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
The price of oil has disengaged from the mechanics of supply and demand – WTI flirting with $100/ bbl when market fundamentals justify something more in the $40 to $60 range – in part because geopolitical uncertainties in places like Venezuela, Nigeria, Iran and Iraq have caused traders to factor a “fear premium” into oil prices in order to account for risk of supply disruptions and potential market panic.
So much more the irony, then, that with Alberta poised to profit so heftily from the distress besetting far away places, while enabling strategic transitioning from conventional to non-conventional oil & gas production, the prime components of the famed Alberta Advantage are being wittled away and the rectitude of political urges loom large. Indeed, when we look at what government is actually doing, we make some unnerving discoveries.
Greed – a disposition towards hoarding objects, especially by means of violence, trickery or manipulation of authority
Treasury coffers overfilling with petro-dollars often brings a change of psychology in government, breeding dangerous illusions of grandeur (see “The Resource Curse,” Alberta Oil, Fall 2007): strongmen in Ecuador and Venezuela creating political capital for themselves by unlawfully terminating contracts with western oil companies; Russian oil diplomacy replacing nuclear warheads as a means to project power in the near abroad; gargantuan revenues from petroleum exports emboldening Iran’s theocracy to expansionistic ambitions.
In Alberta? A royalty review that penalizes gas producers at the worst possible time; a premier unilaterally revoking a mineral lease to the Oil Sands Underground Mining Corporation at Marie Lake; a federal government reneging on a campaign promise to preserve the tax status of energy income trusts; a utilities board spying on landowners – and the rumour the province may not honour contracts with oilsands giants Suncor and Syncrude in order to force them into line with the new royalty structure.
When oil gets expensive, governments in oilproducing jurisdictions get greedy and “el petróleo es nuestro!” (“We are the owners!”) often becomes the battle cry, replete with justifications for expropriations and usurious taxation.
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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