Calgary & Alberta Economy

[DougB]

The price could drop enough if lets say, 300,000 barrels a day that make it to the gulf today, couldn't, and were also banned from re-export. In that situation, either the competition bureau has to allow the different companies to form a cartel to support price, the Alberta government needs to impose curtailment, or the federal government needs to impose an export tax. A significant enough price drop could leave a $10 billion deficit on the province's books, and wipe profits from the energy companies.

I doubt a price drop/export tax (they would have the same net impact) would lead to curtailment. The industry has already survived worse. An export ban could lead to calls for government managed curtailment.

I'd still be more worried about the Red Menace in Ottawa surviving for a fourth term, than the Orange Menace in the south.

 

[CBBarnett]

The irony of a US tariff pulling the Alberta Oil and Gas industry down and possibly leading us to a HST/PST is not something I saw coming out of this but it could happen. I mean should happen if the provincial deficit is so bad that services suffer more than they already are. I know consumption taxes hurt those who make the least the most so if anything does come in, it shouldn't be on anything essential. I am probably getting way ahead of myself though.

From what I recall, the province has explicitly increased it's dependence on oil and gas royalties, not decreased it, in recent years (against the direction of all economists that aren't party members for decades)

So we have really left everything even more exposed to oil price disruptions. We should all remember this is a bad idea in a "normal" time where prices swing wildly every few years for any number of reasons. It's obviously even more serious in our new dimension of renewed American imperialist agenda, tariffs and trade wars.

I am left to the conclusion that the provincial government would rather have the province collapse into a insolvent mess than implement more stable taxation policies like a modest PST. But crisis make heroes and villains - perhaps this new challenge will lead to radical and more stable approaches to province finances (unlike all the other crises that impacted the oil price the past few decades).

 

[CalgaryTiger]

From what I recall, the province has explicitly increased it's dependence on oil and gas royalties, not decreased it, in recent years (against the direction of all economists that aren't party members for decades)

So we have really left everything even more exposed to oil price disruptions. We should all remember this is a bad idea in a "normal" time where prices swing wildly every few years for any number of reasons. It's obviously even more serious in our new dimension of renewed American imperialist agenda, tariffs and trade wars.

I am left to the conclusion that the provincial government would rather have the province collapse into a insolvent mess than implement more stable taxation policies like a modest PST. By crisis make heroes and villains - perhaps this new challenge will lead to radical and more stable approaches to province finances (unlike all the other crises that impacted the oil price the past few decades).

Can't even cry for equalization as long as the formula stays the way it is Alberta would still be punished for its lack of taxes. As far as I know...

 

[Surrealplaces]

Varcoe: WestJet deal with global aviation giant to spur new engine repair facility — puts Calgary hub 'on the map'

WestJet and Lufthansa Technik announce a commercial agreement that will see a new aircraft engine maintenance facility built in Calgary.

calgaryherald.com

Reposting this from the transportation thread. 160 perm jobs, plus another 20-30 managerial jobs. Not huge numbers, but this is good toward Calgary's diversification. Also will benefit quite a few indirect jobs as well.

 

[DougB]

Can't even cry for equalization as long as the formula stays the way it is Alberta would still be punished for its lack of taxes. As far as I know...

Why shouldn't Quebec be punished for
-lack of charging market rates for daycare and electricity
-lack of charging average rates for tuition
-bans on revenue generating natural resource exploitation
-compromising its fiscal capacity with language laws

 

[Mountain Man]

Quebec has too much voting power, so they get to be special.

 

[darwink]

Equalization was set up to protect provincial rights, over demands of Alberta and Saskatchewan to create an either federal led, or federal entire, social welfare state.

 

[DougB]

From what I recall, the province has explicitly increased it's dependence on oil and gas royalties, not decreased it, in recent years (against the direction of all economists that aren't party members for decades)

So we have really left everything even more exposed to oil price disruptions. We should all remember this is a bad idea in a "normal" time where prices swing wildly every few years for any number of reasons. It's obviously even more serious in our new dimension of renewed American imperialist agenda, tariffs and trade wars.

I am left to the conclusion that the provincial government would rather have the province collapse into a insolvent mess than implement more stable taxation policies like a modest PST. But crisis make heroes and villains - perhaps this new challenge will lead to radical and more stable approaches to province finances (unlike all the other crises that impacted the oil price the past few decades).

