Alberta’s about face
Perspective truly is everything. Let’s be clear at the outset: the Alberta government is right to intervene in the oil industry at a perilous time for both the province and its most important industry.
The irony is that it’s Alberta, and that support for the province’s planned intervention is supported across much of the provincial political spectrum.
Here’s what’s happening: faced with a clearly depressed oil price, growing inventories and oil that’s priced low particularly because of shipping bottlenecks, the Alberta government is intervening in both the oil business and the railway industry. The government intends to buy enough railway engines and tanker cars to start shipping an additional 120,000 barrels a day by rail, and is mandating an 8.5 per cent cut in oil production to reduce the provincial oil stockpile and drive oil prices up.
As Alberta Premier Rachel Notley said in a province-wide speech, “In Alberta we believe that markets are the best way to set prices, but when markets aren’t working, when companies are forced to sell our resources for pennies on the dollar, then we have a responsibility to act.” Government, she said, has “a responsibility to defend our province and to defend our resources.”
The move is supposed to recover $80 million a day in lost provincial government revenues.
The response has been generally positive, though some oil companies complain they had successfully planned for the current problems and are being penalized for making the right business decisions.
But cast your mind back to Pierre Trudeau’s National Energy Program, and Alberta’s complaint that the federal government had no business intervening in the oil industry. The NEP was also a reaction to a broken market, imposing a Canadian oil price when world markets were shooting upwards and Alberta was making windfall oil revenues.
Back then, intervening in the market to share the Alberta wealth and to lessen the damage done by high oil prices on other Canadians was deemed by Albertans as a heavy-handed abuse of federal power. The tone then was virulent enough that some Albertans had bumper stickers saying, “Let the Eastern bastards freeze in the dark.”
Now, Alberta’s government did have to act, if for no other reason than to prevent a nonrenewable resource from essentially going to waste.
But, to recap: instituting government market controls to modify the oil price, making the federal government more money and lowering the cost of oil for other Canadians is a very, very bad thing and an abuse of government powers.
But instituting government market controls to modify the oil price to protect Alberta revenues and increase the price of oil for Alberta oil operations is a very, very good thing and absolutely a proper use of government powers.
Got it. Beauty is in the eye of the beholder.