Calgary & Alberta Economy

[JonnyCanuck]

Q2 results from Alberta energy companies are starting to be reported. Steep losses as expected. Most concerning thought is the lack of confidence from these companies in any kind of sustainable recovery. It is pretty clear that the stock market performance from April until now was based on the assumption that economic recovery would be relatively quick and a vaccine is near .... neither is true.

 

[Yunus Emre]

Alberta has made $240.000 billion contribution to equalization between 2007 and 2018
I always wonder that What could be done if this money remained in Alberta ?
What would have changed if this money remained in Alberta?

 

[darwink]

Alberta has made $240.000 billion contribution to equalization between 2007 and 2018
I always wonder that What could be done if this money remained in Alberta ?
What would have changed if this money remained in Alberta?

There are different things going on. Net transfer is not equalization. Much of the net transfer is simple things: federal transfers to provinces and cities are on a per-capita basis. Albertans has the highest personal income, and for a large part of that period had very profitable companies, so more of our workers pay higher taxes, and our companies paid more federal corporate taxes. Then you have net transfers: Albertans are younger so we are paying into CPP rather than collecting. For a long period our unemployment was really low, so we collected less EI than we paid in.

So yes. Alberta could have its own pension and own EI - but it is likely the latter would be in a huge deficit by now due to the long term recession.

As for equalization - it is a price we pay for a federation. We are the most decentralized democracy on the planet. Other countries avoid such programs by just having the federal government pay directly for expensive things. Plus they do economic development by placing military bases and steering government contractors to depressed locations.

The rest, you can only get out of if Alberta is independent. And independence has costs. Building a new government to do all the things the federal government does for us today.

Albertans need to learn that having the lowest taxes by far eventually means we will have the worst services by far.

 

[JonnyCanuck]

I was away last week for a few days in Jasper & Banff. Summer business for hotels and restaurants was dismal until the middle of July. Not only have they missed out on foreign tourists this year but Western Canadians stayed away until the weather got better. Even with the recent bump in travelers, business is still at a fraction of where it would normally be for peak season. Small business in the Rockies is really worried about the fall. Most of them need a steady summer to bridge them to ski season.
I also went out for dinner on Stephen Ave this past weekend. Business has been worse for them. Even with a week of really good weather and expanded patios, restaurants are hurting.
I am really concerned about the future of small business ... hospitality and retail especially. If we have mass closures as are expected, particularly when some of these 'lifeline programs' run out, then there will be a significant percentage of the work force that will be permanently unemployed with little prospect of finding work.

 

[Silence&Motion]

Three things that keep me up at night (in addition to the well being of my children and close family members):
1. That COVID infections are going to produce widespread, life-long chronic illness such as heart and lung disease that will significantly reduce people's quality of life and life expectancy, and put long term pressures on our health system. The possibility that children with relatively mild COVID symptoms might nonetheless develop chronic heart disease absolutely chills me to my bones.
2. That an entire generation of young people have had their careers derailed in a way that will impact them financially and psychologically for the rest of their lives, and what that might mean in terms of societal unrest.
3. That #1 and #2 are going to fall much, much harder on already disadvantaged groups (the poor, minorities, people without university educations, etc.)

 

[JonnyCanuck]

I hear you. The unknown health and societal implications are scary. It is hard to believe that anyone being diagnosed with the virus but not experiencing symptoms, particularly severe respiratory issues, could still be scarred for life. I have never heard of another disease that has done that.
We are all hoping that the medical community just doesn't know enough about the virus and are motivating people to err on the side of caution .... meaning ... you don't want to get this virus because we really don't know what it can do to you if you don't die from it.

 

[darwink]

It doesn't look good at least on a preliminary basis. Could be that many mild cases end up showing life long heart complications, much like rheumatic fever. Add in reports of mild brain damage, lung scarring, kidney issues, it is scary.

Hard to tease out the COVID causes from the in an ICU and on a respirator and dialysis causes of course.

The scary thing is they are finding people who experience no discomfort with incredibly depressed blood oxygen levels. Which could mean they are experiencing the virus in slow motion, and adapting. Sure they avoid the short term awfulness but they could have long term all sorts of stuff!

It is so bad that Russia is pushing mass vaccination far faster than almost anyone else deems even half safe to do.

As for the economy. Massive displacement in the service industry and travel. I think the government will have to begin to make calls: for given businesses is it better to support with tax revenue and right size the companies for eventual recovery; or is it better to have businesses fail and then develop a mechanism to support capital investment in industries that have depleted their investment capital.

