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


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9 minutes ago, Jimmy McGill said:

 

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. 

I've appreciated Tombes now for a while.  He's got a very level head on himself and doesn't mince words when it comes to the numbers.  his projections are entirely accurate and below $30 oil through 2023 i a reasonable bet.  That is a very frightening thing moving forward

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10 minutes ago, inane said:

Because 'screw you I got mine'. 

 

8 minutes ago, stawns said:

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

And it's INCREDIBLY short sighted.

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8 minutes ago, Warhippy said:

I've appreciated Tombes now for a while.  He's got a very level head on himself and doesn't mince words when it comes to the numbers.  his projections are entirely accurate and below $30 oil through 2023 i a reasonable bet.  That is a very frightening thing moving forward

I see it as the opportunity Alberta and Canada needs for some renewal. Oil is depressed, for a long time, Maybe for good. We have a new mountain of debt. 

 

But we also have a ridiculous wealth of many other resources and a smart population that other smart immigrants love to come to. We get through this better on the other side if we leverage more immigration and invest a lot more in our manufacturing base, everything from agriculture to aerospace. 

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Today is the beginning of earnings reports for oil and energy in canada.  This could get very ugly.  An estimate of no less than 35% of all small outfits in Alberta could be bleeding red ink by the end of the weeks financial reports.  Going back ten years you can see the index for some companies is down as much as 80%.  Cenovus along over that decade 82%.  Things are not well

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1 hour 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.

I never said it's a negative. Thanks for you for your response. Now considering we pay the most by a long shot to the rest of Canada and Quebec is the biggest recipient and blocks Alberta the most, so don't you see that as problematic?

It's essentially biting the hand that feeds you.

Can't you leave the partisan opinion out and actually think about what I said. Imagine BC giving as much as we do and having Quebec cry about mining and logging. 

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2 minutes ago, CBH1926 said:

Not really Alberta related but since we have been talking about bailouts.

 

https://www.msn.com/en-ca/money/topstories/germany-prepares-to-take-stake-in-lufthansa-in-bailout/ar-BB13jg6J?li=AAggFp5

 

I love this.  Get government money, give the government ownership stake.

 

I've said it numerous times over the past few weeks.  If companies, especially those trading on public markets want taxpayer dollars.  They should be coughing up percentages of ownership

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2 hours 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

 

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.

 
debt-gdp.jpg

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.

 
future-revenues.jpg

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.

 
cda-coronavirus-feds-economy-20200313.jp
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.

 

Cries about opinion pieces yesterday then posts one. Put down the bong, go take some pictures. 

Btw Tombe is a moron.

2 hours ago, 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.

Nationalized haha how did that work out. We should have nationalized the logging industry so all our houses are cheaper. Btw there is no irony, you are responding to complete made up BS. Corporate tax cuts, are for all corporations, not just oil companies. 

2 hours ago, Warhippy said:

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

Incorrect..as usual. Do you offer your super duper photo services cheaper for Canadians?

1 hour ago, stawns said:

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

As if you know anyone. 

Btw I see you gave up on your bs story about your billionaire buddy at tolko. No union hey?

We have one warhippy we don't need two, I won't have the time to correct the both of you.

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2 minutes ago, Warhippy said:

I love this.  Get government money, give the government ownership stake.

 

I've said it numerous times over the past few weeks.  If companies, especially those trading on public markets want taxpayer dollars.  They should be coughing up percentages of ownership

Lol oh really? But you cried when not enough was made back when government sells it. Oh wait you want government to own all businesses, except of course your photo lab.

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29 minutes ago, Ryan Strome said:

Cries about opinion pieces yesterday then posts one. Put down the bong, go take some pictures. 

Btw Tombe is a moron.

 

Incorrect..as usual. Do you offer your super duper photo services cheaper for Canadians?

As if you know anyone. 

 

We have one warhippy we don't need two, I won't have the time to correct the both of you.

Cries about opinion pieces but you literally don't post anything but.  You have 3 ongoing threads worth of proof of that you poor thing.  Honestly, how do you function with the galling hypocrisy you manage to put down daily?

 

Incorrect as usual you say?  Well.  Educate us then sir.  We've been waiting for that education for some time since we're all always wrong.  Even with credible facts behind us we're wrong and you're not so please, man up and educate us.  

