The discussion was never about what happens if the oil runs up. I would readily acknowledge that equalization would be hurt if so.
To the person that asked for me to explain equalization. The government picks an average per capita revenue raising of the federation. Ontario is usually the baseline. The formula for calculating this average is based on determining what a province could raise if it used average tax rates and it counts things like income tax, corporate tax, sales tax etc. Resource royalties are NOT part of this formula.
Once they determine what the average is they top up each province on a per capita basis to get to the average. Usually this brings provinces up to Ontario as a baseline.
The whole purpose of equalization is to ensure that there are no broad disparities in basic services across the federation. So that the health care or education systems in Newfoundland are relatively similar to the systems in Ontario or Alberta.
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