PST=political suicide tax in Alberta

The primary reason dependence on non-renewable resource revenues has increased is that many oilsands facilities achieved payout which increased the royalty rate.

 

[DougB]

Equalization was set up to protect provincial rights, over demands of Alberta and Saskatchewan to create an either federal led, or federal entire, social welfare state.

That is the flaw right there. A country is nothing more than a geographic area in which movement of people, goods, services and capital approaches non-restriction. Equalization should be the minimal amount required to maintain that mobility.

Why should social welfare have significant federal involvement as it is by physicality, a local issue?

 

[darwink]

That is the flaw right there. A country is nothing more than a geographic area in which movement of people, goods, services and capital approaches non-restriction. Equalization should be the minimal amount required to maintain that mobility.

Why should social welfare have significant federal involvement as it is by physicality, a local issue?

The goal at the time was to prevent depopulation of significant areas by ensuring services were able to be delivered at a baseline level, and to recognize that national corporations that made a lot of money that were located in Vancouver, Montreal and Toronto, were really hard to tax in Saskatchewan and New Brunswick, even though they conducted activities in Saskatchewan and New Brunswick, and existed at least in part due to natural resources from Saskatchewan and New Brunswick, while Saskatchewan and New Brunswick didn't benefit nearly as much under trade deals which benefited Vancouver, Montreal and Toronto.

Equalization replaced a program where every province got a per capita payment that was the same for every province, where in exchange, the federal government put in the same taxes in every province.

The question you raise is a question that weighed heavily on the mind of Louis St Laurent, the PM at the time. He resisted federal leadership in delivering social programs.

 

[CalgaryTiger]

As far as I know equalization is about Provincial income capacity. That's what gets equalized, what happens with that money is up the Province, right?

 

[darwink]

As far as I know equalization is about Provincial income capacity. That's what gets equalized, what happens with that money is up the Province, right?

Yeah, it is an untied, not event a grant, a cheque for no explicit purpose, which was another Louis St. Laurent choice.

The main events that started the process from provinces fund and deliver services, to the per capita arrangement (called tax rental), to equalization, was the depression and then the war. Many provinces were stretched to the limit providing relief during the depression, and had no capacity to go over and above that level to provide stimulus to try to get out of depression conditions. At the same time, Quebec viewed the centrality of providing social services via the church (and for other religions, their structures) as central to protecting Quebec's identity and culture. 'Quebec' had no problem raising tithes to feed and house Catholics. After the war, Quebec opted to not renew tax rental, which started the conversations of how to properly support the welfare state without opening the constitution (which had been talked about before the war, switching to an arrangement much like Australia used, something called needs and capacity based assessment, which I haven't learned much about other than the name).

 

[DougB]

As far as I know equalization is about Provincial income capacity. That's what gets equalized, what happens with that money is up the Province, right?

Income capacity is difficult to measure. The Feds' current measure is ridiculously gamed to favor Quebec, the most egregious example being including non-renewable resource revenue, in effect asset sales, but not including electricity exports.

 

[DougB]

The goal at the time was to prevent depopulation of significant areas by ensuring services were able to be delivered at a baseline level, and to recognize that national corporations that made a lot of money that were located in Vancouver, Montreal and Toronto, were really hard to tax in Saskatchewan and New Brunswick, even though they conducted activities in Saskatchewan and New Brunswick, and existed at least in part due to natural resources from Saskatchewan and New Brunswick, while Saskatchewan and New Brunswick didn't benefit nearly as much under trade deals which benefited Vancouver, Montreal and Toronto.

Equalization replaced a program where every province got a per capita payment that was the same for every province, where in exchange, the federal government put in the same taxes in every province.

The question you raise is a question that weighed heavily on the mind of Louis St Laurent, the PM at the time. He resisted federal leadership in delivering social programs.

Isn't the first paragraph rather ironic in that tax revenue from SK is now being showered on Montreal?

 

[darwink]

Isn't the first paragraph rather ironic in that tax revenue from SK is now being showered on Montreal?

SK is a net recipient of federal funds. From Trevor Tombe:

Alberta looks worse here because CPP counts with this data, and Alberta is in the savings phase of CPP right now. This also tilts things with OAS and GIS, even without thinking about relatively higher incomes. More GST is collected because Albertans buy more stuff because they're richer. Moe corporate taxes are paid. Alberta also produces less things the federal government buys because oil and gas crowds out other economic activity versus in Quebec, where aerospace contributes.