 

We have one war hippy.  That's right.  And you cannot keep my name out of your mouth.  So I need to know, since you won't step up and educate us.  Won't post anything but opinion pieces but whine about opinion pieces that actually have credible financial projections in them.  I need to know.  Are you employed by oil and gas?  Super simple question, are you employed by the oil and gas sector.  I know even you can manage that one

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20 minutes ago, Ryan Strome said:

Lol oh really? But you cried when not enough was made back when government sells it.

 

Oh wait you want government to own all businesses,

 

except of course your photo lab.

1.  Cried?  No, rightfully pointed out that they lost a lot of money on that investment in a rush to make the books look better.  Even you said agreed.

 

2.  Where did I say that  I dare you to pull up a post where I advocate that.  Step up and be a man about it and put your money where your post is.  A good Albertan would have the stones to back up a claim like that, so please.  Show me

 

3.  We don't have photo labs anymore, we have print labs.  Stay current old boy.

 

So...are you employed by the oil and gas sector or?

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17 minutes ago, Ryan Strome said:

NO!!

Kenney said three times now in 2 weeks no taxes, if he changes course, well doesn't matter I'm voting Wildrose independence party.

Because you weren't already voting exit as it was as evidenced by your numerous posts about leaving the nation and hating the union but whatever.  Consistency has never been your strong point

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8 minutes ago, Warhippy said:

1.  Cried?  No, rightfully pointed out that they lost a lot of money on that investment in a rush to make the books look better.  Even you said agreed.

 

2.  Where did I say that  I dare you to pull up a post where I advocate that.  Step up and be a man about it and put your money where your post is.  A good Albertan would have the stones to back up a claim like that, so please.  Show me

 

3.  We don't have photo labs anymore, we have print labs.  Stay current old boy.

 

So...are you employed by the oil and gas sector or?

Contracted to a company, yes.

7 minutes ago, Warhippy said:

Because you weren't already voting exit as it was as evidenced by your numerous posts about leaving the nation and hating the union but whatever.  Consistency has never been your strong point

What? There is no consistency issues, I said who I was voting for. You really have trouble with some things.

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48 minutes ago, Ryan Strome said:

Contracted to a company, yes.

What? There is no consistency issues, I said who I was voting for. You really have trouble with some things.

So...you're unemployed then with the oil downturn? Or working from home?  if so you should have plenty of time to give us that education you say we need.  If not and you're not unemployed than I guess it cannot be all bad right.  As contractors are universally the first out the door in bad times.

 

What?  Yes.  No.  What?  Canada is bad, we're leaving.  No we're not leaving.  Wait what?  I work for oil, no Alberta is great no Kenney is our Premeir no he's bad Trudeau is worse, Trudeau bought a pipeline he's bad, Kenney bought one that isn't getting built it's ok.  Wait what no.  Canada is bad we're leaving if we don't get what we want.  Mr. Consistency

 

3 threads just a few steps away from each other.  Once you give me that education or post EXACTLY where I said I am for the government ownership of all business I will be happy to start responding to your comments with your own comments.  As I am obviously unemployed and only a photographer I have time to do that when I am not quote "taking pictures"

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21 minutes ago, Jimmy McGill said:

you'll warm up to it. 

 

so you're OK with a national AB tax that stays in AB, but not a provincial AB tax that stays in AB :blink:

When the hell did I support GST?

8 minutes ago, Warhippy said:

So...you're unemployed then with the oil downturn? Or working from home?  if so you should have plenty of time to give us that education you say we need.  If not and you're not unemployed than I guess it cannot be all bad right.  As contractors are universally the first out the door in bad times.

 

What?  Yes.  No.  What?  Canada is bad, we're leaving.  No we're not leaving.  Wait what?  I work for oil, no Alberta is great no Kenney is our Premeir no he's bad Trudeau is worse, Trudeau bought a pipeline he's bad, Kenney bought one that isn't getting built it's ok.  Wait what no.  Canada is bad we're leaving if we don't get what we want.  Mr. Consistency

 

3 threads just a few steps away from each other.  Once you give me that education or post EXACTLY where I said I am for the government ownership of all business I will be happy to start responding to your comments with your own comments.  As I am obviously unemployed and only a photographer I have time to do that when I am not quote "taking pictures"

No and no.

Energy sector is essential services.

8 minutes ago, Warhippy said:

Mr. consistency :p 

More stupidity. 

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