Seven Deadly Sins of the New Alberta Disadvantage
Aside from inspiring an entire cottage industry of overnight experts, one side effect of this fall’s Alberta royalty review was the practice of faultfinding – particularly of the oil & gas industry. But in accepting the overall message of the review panel that industry has been blatantly robbing past, present and future Albertans of their fair share of the economic rent from hydrocarbon production, the government may have done more than sow the seeds of its own corpulent destruction. It just might take the rest of us with it
In some petroleum producing countries, the benefits of economic rent accrue disproportionately to the rich and aggravate the conditions of the poor. One of the remarkable characteristics of the Alberta petroleum sector is the degree to which the positive effects of its activities are distributed throughout society. Thanks to the province’s geology and culture, a vast number of small and mid-size companies are engaged in exploration and production, employing approximately 740,000 people, with the benefits of their employment spilling over greatly to the rest of the population. Government policy should not decrease this distribution of wealth – a real risk in light of the extent to which the panel’s recommendations are clearly more detrimental to the economics of new projects.
Sloth – a disinclination to labour or exertion; indolence; laziness
When individuals become affluent, the lure of leisure is almost irresistible. Governments in budgetary surplus may feel an analogous compulsion and decide, overtly or covertly, to solicit popular support with this money – a practice often decried as “pork barrel politics.” It leads to a well-studied social organization called “clientelism” – an arrangement prevalent in developing countries such as Nigeria and Venezuela that demeans citizens to the status of “clients” who find themselves perpetually indebted to their powerful benefactors for the gifts they receive.
The Heritage Fund was meant to absorb surpluses and put them into long-term investments with tight conditions limiting access. Poring over Finance Minister Lyle Oberg’s recent budget, Scott Hennig, Alberta director of the Canadian Taxpayers Federation, pointed out that booms don’t last.
“I hope somewhere in that $33 billion they are hiring some clergy to pray for high oil and gas prices,” said Hennig, “because that’s what they’re going to need to maintain this budget.”
Pride – n. a high or inordinate opinion of one’s own dignity, importance, merit, or superiority
The great theologian St. Thomas believed pride was inordinate self-love and “the cause of every sin.” Humility was its bitter antidote. When a government gets smug about its accomplishments, it starts taking the populace’s support for granted. After thirty-five years of uninterrupted governing, the Conservative Party has been prone to shift the economy into auto-pilot and fall asleep at the wheel. Without a plan other than lavishly showering royalty and tax dollars back on a no-longeradoring voting population, one wonders whither we are headed.
The production of crude from the Albertan oilsands is more costly than anywhere else in the world. By comparison, a barrel of Saudi light can be produced at a cost of two dollars; Alberta’s requires $50. To make up for this gargantuan difference, we need to be keenly resourceful in making Alberta an attractive place for investment capital. The so-called Alberta Advantage is predicated on the belief that a fiscally-responsible, lawabiding and absolutely reliable government can effect an edge over low-cost competitors. Should government lose its nerve and succumb to the aforementioned seven “sins,” Albertans may discover that the prospect of their future success is more tenuous than previously thought.
Issue ContentsRelated Posts
Is China turning its back altogether on Alberta’s oilsands? • July, 2007
Does Alberta suffer from a paradox of plenty? • July, 2007
Analysing Canada’s Energy Superpower Status • April, 2007
Business is Business: China’s petroleum companies come of age • July, 2006
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