The eggs-in-one-basket economy: lessons to learn from Alberta
Diversification: B.C. must broaden its spectrum of initiatives
Two summers ago, my wife and I and our dog drove through northern B.C. and Alberta, camping, and it was as if we were travelling through two different countries.
The differences were stark. At the time, B.C. seemed adrift, conflicted internally by the oil pipelines Alberta wanted to impose upon it, and at odds with a federal government that made no secret of its distaste for our environmental doubts. We heard a lot of that from folks in B.C.
Then we crossed the border into Alberta.
You could see the money. New highways. Crowded malls. An energy that translated into a new pickup truck in every garage and the spread of just-built subdivisions eating their way into the foothills and canola fields. Fort McMurray was a revelation, a modern, affluent city built into the boreal forest. Massive road crews worked on a four-lane separated highway connecting it to the outside world. In the campgrounds, Albertans lectured us about the inevitability of the pipelines that would cross our province, and they considered our misgivings as typically effete B.C. tree-hugging, as opposed to their industrious pragmatism. Oil, they reminded us, made the world go round.
We didn’t know it at the time, but we stood at the fulcrum of the two provinces’ fortunes. In the time since, the tables have turned. Saudi Arabia increased oil production and drove prices down. Demand fell in China. Climate-change concerns put new pressures on non-renewables. There was talk that oil wasn’t just slumping but had become a sunset industry.
And voters kicked Stephen Harper’s Conservatives out of office.
The bleeding started in Wild Rose Country soon thereafter, and when it will stop is anybody’s guess.
“Unfortunately,” said Todd Hirsch, the chief economist at Alberta Treasury Branches, the province’s financial Crown corporation, “the bleeding is going to continue. I think we haven’t seen the bottom in oil prices yet. ... So as a result, I think the economy is going to continue to bleed red ink, at least until the first half of 2016.”
The province lost about 20,000 jobs in the last three months of 2015, Hirsch said, and he sees more coming this year.
“I think the reality is, there will be more layoffs in the (oil and gas) industry and in those other peripheral industries that are affected by it, like manufacturing and construction.”
The dominance of oil and gas in the Alberta economy isn’t just massive, it has turned out to be a burden. From extraction to refining to manufacturing, it accounts for 25 to 30 per cent of Alberta’s total output.
“When oil is at $100 a barrel,” Hirsch said, “it just naturally turns into this gravitational black hole that pulls everything into it.”
Hirsch would like to see what he called more “organic diversification” in the Alberta economy — the growth of new businesses that previously found Alberta too expensive because of its high wages and costs brought on by oil and gas — but it is a difficult proposition in a province so dominated by a single industry.
There are, he thought, lessons in this for B.C.
“I think there are lessons to be learned, and that is, you don’t want to push one industry or one project or initiative too much at the expense of the others, because when things don’t pan out as you had hoped, you’re going to find yourself with the proverbial eggs in one basket. I wouldn’t say to drop (the push to develop liquefied natural gas) entirely, but I would advise British Columbians to look at as broad a spectrum of initiatives as possible, including LNG, so you don’t become so singularly focused on one thing.”
Almost by default, our lack of focus has been B.C.’s saving grace. It left us less vulnerable to falling oil prices.
“The B.C. economy is more diversified than Alberta’s,” said Helmut Pastrick, chief economist at Central 1 Credit Union, “with more service industries, and more diverse export markets. ... Alberta’s energy sector accounted for about 30 per cent of total provincial output or industry gross domestic product. In B.C., the energy sector represents 5.5 per cent of total output.”
B.C. led the country in job growth (2.3 per cent in 2015 compared with Alberta’s minus0.6 per cent). Interprovincial migration was up close to 18,000 by the third quarter.
“Most forecasters, including my own shop,” said Jock Finlayson, chief economist of the Business Council of B.C., “project that B.C. will lead Canada in GDP growth in 2016. Once the final numbers are tallied for 2015, they are likely to show B.C. topping the growth charts last year as well.”
No better time then, Finlayson said, for “a stepped up public policy” to promote industries outside of the natural resource sector — tech, tourism, advanced manufacturing, knowledgebased businesses. And time, too, to pour money into our schools, rather than war on them.
“On higher education,” he said, “it is worthwhile noting that virtually all successful jurisdictions are allocating additional resources to expand and strengthen university and college education, technical training, and related research.”