For displaced workers: retraining like we have seldom seen will be needed. On a larger scale than world war 2's industrial and military mobilization. If we start this fall, by spring we could have a workforce to massively expand capacity in any industry. Just which to target? What would be useful?

A once in a generation mass retrofit of solar on homes anyone? Insulation on tower blocks? Twinning/triple tracking mainline rail? Small cohort childcare? Massive increase in long term care staffing? Building TODs in major cities/housing supply everywhere by massive use of higher government powers to impose development on recalcitrant cities?

 

[Sky of Blue]

I was away last week for a few days in Jasper & Banff. Summer business for hotels and restaurants was dismal until the middle of July. Not only have they missed out on foreign tourists this year but Western Canadians stayed away until the weather got better. Even with the recent bump in travelers, business is still at a fraction of where it would normally be for peak season. Small business in the Rockies is really worried about the fall. Most of them need a steady summer to bridge them to ski season.
I also went out for dinner on Stephen Ave this past weekend. Business has been worse for them. Even with a week of really good weather and expanded patios, restaurants are hurting.
I am really concerned about the future of small business ... hospitality and retail especially. If we have mass closures as are expected, particularly when some of these 'lifeline programs' run out, then there will be a significant percentage of the work force that will be permanently unemployed with little prospect of finding work.

Huh. I have not eaten out since all this started. I wouldn’t go inside to eat, regardless. But I’ve avoided outdoor patios because I’m one person and didn’t think I’d be welcome hogging a limited table.

 

[Silence&Motion]

I hear you. The unknown health and societal implications are scary. It is hard to believe that anyone being diagnosed with the virus but not experiencing symptoms, particularly severe respiratory issues, could still be scarred for life. I have never heard of another disease that has done that.
We are all hoping that the medical community just doesn't know enough about the virus and are motivating people to err on the side of caution .... meaning ... you don't want to get this virus because we really don't know what it can do to you if you don't die from it.

Studies like this one are freaking me out: "In this study of a cohort of German patients recently recovered from COVID-19 infection, CMR revealed cardiac involvement in 78 patients (78%) and ongoing myocardial inflammation in 60 patients (60%), independent of preexisting conditions, severity and overall course of the acute illness, and time from the original diagnosis." Basically a study of 100 adults in Germany who "recovered" from COVID, 67% of whom were never hospitalized, but 78% had heart abnormalities 2-3 months after their original diagnosis. Early findings, but very concerning. I should also note that I'm not a doctor, but a friend who is a doctor sent me this article.

Talk of scarring on the lungs and the heart makes me think of my grandfather who suffered pneumonia as a child before the availability of antibiotics. It left his lungs scared for life. He had to retire as a middle-aged person and died of congestive heart failure at 63.

There's a lot of uncertainty, and it's easy to become fixated on the worst case scenarios. Nonetheless, the worst case scenarios are extremely horrifying. I think most people are fixated on the death rate and the average age of death without realizing some of these other potential consequences of the virus. We really, really need to minimize infection rates until we have a better understanding of the long term consequences of the virus.

 

[Surrealplaces]

I have the same concern also. Sure people recover, but it's the long term effects that concern me.

I was up in Banff yesterday, and happy to see almost everyone wearing masks, still it was surprising to see a few people walking around without masks. Every one of those people, a young person. Banff had people giving out masks for free and asking anyone without a mask to wear one. Most people did, but there was one group of young guys indignant about it and refused to wear them.

Overall though, I'd say we've handled the crisis pretty well. We could be doing better, but the fact that we started enforcing masks before cases got too out of hand is good.

Studies like this one are freaking me out: "In this study of a cohort of German patients recently recovered from COVID-19 infection, CMR revealed cardiac involvement in 78 patients (78%) and ongoing myocardial inflammation in 60 patients (60%), independent of preexisting conditions, severity and overall course of the acute illness, and time from the original diagnosis." Basically a study of 100 adults in Germany who "recovered" from COVID, 67% of whom were never hospitalized, but 78% had heart abnormalities 2-3 months after their original diagnosis. Early findings, but very concerning. I should also note that I'm not a doctor, but a friend who is a doctor sent me this article.

Talk of scarring on the lungs and the heart makes me think of my grandfather who suffered pneumonia as a child before the availability of antibiotics. It left his lungs scared for life. He had to retire as a middle-aged person and died of congestive heart failure at 63.

