Saturday, November 15, 2014

Questions for Danielle Smith and the #WRP

The Wildrose party of Alberta wants to better define their image, so I have a few questions for Danielle Smith or any other representative of the Wildrose. I've posted this comment here and emailed them as well.

Hi Danielle,

I would definitely consider myself one of those who has no idea what the Wildrose stands for. I used to think you were an ultra-right wing extremist party masquerading as Libertarian, particularly during the media circus around Allan Hunsperger (which I wrote about here ) though your more recent views and policy announcements have me less convinced of that. I don't know what label to apply to the Wildrose currently, and I'm perfectly ok with that, maybe you're just a "people" party, lord knows it's about time. So instead of attempting to figure out what label you are I'm simply going to ask some direct questions and if you'll answer them and I like your answer you can consider me a supporter and voter in the next provincial election. First I need to provide some context for them so you can see where my concerns are deriving from.

I personally am a political atheist. I don't believe in taking partisan sides, or even the phony "left" and "right" wing labels. In fact I am one of a younger generation that's quickly losing faith in a political and economic system that routinely puts their children, grand children, and unborn children on the chopping block for supposed "prosperity" today. It's clear that while politicians talk a good game about the concerns of a disenfranchised youth and the world they will be inheriting, actions always seem geared to maintain the status-quo and ensure any unaffordable or unforeseen costs of this great prosperity the older generations have enjoyed is promptly shifted onto the backs of their children.

From low interest rates which prevent those with little in assets to be able to save, to massive cost inflation that's routinely just excluded from government CPI calculations so subsequent costs don't increase with it, to public services at all 3 levels of government being routinely cutback or simply not expanded at the proper rate to account for population growth ( ), to the addition of numerous "fees" for everything and red tape, the cumulative effects are continually and increasingly squeezing everyone, but especially those who are attempting to build a life, pay off student debt, pay off a mortgage, a car loan, and also save for retirement. It's so unrealistic it's laughable and yet it continues. The fact that Canada's central banker Stephen Poloz just recently told those being squeezed to just "wait for the recovery to take hold and take a job for free in the meantime" I think highlights what I'm saying here ( ).

I find the skewed reality of what's really going on to be especially bad in Alberta where a relatively small number of high paying oil jobs unbalance the cost-of-living for everyone else, further drive up the cost of housing beyond the bubble already created by low-interest rates, and pigeon-hole Alberta into a one-industry economy. The fact that this is occurring is seemingly ignored by the PC government (and the Federal government for that matter) with an attitude of "well just go get an oil job" which is hardly going to encourage industry diversification and economically suppresses those who choose not to or can't work in the oil industry. Which brings me to my first question: What would you do to help mitigate and raise awareness of this discrepancy and loss of opportunity?

QUESTION #1) What would you do to help mitigate and raise awareness of the skewed economic discrepancy and loss of opportunity Albertans not in the oil industry experience?

The problem, I fear, is that Alberta in general just doesn't have a very good grasp on what the future global economic situation looks like. We're constantly stuck in and trying to revive the past.

For instance, much of Alberta's current expectations on what economic growth and returns from oilsands development are supposed to look like are based on our experience from the run on oil prices leading up to 2007. The era of "The Alberta Advantage" and even though that time is long gone now in the rear view mirror of time it doesn't seem that Alberta's politicians are any closer to understanding why.

Even at $80, the price of oil compared to just 10 years ago is extremely high and yet now we talk as though this is a "low oil price". What I never see acknowledged though is the climate of the market at the time. Alberta's prosperity didn't come from the price of oil, it came from the fact the price of oil was always going up. If the price of oil hadn't continually gone up and levelled off for any significant amount of time (as it has done for the last 5 years) we would have hit these economic problems sooner. If you remember when oil was $40 the government went ahead and declared they needed a target of $70. When $70 was hit the target changed to $90. And so on. But the oil market has now reached the upper limit of affordability where a move from $80 to $110 causes a rash of frontpage articles about "pain at the pump". Given the rest of the economic environment and the stagnation of wealth natural market forces will not be pushing the price of oil beyond $110 barring the exception of some sort of supply disrupting geopolitical event - but if Alberta's future economic hopes are based on geopolitical destabilization (as the many news articles that come out around war declaring "such and such military action could be good for Alberta") then we're truly up s**t creek.

