Saudi Arabia declares oil price war on fellow OPEC (and non OPEC)members.

[kingofsurrey]

2 minutes ago, Ryan Strome said:

Some how I don't see this happening. 

Never say never.. Never is a long.......... time.

 

Alberta is our neighbour and   neighbours look out for each other.  We may fight some times... most times...  but you know if anything goes sideways in Alberta. BC would the first people / province to come running.

Edited April 28, 2020 by kingofsurrey

[Ryan Strome]

Just now, kingofsurrey said:

Never say never.. Never is a long.......... time.

 

Alberta is our neighbour and   neighbours look out for each other.  We may fight some times... most times...  but you know if anything goes sideways in Alberta. BC would the first people / province to come running.

Yes I'm sure BC would. Outside the lower mainland most of BC is closer to Alberta than it is Vancouver, Surrey, Richmond, Burnaby, Victoria, etc.

 

King the issue is the system is to always benefit Quebec and Ontario. They have all the seats so both cpc and liberals will toss the west under the bus for those two. Both Quebec and Ontario could be equalization recipients while we will have a deficit 20% of gdp and still contribute equalization. There is a problem with that picture. Freeze the program for a bit. Honestly BC is going to be in a mess if the 2020 tourism season in cancelled. The Okanagan, Shuswap, Kootenays, islands, etc will all need bailouts from Victoria. 

[kingofsurrey]

4 minutes ago, Ryan Strome said:

Yes I'm sure BC would. Outside the lower mainland most of BC is closer to Alberta than it is Vancouver, Surrey, Richmond, Burnaby, Victoria, etc.

 

King the issue is the system is to always benefit Quebec and Ontario. They have all the seats so both cpc and liberals will toss the west under the bus for those two. Both Quebec and Ontario could be equalization recipients while we will have a deficit 20% of gdp and still contribute equalization. There is a problem with that picture. Freeze the program for a bit. Honestly BC is going to be in a mess if the 2020 tourism season in cancelled. The Okanagan, Shuswap, Kootenays, islands, etc will all need bailouts from Victoria. 

Of course BC will be in a mess.... that much we agree on. 

[Ryan Strome]

1 minute ago, kingofsurrey said:

Of course BC will be in a mess.... that much we agree on. 

All of Canada and the world will be.

[JM_]

11 hours ago, stawns said:

There's been a lot of billionaires made on the blood sweat and tears of oil workers in western Canada.  Sadly, they were sold a bill of goods.  Now what do they do?

cross train for other industries - we still need plastics, there are other types of energy opportunities in hydrogen and other renewables. 

[JM_]

9 hours ago, Ryan Strome said:

I think it's silly to knowingly and willfully letting the oil industry die. How does Ottawa make up for the loss of 20 plus billion annually?

you're assuming our tax dollars can save it, or is the biggest factor in Canada's oil industry surviving. There's no reason to think that the world won't be awash in a continued glut of cheap oil. Unless you have some evidence otherwise. 

 

To me whats worse is not seeing the writing on the wall and giving people a chance to move to other industries. 

[Boudrias]

9 hours ago, Ryan Strome said:

Yes I'm sure BC would. Outside the lower mainland most of BC is closer to Alberta than it is Vancouver, Surrey, Richmond, Burnaby, Victoria, etc.

 

King the issue is the system is to always benefit Quebec and Ontario. They have all the seats so both cpc and liberals will toss the west under the bus for those two. Both Quebec and Ontario could be equalization recipients while we will have a deficit 20% of gdp and still contribute equalization. There is a problem with that picture. Freeze the program for a bit. Honestly BC is going to be in a mess if the 2020 tourism season in cancelled. The Okanagan, Shuswap, Kootenays, islands, etc will all need bailouts from Victoria. 

Maybe you should ask how our federal government will continue to function when; the CDN$ drops to 0.50 cents, 33% of federal debt is held by foreigners, CDN creditworthiness is dropped, when federal debt exceeds $1 trillion and combined provincial debt exceeds $1 trillion as well? CDN economy is primarily price takers as demonstrated by the oil industry. Where will the foreign exchange come from to pay for food imports and pay for debt service which is primarily in USD$? 

 

We have a goof running the country who hasn't got the PPE or testing in place to restart an economy that is in desperate shape. Canadians should be very concerned.    

[JM_]

44 minutes ago, Boudrias said:

Maybe you should ask how our federal government will continue to function when; the CDN$ drops to 0.50 cents, 33% of federal debt is held by foreigners, CDN creditworthiness is dropped, when federal debt exceeds $1 trillion and combined provincial debt exceeds $1 trillion as well? CDN economy is primarily price takers as demonstrated by the oil industry. Where will the foreign exchange come from to pay for food imports and pay for debt service which is primarily in USD$? 