There's a lot of uncertainty, and it's easy to become fixated on the worst case scenarios. Nonetheless, the worst case scenarios are extremely horrifying. I think most people are fixated on the death rate and the average age of death without realizing some of these other potential consequences of the virus. We really, really need to minimize infection rates until we have a better understanding of the long term consequences of the virus.

 

[Chowda7]

Great to see we are starting to build up a bit of a cluster in our tech sector. Sounds like Attabotics will be needing more office space soon

Varcoe: Tech sector gets more traction in Calgary as big investors target Attabotics

A couple of weeks before Christmas 2018, fledgling technology firm Attabotics was operating in a busy building in northeast Calgary and making big plans to ramp up …

calgaryherald.com

 

[JonnyCanuck]

I know there are some green energy advocates that participate in this blog. I respect your opinions as I hope you do mine.

The Liberal government's pledge to return to parliament in October with a recovery plan to 'Build Back Better' has me even more worried about the future of the Alberta economy. For those not familiar with this strategy, here are the main principles which are also endorsed by the Democratic party in the U.S.

This pledge and resulting recovery plan may very well be the death knell of our oil & gas industry. The plan will most certainly not have any investment in the industry. There may be something to keep it on life support but that is about it. Instead there will be lots of programs and funding for:

Green energy & infrastructure that will lead to job creation. ✔
Lower carbon emissions✔
Strengthening environmental standards✔

but what about?

...investment & programs that will generate revenue for the economy that will replace the impending decline in our country's largest export product ... oil & gas. We can certainly consume more green energy in Canada and by doing so, it will maintain some jobs ... but can we export it to generate revenue? I have not heard how that can be done. Anyone?
As I have stated a couple of times in this thread .... we still have to pay for things in this country. Having jobs requires revenue from somewhere to pay for those jobs. We have racked up this massive federal and provincial debt till now, and it will only increase by X billions of dollars with the Build Back Better plan. How are we going to pay for all this without a growing oil & gas industry? I am all ears.

 

[darwink]

Without prices going up and factors showing that they will stay up, I seriously doubt there will be a growing oil and gas industry anywhere in the world! Investors are so down on drilling that we will probably have a huge natural gas price spike this winter as storage is drawn down. And then the questions for investors will be: do they go back just to be punched in the face again?

We still have to pay for things, balance of payments wise, but it is important to remember that a move to replace fossil fuel imports with domestic production of green energy would probably improve balance of payments more than trying to replace imports with domestically produced fossil fuels.

As for your life support comment. I think it is true. But I also think there isn't anything that can create a renaissance. Even a new 1MM B export pipeline to the Portland Canal can't change that the industry is in the throws of transition, and that as the most capital intensive way to produce oil, the bets on most oil sands projects are looking pretty long time wise even for oil bulls.

Alberta now has to think about doing the best we can given the context. Which includes in my mind:

• Adopting the principle of price 'conservation' along with resource conservation for project approvals; which would mean aligning approved projects with takeaway capacity, ensuring we don't overshoot current capacity + TMX (and if we're lucky a future TMX debottleneck to add another 300-400M B a day)
• Attempt to attract more manufacturing like petrochemicals, and work to green feedstock and production processes so one day we don't wake up and someone has produced a bacteria that can turn CO2 and sunlight into plastics and our industry is uncompetitive overnight (this actually isn't going so badly right now)
• Do everything possible to get XL built and Line 3 replaced (unfortunately the americans are so bad at regulation that both projects will continue to circle the drain), but start aligning policy in a way where we aren't sideswipped if they are never done, or even if takeaway capacity starts to go down
• Hope that the Line 5 link isn't gone forever
• Stop pushing projects that aren't economic today, and certainly won't be economic in 30 years, and accept that means that some projects will be gone because they are solely a distraction.

 

[Chinook Arch]

Any updates on TMX? I keep hearing that work is just about to begin, but I've heard that a few times. I wonder if it will ever get going?

 

[darwink]

Any updates on TMX? I keep hearing that work is just about to begin, but I've heard that a few times. I wonder if it will ever get going?

Under construction. Working on the docks, the tank farm, the tunnel portals in Burnaby.

Project Update: Burnaby Terminal and Westridge Marine Terminal…

www.transmountain.com

Pipe in the ground in various places. Prep work everywhere.

Trans Mountain Expansion Starts Work in Kamloops

www.transmountain.com

News

www.transmountain.com