A few years ago "The minute" interviewed you and asked about Peak Oil ( - Unfortunately it seems the video of the interview itself is gone, Jason Lamarche quit his 'The Minute' project awhile ago). However, suffice to say I wasn't very impressed with your answer.
But that said, it's nearly 4 years later and the effects of peak oil are becoming a lot more noticeable. There's been a lot of articles lately that declare the fracking boom in the U.S. and the oilsands are evidence against peak oil but in reality, with a proper understanding of peak oil, they are proof of it. Conventional, cheap oil is on the decline, and it's being increasingly replaced with expensive to produce oil such as fracking and the oilsands. Peak oil theory isn't about oil depletion, and it's only those who didn't take the time to understand the supply downside who were saying the price of oil will be going to $200 due to supply constraints. Few theorists considered that perhaps it would not be the oil supply that would be constrained but rather the ability for economic growth to truly ramp up.

The oilsands are encountering serious issues in financing, and these are only going to become progressively worse. Keep in mind that we are in an unprecedented low interest rate environment, credit has never been cheaper, and yet even still financing for these projects is a problem (and the U.S. fracking companies are experiencing the same issues - I've written more extensively about this here: ).

I very much appreciate your environmental outlook on oilsands development, and you're absolutely right in that something needs to be done before Alberta's image (which frankly has been rightfully earned due to the deception and propaganda the government has used to try to convince people otherwise instead of addressing the issue) deteriorates further and also, you know, the environmental situation there gets worse, but I think you're underestimating the challenges ahead.

With conventional 'cheap' energy declining (which inherently subsidizes aspects of more extreme energy extraction) projects like the oilsands are only going to become more difficult to maintain even at current environmental levels but what's more likely to happen to reduce costs is more and more corners will be cut as we continually lower the bar on what's acceptable to maintain profits. It's great that you believe that some "technology which doesn't exist yet" is going to save the day, but my second question is: what your contingency plan is if one doesn't materialize as I don't believe one is going to be forthcoming any time soon?

QUESTION #2) what's your contingency plan if "some new technology" doesn't materialize which can viably reduce the ever increasing environmental destruction of oilsand development if not eliminate it entirely?

QUESTION #3)  Likewise given what I've described above in terms of an accommodative financial sector which still barely keeps production's head above water and the understanding that peak oil doesn't necessarily describe diminishing supply but rather diminishing energy returned on energy investment (EROEI) what is your opinion on peak oil now and do you believe your policies are compatible with a future in which peak oil is a reality? If not, what gives you the confidence that the old normal in terms of growth can resume to the point the risk need not be considered?

On infrastructure and debt: You're definitely on to something here in regards to the ever-increasing overhead of Alberta's growth. This problem has been compounded by a government that has ridden on the illusion that they paid off the debt when in reality all they did was deter the costs and overhead of growth into the future where the investment now required to catch-up, let alone prepare for the future has risen multiple times over.

I've seen a few commenters on here mention that we shouldn't be afraid of taking on new debt to catch up our infrastructure because "interest rates are favourable". I believe this is an incorrect assessment, it's based on living in the past when the capacity to even have higher interest rates was possible. We've entered a new normal where low interest rates will likely be perpetual (the recovery is always right around the corner, right?) and as a result while the interest on new debt may be cheap such low rates of growth and rapidly growing costs will mean less resources available to pay it down in the future. The assumption that growth will resume is not a certainty and taking on large amounts of debt on the backs of the youth in hopes one day soon the economy will pick up is paramount to gambling, especially since most of Alberta's income is projected based on market moves. Not even day-traders would be so careless.

From my perspective Alberta has a serious problem on it's hands due to how far behind infrastructure already is. A more austere approach isn't going to provide what people need as Alberta pissed it's 30 years of decent oil profits down the drain rather than keeping up (Highway 63 is a perfect example: ), but catching up with debt is also very risky and if the government's lofty hopes for growth and revenue don't pan out (which they likely won't as their projections and beliefs are still based on pre-2007 growth and I don't know if anyone has noticed this lately: always wrong - ) then we will simply once again be deferring the problem into the future where costs are once again sure to be a multiple of what they are now and available resources much less. I don't see an easy way out of this conundrum for us  so I'd like to hear a lot more from your party on how it can be addressed.

I really have a lot more concerns regarding Alberta's future and the path we're on but I've written a lot already and as is these aren't easy questions. I'm happy to see your party is embracing new media and directness as it's method of communication and perhaps you might consider incentives for citizen media as a policy initiative.

Thank you for your time.

Richard Fantin

I'll update should I get a response.

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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 CenturyLink

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.

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