 

We have a goof running the country who hasn't got the PPE or testing in place to restart an economy that is in desperate shape. Canadians should be very concerned.    

why would Canada be the exception to whats happening globally? why would we be unique in the world? everyone is going to be in a debt crisis, we won't be the lone stand out, but we also have a better foundation for recovery than a lot of places. You're letting your debt fears cloud your thinking. 

 

you're out to lunch on the bolded part. At least keep your Trudeau rants to facts. 

 

Edited April 28, 2020 by Jimmy McGill

[Warhippy]

1 hour ago, Boudrias said:

Maybe you should ask how our federal government will continue to function when; the CDN$ drops to 0.50 cents, 33% of federal debt is held by foreigners, CDN creditworthiness is dropped, when federal debt exceeds $1 trillion and combined provincial debt exceeds $1 trillion as well? CDN economy is primarily price takers as demonstrated by the oil industry. Where will the foreign exchange come from to pay for food imports and pay for debt service which is primarily in USD$? 

 

We have a goof running the country who hasn't got the PPE or testing in place to restart an economy that is in desperate shape. Canadians should be very concerned.    

Goes from semi credible argument to full Wexit in less than a sentence break.  Well done....

[stawns]

2 hours ago, Jimmy McGill said:

cross train for other industries - we still need plastics, there are other types of energy opportunities in hydrogen and other renewables. 

no argument here, but to them, oil/gas seems to be the only energy source good enough to work for.

[stawns]

2 hours ago, Boudrias said:

Maybe you should ask how our federal government will continue to function when; the CDN$ drops to 0.50 cents, 33% of federal debt is held by foreigners, CDN creditworthiness is dropped, when federal debt exceeds $1 trillion and combined provincial debt exceeds $1 trillion as well? CDN economy is primarily price takers as demonstrated by the oil industry. Where will the foreign exchange come from to pay for food imports and pay for debt service which is primarily in USD$? 

 

We have a goof running the country who hasn't got the PPE or testing in place to restart an economy that is in desperate shape. Canadians should be very concerned.    

you should stick to hockey posting

[Warhippy]

Just now, stawns said:

no argument here, but to them, oil/gas seems to be the only energy source good enough to work for.

Instead of dumping tens of billions in to corporations in a sunset industry that will use said billions to fund projects outside of Canada, maybe take the bailout money they're begging for and invest in green energy and create an entire new and viable industry?

 

Seems like common sense.  I know I know, some will say "but why are we subsidizing X" but will ignore that for the last near 30 years Oil and Gas has been subsidized to the tune of billions per year by taxpayers.

[Warhippy]

A decent read from a guy with a sound mind and credible background.

 

https://www.cbc.ca/news/canada/calgary/road-ahead-opinion-trevor-tombe-alberta-fiscal-reckoning-1.5546481

 

In his televised address on April 7, Alberta Premier Jason Kenney did not mince words: Alberta is "facing not one crisis, but three."

The health and economic shocks from COVID-19 are massive, but they are shared by many around the globe. The collapse of oil prices, however, presents a third crisis that is partly of our own making.

"Alberta's budget deficit this year may triple from $7 billion to almost $20 billion," the premier said, adding that we will soon face "a great fiscal reckoning."

This isn't an exaggeration.

While there remains a uniquely high degree of uncertainty right now, and both the premier's statement and my high-level analysis in this article should be seen in that light, there is no getting around the significant challenge that awaits.

But there are options. Alberta's economy and our budget can recover, but it will require hard choices and cross-party compromises that we too often resist.

Taking stock

First, we should appreciate our current predicament. A $20-billion deficit is plausible.

Consider three major sources of Alberta government revenue:

• Income and Other Taxes: We were hoping for $23 billion this year. But a contracting economy and income losses from low oil prices together suggests nominal GDP may fall by 15 to 20 per cent. This means lower revenues — possibly $4 billion lower.

• Investment Income: Alberta has large savings that generate returns. We were hoping for $2.6 billion this year, but as anyone who has checked their RRSP recently knows, we're more likely to lose money this year. During the financial crisis we lost $1.9 billion. Today, losing $1 billion is possible, which would lower government revenue by $3- to $4-billion relative to our previous estimates. (Of course, how the market will perform over the coming months is not known, and the government might book recent losses in 2019/20 instead.)

