Wednesday, January 23, 2013

Alberta presents: [In The] Red-TV

Premier Redford to address Albertans in Thursday night televised speech

Hey, Albertans! Remember Ed-TV?

I thought not, you're not really supposed to remember Ed-TV because in Ed-TV a 5 year "economic action plan" was described and now that we are in "year 5" it's become quite apparent that their action plan hasn't worked out.

Of course, a year ago the Alberta government wasn't complaining about missing pipeline links or anything of the sort. At the time the oil price was rising and they were estimating even higher prices! But no, let's all ignore this and focus on the "now".

In the "now": Alberta bitumen sells for less than oil, but wait a minute here! I thought Alberta bitumen always sold for less than actual oil?

Taxing dilemma for Alberta’s finances
Like others before it, the Redford government is caught in the age-old trap of relying on the roller-coaster of international oil prices. Bitumen from the oilsands now fetches only $45 to 50 a barrel compared to $65 in March 2012. Natural gas prices have slumped.
Gee, in March of 2012 bitumen was going for more! Of course at the time oil was going for more too, but let's all just pretend that this discount is due to the pipelines and not the fact that at it's core Alberta is selling an inferior product to oil called "Bitumen".

Hell, while we're ignoring simple facts lets also ignore the cause of the problems too. Let's forget about the internal memo telling the government the oilsands are too expensive to produce. Let's forget the AHS scandals, the Duckett cookie. Let's forget the $25million dollar rebranding of Alberta. Let's forget that for 30 years all infrastructure spending in Alberta basically came to a standstill and let's also forget that it takes a decade for this government to put a highway together.

Clearly the issue in Alberta is not that the government wastes money hand over fist, or that the government has put all of our economic eggs into one incredibly unstable and unsustainable basket, or that the economic basket they've chosen is completely unaffordable and requires an immense amount of infrastructure spending, electricity consumption, subsidies, and write-offs just to be operational. No, clearly the issue is "revenue".

So, on Thursday, following the 6PM news Albertan's homes will once again be intruded by a premier desperate for Albertan's to continue believing them. The new Red-TV will pickup exactly where the old Ed-TV left off: "we need money".

For the Wildrose, the culprit is spending. For the PCs the culprit is low oil prices and a *sudden* need for expanded pipelines (in reality bitumen always has sold for less). For the NDP and Liberals the problem is low taxes. It's interesting that not one has put the finger on Alberta's pride and joy industry, the oilsands, itself.

High spending in Alberta is needed because of the influx of people we need to operate the oilsands. Kevin Taft notes this as such:

Taft doesn’t believe that government spending is out of control. On a per-capita basis, Alberta spends about the same on public services as it did in the 1980s, when the dollars are adjusted for inflation.
As covered earlier, the price of bitumen in comparison to the price of oil hasn't changed all that much. When oil goes down, bitumen goes down.. pipelines or no pipelines. Of course, the PCs would like to have us all believe the world has somehow drastically changed in the last 6 months, it hasn't.

Which brings us to taxes. The NDP and Liberals both agree that some additional taxes can even out the revenue but this, also, doesn't make a whole lot of sense. Assuming the influx of new people mostly have jobs (that is why they are moving to Alberta, isn't it?) then shouldn't the additional new tax revenue from the additional new people all supposedly working in high-paying jobs cover that? Wouldn't an oil and bitumen price which is relatively much higher than it was back in 2006-2007 cover that?

The answer is no. The oilsands have an EROEI ratio of 3:1. Whether the price is $40, $70, $90, or $149 this ratio does not change. For readers of this blog, this concept is nothing new, I'm not going to repeat the analysis over and over so if you want to know why 'oilsands prosperity is a lie', then you can read my post on the subject here.

The political parties are singling out 3 separate aspects of the same larger problem. Considering that all of them are aware of the internal memo noting this fact one can only assume that they, too, are aware of Alberta's true economic situation and are working to cover for it as well.

Failed forecasts, failed budgets, and failed promises... only on In-The-Red-TV.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

1 comment:

  1. Terrific post, Richard. Very well thought out. Many thanks.