Alberta’s economic slowdown

2009-03-08

in Canada, Economics, Politics, The environment

According to The Globe and Mail, the economic situation in Alberta has recently worsened considerably. Major causes include the drop in oil prices and reduced access to credit.

While the slowdown will almost certainly reduce the pace of development in the oil sands, it may also deepen the political resolve to pursue growth at any cost. Whatever the economic future holds, a deep conflict will remain between Canada’s stated greenhouse gas mitigation goals and ambitions for Alberta to be an even larger fossil fuel producer.

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{ 12 comments… read them below or add one }

Tristan March 9, 2009 at 2:40 pm

“While the slowdown will almost certainly reduce the pace of development in the oil sands”

I think you have the causal chain backwards. The cause of the slowdown is the reduced pace of development, and the reduce pace of development is caused by commodity prices, which are depressed due to speculation that growth will be slow in the near future at least.

The proof of this would be, if the cost of oil went back up but not due to increased demand (say, due to another war), Alberta’s slowdown would be reversed. If this is true, then we can’t say the reduced oil sands development is caused by Alberta’s slowdown, but by the World’s slowdown – and by that only insofar as it makes oil sands production unprofitable.

Milan March 9, 2009 at 3:04 pm

Access to credit is another important factor. Even investments likely to be profitable in the medium term are having trouble securing financing right now. Most forms of energy production likely to grow in the near future are very capital intensive: solar, nuclear fission, oil sands, biofuels, etc.

Tristan March 9, 2009 at 8:10 pm

I’m sure glad we have a system of investment based on betting other people’s money.

Milan March 9, 2009 at 8:34 pm

I guess you should close your bank accounts and lend your money to individuals one-by-one, then.

Tristan March 9, 2009 at 9:04 pm

“I guess you should close your bank accounts and lend your money to individuals one-by-one, then.”

Why would you assume that the rational act for someone who disagrees with something about a system to be to do the act which he might do in an entirely different system (presumably, the one he or she wishes to implement?) ? The problem here is that acts don’t have any meaning outside systems, so the act in the “next” system can only be feigned, not accomplished, within the existing one. The rational act given a lousy system might be very different what one would like to do given better conditions.

Milan March 9, 2009 at 10:41 pm

Any system where you manage who borrows your money directly will be time-consuming and inconvenient. Any system where someone else handles it for you will be “based on betting other people’s money.”

Tristan March 10, 2009 at 12:49 am

“I guess you should close your bank accounts and lend your money to individuals one-by-one, then.”

This seems to assume I have money. If I closed all my bank accounts, and paid all my debts, I wouldn’t have any money. In fact, I can’t do this, because I have far more debt than I have bank accounts. I could try to open more bank accounts, but I’d just have to take out more debt to get the money to do so. So, I don’t have any money. I’d like to say this is just because I’m young and a poor student, but that doesn’t seem to hold – I don’t actually know for certain, but I believe many people who are “richer” than me, are actually far more in debt than I am. So, they have even less money.

So, no one has any money – and the money they have access to depends on people that aren’t not making bad bets with other people’s money.

I don’t know about you, but I’d only buy into this system if it were really good at internalizing systemic risk.

Tristan March 10, 2009 at 10:19 am

This entire discussion also presumes that the only possible “systems” are one’s based on property rights.

Milan March 11, 2009 at 1:26 pm

Home prices in Alberta are falling too, by 6.5% in Calgary and 10.4% in Edmonton, this year.

. March 12, 2009 at 11:39 am

Canada’s economy shrank at an annualised rate of 3.4% in the fourth quarter of 2008, its worst performance since 1991. Its current account swung into deficit for the first time since the second quarter of 1999.

. April 7, 2009 at 6:28 pm

Alberta to post the biggest deficit in its history

Government projects four straight years of deficits, including $4.7-billion this year

. February 13, 2011 at 9:40 pm

Prairie fire
A split in Canada’s most powerful right-wing political machine

OVER the past four decades Alberta’s wealth of oil and gas has turned a former prairie backwater into one of Canada’s most powerful provinces. But for much of that time its politics has been the epitome of dullness. The only real question at elections was how big a majority the Progressive Conservatives, who first came to power in 1971, would get in the provincial legislature. In the 2008 election Ed Stelmach, a farmer, led the governing party to the largest majority ever won by a new premier, taking 72 of 83 seats. But despite that seemingly impressive triumph, his party was already fracturing. The divisions became public on January 25th, when Mr Stelmach announced that he plans to step down after his government unveils its budget in a few weeks’ time.

Were this no more than the result of an internal coup, few Canadians would sit up. But the Conservatives face unaccustomed opposition to both right and left. Ordinary Albertans care about strains in their health service and the budget deficit. And the provincial government’s mismanagement of the tar sands has damaged Alberta’s international reputation and left oil bosses privately calling for stricter regulation.

Mr Stelmach seems to have been pushed out by his own party’s fiscal hawks, led by Ted Morton, his finance minister. The premier wanted to balance the budget gradually, without big cuts to services. Mr Morton, a leader of the party’s right-wing brought in by Mr Stelmach last year, wants fiscal balance now. Mr Morton and his allies in the party worry about the rise of the Wildrose Alliance, a libertarian, small-government group which won its first seat in the legislature in a by-election in 2009 but has since attracted three Conservative defectors and drawn close to the ruling party in some opinion polls. Its leader, Danielle Smith, sparkles in comparison to the Conservatives’ dull suits.

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