• Resource Revenues: Alberta chooses to rely heavily on resource revenues to fund public services. And when energy prices fall, so do revenues. The government was hoping oil would fetch $58 per barrel this year; today it's less than $20. So instead of the $5.1 billion we were hoping for, we might see $2 billion (or less).

We could keep going, but these three items alone put us on track for a revenue hit of $11 billion. Add additional health-care spending of at least $500 million (possibly more) and other costs, and we're almost at a $20 billion deficit already, up from the original $6.8 billion.

Combined with borrowing for capital projects and a smaller economy, we could be looking at a 20 per cent debt-to-GDP ratio — double our current level.

 

This short-term challenge is manageable, to be sure, and Alberta would remain the lowest-debt province. 

The trouble is, these fiscal challenges will continue for many years.

Our fiscal reckoning will last years

Oil prices are not projected to bounce back anytime soon.

Current futures prices are roughly $20 to $30 per barrel lower than government forecasts by 2022-23. And to balance the books that year, the government was hoping for $8.5 billion in resource revenues. This is no longer in the cards. Not even close.

Budget 2020 provides some clues of how bad it might be.

The budget reported "high" and "low" economic scenarios for 2022-23 that, roughly, corresponded to a $20 per barrel swing in oil prices (see page 73 of the budget). Such a swing may lower income tax and resource revenues by nearly $9 billion, they report. 

The shock we're facing today is slightly larger, so instead of a modest surplus by 2022, we may see a deficit of more than $9 billion.

Let that sink in. After four years of significant spending restraint, we're on track for a larger deficit than the one we started with.

This is our fiscal reckoning. But, luckily, there are options.

Getting out of the fiscal hole

Let's start with the government's current policy: a freeze in program spending.

Without going into details, I updated my own model of Alberta's budget to reflect most of what we know today from publicly available sources and display the results below.

 

The government's current fiscal policy suggests we'll balance four years later than planned: 2026 instead of 2022.

This is less than ideal. 

Alberta would see $140 billion in taxpayer-supported debt, with interest costs of nearly $6 billion per year — or roughly triple our current amount. And, since prices and population will continue to grow, a freeze is effectively a nearly 30 per cent reduction in the inflation-adjusted per person level of spending. This would require a deeper reinvention of public services and is roughly double the government's previously planned restraint.

But there is another side to the budget: Revenue.

Consider a broad-based and efficient source of revenue like the sales tax. Alberta already has one, of course: it's called the GST. Except the federal government gets all of the revenue.

Alberta could, if it wanted, raise the GST from its current five per cent and keep the incremental revenue (this is known as a harmonized sales tax, or "HST"). 

If, starting next year, Alberta gradually phased in a four-point increase to the GST (which would be lower than any other province), then we'd be on track to balance the books by 2024. That would mean only two additional years of frozen spending, and would avoid roughly $20 billion in additional debt. 

Of course, there are other revenue options.

Some might prefer higher income taxes. Adding one point to all income tax brackets could add around $1.5 billion to revenues.

Some might prefer pausing the corporate tax cut. This would add around $500 million.

Others might suggest Alberta take back carbon tax revenues from Ottawa. Once it reaches $50 per tonne, that would be $2.2 billion to Alberta — and if we kept rebates to lower income households, it might net $1.5 billion.

Whatever the tool, to balance by 2024 with frozen spending requires we raise total revenue by roughly eight per cent. And if, after 2022, we allow spending to keep pace with population and inflation, revenue would have to rise by 15 per cent.

Even with such increases, Alberta would still enjoy the lowest taxes in the country — by an extremely wide margin — but it would be challenging nonetheless.

Can Ottawa help?

All provinces are facing revenue shortfalls and spending pressures. And Ottawa will likely offer support. But it matters less than you might think.

 

Prime Minister Justin Trudeau holds a COVID-19 news conference at Rideau Cottage in Ottawa. The federal government could cover some (or even most) of the direct COVID-19 related expenditures faced by Alberta, but that would barely nudge the province's daunting longer-term financial trajectory. (Fred Chartrand/The Canadian Press)

Ottawa could cover some (or even most) of the direct COVID-19 related expenditures by extending the disaster assistance program to cover pandemics (it currently does not). If Canada supported provinces with funding in line with what the United States delivered for states, for example, Alberta might see over $2.5 billion this year.

Ottawa could also cover a share of revenue declines through a reformed Fiscal Stabilization Program (which Alberta has long demanded). If it fully acceded to Alberta's request for reform, Alberta might see $3 billion more this year.

There's a strong case to be made for such support, since it's cheaper and easier for the federal government to borrow and smooth out shocks like COVID-19 than it is for provinces. There are also many options for reform, from removing the current cap on payments to more fundamental reform. 

