Feb 042013
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Dependence on energy industry makes province's economy unstable and unsustainable.

by Ricardo Acuña
Despite the ongoing problems with Alberta's economy and the series of scandals exposed in the Alberta Legislature in the fall, Alison Redford continues to be seen in Alberta as someone who is smart, thoughtful and articulate. There was a moment during her televised speech to Albertans last week, however, which called all of that into question.

As Redford explained how we will move the province forward in a more economically stable way, she clearly identified the heart of the problem: "A province as prosperous as Alberta should not be as susceptible as we are to swings in the price of oil and gas."

Although economists, advocacy groups and think tanks of all stripes have been saying this for at least the last 10 years, this was the first time in recent memory that a premier has expressed the problem with Alberta's economy so directly. Our economy is overly dependent on oil and gas revenues, and oil and gas revenues are volatile. That makes our economy unstable and unsustainable. It's not rocket science, but it was oddly comforting to hear a provincial premier articulate it so bluntly.

Despite her ability to articulate the problem, however, the very next line out of her mouth betrayed the degree to which she still doesn't actually get it. She promised to fix the problem by fighting for a "Canadian Energy Strategy that gets our oil both to the west and east coasts in Canada, to the refineries in the US Gulf Coast and to markets overseas — particularly growing economies in Asia."

Suggesting higher oil prices will fix Alberta’s deficit is kind of like suggesting that the way to deal with obesity is to provide people access to more food for less money.

It seems that in Redford's mind, the way to get over the fact that our provincial budget is too dependent on oil and gas is for us to find ways to sell more of it for more money. It's kind of like suggesting that the way to deal with obesity is to provide people access to more food for less money. It doesn't work. The way to make the budget less dependent on oil and gas is to either remove oil and gas revenues from the budget or find other sources of revenues that will reduce the share of oil and gas money in the budget, or both.

Redford also suggested that reforming our tax system to reduce volatility and dependence would be the easy way out, and as such, not the way she would take.

That's right, over the course of an eight-minute speech, the premier correctly identified the problem with Alberta's finances, correctly identified the most logical solution, said that it would be "easy" to do and then stated unequivocally that she wouldn't do it.

Instead, Premier Redford is promising to fix the problem by "holding the line on spending" during a time of huge population growth, and working to build pipelines from Alberta to the east and the west despite the rights of indigenous communities and the proven environmental dangers. That will certainly work far better for the long-term well-being of Albertans and our economy than actually fixing the problem at hand.

As an aside, it was also quite interesting to hear the premier say that Alberta's oil and gas resources are "our assets and we need to sell them for the highest price possible." Why is her attitude so different when it comes to talk of increasing royalties on "our assets" in order to ensure we get a fair price for them? More conservative logic, I guess.

Redford finished her presentation by assuring us that although she's already made up her mind about how to move forward, she will nonetheless begin a "conversation" with Albertans about the options at hand. Part of this will be an economic summit sometime this spring, which will bring together leading thinkers, experts, academics and non-profits to discuss the issues. In other words, all of the same people who have been telling her over and over again that we need to reduce our dependence on oil and gas and fix our tax system.

If only she were actually prepared to listen to them this time and take their proposed solutions to heart instead of continuing to rely on the false logic and the pipe dreams of the oil industry.

Ricardo Acuña is the executive director of the Parkland Institute, a non-partisan, public policy research institute housed at the University of Alberta.

About Ricardo Acuña

Ricardo Acuña is Executive Director of the Parkland Institute, a non-partisan public policy research institute housed at the University of Alberta.

© Copyright 2013 Ricardo Acuña, All rights Reserved. Written For: StraightGoods.ca

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