Alberta’s oil sector has the pain with no gain
Such is the state of the Alberta oil patch that this week a major industry player has called on the provincial government to mandate lower production levels.
The goal, to stabilize prices earned in the face of a transportation glut that discounts prices, seems straightforward enough, though entirely contradictory to how many view the industry.
It’s an issue of economics multiplied by politics, making a solution to Alberta’s structural problems with pipeline, export and the general economy much, much more complex and difficult to solve.
A good first step would be for Albertans to decide exactly what role the government should have in regulating and benefitting from the oilpatch.
For decades Alberta governments have been criticized, both in turn or in the same breath, for being too restrictive, too active, in the oil and gas economy or too lax.
This week Cenovus has announced it will scale back some production to lessen its exposure to gaping price discounts it receives compared to world and U.S. markets.
Without other export markets, Alberta’s crude is currently fetching $15 per barrel, about equal to a pack of cigarettes, compared to a U.S. benchmark of about $60.
Other major industry players have, as well, scaled back production to avoid losses. But leaving it entirely to market forces, one player dropping production acts to only firm up prices for those who keep production up.
Basically, smaller players would continue to get walloped, perhaps out of existence.
To accomplish such a production drop without government action would require unprecedented agreement, bordering on collusion, from market actors.
There’s also the question of whether a government of Rachel Notley could accomplish such a move.
At this point, despite general agreement with much of NDP policy from oilpatch, that’s not the public perception.
More tinkering, let alone direct market interference, would no doubt hurt the premier.
Similarly, Justin Trudeau’s standing in local polls is still hurt by the prime minister’s father attempting to tame the industry in the early 1980s.
The powerful business sector has long and loud argued it should be left to its own devices to shape and participate in markets.
Even today, free market economists see a cap production as something akin to swallowing a spider to catch the fly. They don’t like where this could be headed in terms of further intervention or trade implications, let alone investment chill.
Albertans in general have a knee-jerk reaction against government stepping in, but also get teary-eyed when recalling Peter Lougheed enacted such production caps to battle the National Energy Program.
As premier, Earnest Manning also managed production, limiting gas shipments east to reserve volumes for the needs of the expanding oilsands.
More recently, Albertans have shown support for limiting oil shipments to British Columbia, a punishment of sort for opposing the TransMountain Pipeline project.
That’s part of a general call from the public for government to ram home pipeline projects, despite murky options to do so.
On Wednesday, Alberta Trade Minister Deron Bilous announced a new billboard on Parliament Hill will have a running tally of revenue lost without greater export pipelines.
That’s worth $84 million per day, according to a ScotiaBank study, meaning about $6 billion has been lost already while the TransMountain approval process is redone. There’s no easy short-term answers, however. TransMountain construction could have started two years ago and still be two years from completion.
Alberta is close to announcing $2.5 billion in grants for refining and petrochemical diversification, but we’ll be in the 2020s before those projects are up and running.
There’s no escaping that Alberta is in the midst of a long, hard pivot for the sector.
If there’s going to be pain, shouldn’t Alberta gain?
Tickled Pink
That our MLA finally set the mayor straight on issues the mayor has been criticizing the provincial government for when it was not the province who was responsible and the mayor should have known that.
Ticked Off
That these so-called left leaning news media say it’s my way or the highway.
Tickled Pink
That our local MLA called out the city on their BS scapegoating. You can only blame your problems and actions on other political parties for so long before we all see through you.
Ticked Off
That our tax dollars are being wasted on town leaders’ friends for bike trails and probably golf course debts. How about a little more snow plowing, sidewalk and road repairs which would benefit all, not just a few buddies.
Tickled Pink
By Mr. Lube’s participation and contributions to Remembrance Day.
Ticked Off
To the lady at the local gym who feels it’s OK to grunt, moan, groan and sing out loud without having any respect for the rest of us who use the facilities. She is obnoxious and very disrespectful.
Tickled Pink
With companies that use labels that stick well, but come off easily for recycling. Not happy with ones whose labels are very tough to fully remove.
Ticked Off
Had to laugh at the letter that wanted names included for comments in this section. In case you haven’t noticed, names cannot be included in this section, and the News isn’t about to print twenty or more in one paragraph.
Ticked Off
I’ve heard comments from individuals about what a great man Justin Trudeau is. He may be a great guy but sadly he knows absolutely nothing about leadership. Think about the financial mess we are in and the fact that we all pay 42.5 per cent of what we make in some form of taxation.
Tickled Pink
Our government is raising AISH. The last raise was 2012.
Ticked Off
Justin Trudeau couldn’t lead a one man race to the outhouse!
Ticked Off
That our PM is always apologizing for something that happened 150 years ago. Tell both sides of the story before you make us look like the bad guy and weak.
Ticked Off
Getting tired of the guy on my street who thinks it’s cool to do burnouts and spin his car around every time it snows.
Ticked Off
That after paying close to $1,200 for Tigers’ season tickets that we can’t even get a lousy program at the game. Next year you will be that much short along with a lot of other season ticket holders.
Tickled Pink
Thank you so much to the kind young man with the florescent orange hood who shovelled our sidewalk the morning of Nov. 11.
Tickled Pink
As an American living in Medicine Hat, I’m constantly amused how many people have negative opinions of events in the U.S. What’s the obsession? Don’t you have enough problems to worry about with Canadian politics?
Tickled Pink
That we will soon be able to bike through the beautiful Kin Coulee park without getting chased by dogs.