But even though these dollar amounts are large, and helpful for provincial balance sheets, such federal support would barely nudge Alberta's daunting longer-term trajectory.

Alberta's fiscal reckoning is of our own making. We cannot look to Ottawa to fix it.

It's time to change course

There are real political challenges with spending restraint and new taxes, to be sure. And there's no easy option. But cross-party compromise and a whole-of-budget approach to tackling this challenge is the best way forward.

Government and opposition parties must both re-evaluate their approach to fiscal policy. And Albertans must give them space to do so. 

After the dust from the health crisis settles, we'll need to have an open and honest discussion about our budget and our future. Our fiscal reckoning may look bleak, but we have options. We just need to choose wisely from among them.

 

[stawns]

Just now, Warhippy said:

Instead of dumping tens of billions in to corporations in a sunset industry that will use said billions to fund projects outside of Canada, maybe take the bailout money they're begging for and invest in green energy and create an entire new and viable industry?

 

Seems like common sense.  I know I know, some will say "but why are we subsidizing X" but will ignore that for the last near 30 years Oil and Gas has been subsidized to the tune of billions per year by taxpayers.

I agree on all counts and the irony that oil/gas workers whine incessantly about how they are propping up pur "socialist country" is incredibly frsytrating when it's actually us propping them up.

 

Had we developed our oil and gas industry responsibly, we could have had a much more stable, clean industry that all canadians could be at least somewhat proud of.  Instead we let let huge multinational corps come in and rape the land and leave town with all the money and leaving us to pay for the mess they created..........and we paid them to do it.

 

It should have been nationalized from day one.

[Warhippy]

Just now, stawns said:

I agree on all counts and the irony that oil/gas workers whine incessantly about how they are propping up pur "socialist country" is incredibly frsytrating when it's actually us propping them up.

 

Had we developed our oil and gas industry responsibly, we could have had a much more stable, clean industry that all canadians could be at least somewhat proud of.  Instead we let let huge multinational corps come in and rape the land and leave town with all the money and leaving us to pay for the mess they created..........and we paid them to do it.

 

It should have been nationalized from day one.

It goes back to the NEP.  Telling the rest of the nation east of Sask to freeze in the dark and instead choosing to sell just to America created the foundation of the issues they're facing now.

 

But it's the feds, always the feds.  There is never that understanding that many of these issues are created and were created by bad provincial policy

[JM_]

27 minutes ago, stawns said:

no argument here, but to them, oil/gas seems to be the only energy source good enough to work for.

yeah its got a bit of that old coal miner thing to it, my daddy's daddy was an oil guy, etc. 

 

I don't have any special sympathy for that, many people are forced to change career directions. You're not owed a career in any field. 

[JM_]

26 minutes ago, Warhippy said:

A decent read from a guy with a sound mind and credible background.

 

https://www.cbc.ca/news/canada/calgary/road-ahead-opinion-trevor-tombe-alberta-fiscal-reckoning-1.5546481

 

 

an HST for Alberta makes complete sense, and its a very fair way to pay for the covid costs, AND for Alberta to determine where its own money goes. But they'll flip their lids, poop the bed and just get taxed more federally and have less choice about where that money went. 

[aGENT]

12 hours ago, Ryan Strome said:

I have asked multiple times why does equalization have to be a thing? 

So that we don't end up like the US with large areas of that country that have woeful, 3rd world level states of health care, education, infrastructure etc. 

 

A strong, diverse, healthy, educated, mobile country is better for everyone in it. It allows us to have a healthy, intelligent work force and mobile economy, movement of goods etc. One that can have it's oil and gas sector help us through the 2008 recession with high oil prices and the rest of the country help out oil and gas dependent Alberta during this coming one with oil currently trading at/near negative.

 

How you view that as negative is a complete head scratcher.

[inane]

2 minutes ago, aGENT said:

So that we don't end up like the US with large areas of that country that have woeful, 3rd world level states of health care, education, infrastructure etc. 

 

A strong, diverse, healthy, educated, mobile country is better for everyone in it. It allows us to have a healthy, intelligent work force and mobile economy, movement of goods etc. One that can have it's oil and gas sector help us through the 2008 recession with high oil prices and the rest of the country help out oil and gas dependent Alberta during this coming one with oil currently trading at/near negative.

 

How you view that as negative is a complete head scratcher.

Because 'screw you I got mine'. 

[stawns]

1 minute ago, inane said:

Because 'screw you I got mine'. 

that pretty much sums up the attitude of everyone I know that works in that industry