely.

Can we take some learning from it? We sure can – if we are willing to.

1. we shouldn’t have made us so darn dependent on oil
2. we should have put aside more of the oil revenues, instead of spending it like it would never stop.
(Little Norway has put aside staggering 900 billion Dollars since the early nineties, while Alberta managed to save only 17.4 billion Dollars since 1976) 3. Royalties to the Government should have been set much higher instead of giving a free ride to the richest companies in the world.
There is an old saying that no trees are growing for ever.

So why are OPEC countries refusing to cut production? Could there be a strategy to hurt the U.S. and Canadian economies? Or is it simply because of these countries are so poor that they need the revenue?
I don’t know which, but what I do know is that we have to deal with it.

3 comments:

  1. I hear you...If only the the Governments would do what they are supposed to do- THINKING WHAT IS GOOD FOR THE COUNTRY and not how do I keep my seat .....each one should be doing his\her job ,that is why we selected them -NO? well I am to naive to think that ,but I do not see any other option....
    In my opinion the majority of the people want to be elected so they can make money for themselves during and after they are in office,for 20 minutes lecture 300.000USD?????
    There something wrong in the system.

    ReplyDelete
    Replies
    1. Couldn't agree more Danny. And it is everywhere.

      Delete
  2. There are always consequences to situations such as this and you are right. It just has to be dealt with. I'm sure drivers are thrilled with the low prices but there may be another price to pay too.

    ReplyDelete

We like to hear from you. You can add your comment here: