O Lord, please let there be another boom, and I promise not to pi$s this one away.

[Clarkey]

The Bumper Sticker that Haunts Us

By Frank Atkins

In early April, 2009, two of my colleagues (Herb Emery and Ron Kneebone) wrote an interesting article that was published by the School of Public Policy at the University of Calgary. The title of this paper is “Will it be Déjà vu all Over Again?” In this paper they examine the parallels between the economic conditions of the 1970s, the 1980s and those of today, and review Alberta’s response to the earlier episodes. It is well known that in the 1970s and 1980s we experienced the usual boom and bust of energy prices. During the boom periods the government found it very difficult to restrain spending. After the crash of energy prices in the mid-1980s the Getty government went into several years of deficits. This was followed by the early Klein era where we experienced deep cuts to spending.
The School of Public Policy paper was released in anticipation of the Alberta budget which was delivered on April 7, 2009. In this budget the government projected a deficit of $4.7 billion for fiscal 2009-2010. The déjà vu of the title refers to the fact that we just experienced another boom where we failed to restrain spending, and we are now faced with another energy price drop......

http://www.businessincalgary.com/index.php?page=49

This is an interesting article that reviews the reactionary provincial budgeting mentality of the last 30 or 40 years in Alberta. Frank Atkins identifies some mistakes that appear to be repeating as a result of short-term planning.

[albertGQ]

Atkins taught me a couple Economics courses at the U. He is a smart man.

There was another paper written by his colleague Professor Wen almost a decade ago. It compared the growth of the Alaska fund with our very own Heritage fund. Our fund barely grew in real dollars while the Alaskan one grew so much that every year, their citizens were able to get annual rebates.

[macker]

Alaska aint nothing......http://wayangparty.com/?p=4773

[Azure]

Oil is back up to $60/bbl.

Good news.....if it keeps going up, maybe the deficit won't be so bad after all.

[Clarkey]

Originally Posted by Azure

Oil is back up to $60/bbl.

Good news.....if it keeps going up, maybe the deficit won't be so bad after all.

Although historically oil and gas royalties were about equal, the province now
receives more royalty revenue from natural gas than oil. In 2005/06 natural gas will
account for about 75 per cent of royalty revenues for Albertans. As a result, changes
in gas prices have a more dramatic effect on government revenue than changes in
oil prices.

http://www.capp.ca/getdoc.aspx?DocId=100066&DT=NTV

Most of the royalties come from gas, which is still in the crapper.

[Daradon]

Originally Posted by Azure

Oil is back up to $60/bbl.

Good news.....if it keeps going up, maybe the deficit won't be so bad after all.

As I mentioned before in a nother thread, there is NO way oil can stay down for too long. It may not jump right back up to boom levels right away. But it's a dwindling resource in a growing world, and as much as we talk about conserving and fixing the problem, we're really not moving very quickly in that direction.

Course, I'm not saying we don't have to be cautious and manage the money and resource properly, of course we do. I'm just really doubt all the doom and gloom that surrounds a lot of talk in the industry. Maybe the companies should be aware of the booms and busts and manage better instead of riding it, their assets, and their employees like a roller coaster.

[Daradon]

Originally Posted by Clarkey

http://www.capp.ca/getdoc.aspx?DocId=100066&DT=NTV

Most of the royalties come from gas, which is still in the crapper.

Good point

[macker]

Natural gas is comming back up off of the mat and had a 3.5% move today alone....in the next 6 months it is going higher....as for Oil it is the same supply and demand issue that existed this time last year and it likely won't go to $140 in the next year or two but I can't see it not going back to that level in the next 3-5 years. Short term it should be pulling back as should our dollar.
http://www.eia.doe.gov/emeu/ipsr/t14.xls
Could be worse things to have in our ground.....

2009 World Proven Crude Oil Reserves : BBLS
1. Saudi Arabia : 266
2. Canada 178
3. Iran 136
4. Venezualia 99
others :
US 21
China 16

[macker]

http://www.edmontonsun.com/news/edmo...3/9438356.html

Royalty revenues have sure aledgedly changed...
$14.57 a year ago and now $0.48 Based on COS.un

[SebC]

Personally... I think I pissed away the bust. Damn you TSX, go back to 7000. Please?

[CrusaderPi]

Originally Posted by macker

http://www.edmontonsun.com/news/edmo...3/9438356.html

Royalty revenues have sure aledgedly changed...
$14.57 a year ago and now $0.48 Based on COS.un

HEY! Leave COS.un out of this conversation. Personally I'd rather have those guys take care of their shareholders.

[Shazam]

Originally Posted by Daradon

As I mentioned before in a nother thread, there is NO way oil can stay down for too long. It may not jump right back up to boom levels right away. But it's a dwindling resource in a growing world, and as much as we talk about conserving and fixing the problem, we're really not moving very quickly in that direction.

Course, I'm not saying we don't have to be cautious and manage the money and resource properly, of course we do. I'm just really doubt all the doom and gloom that surrounds a lot of talk in the industry. Maybe the companies should be aware of the booms and busts and manage better instead of riding it, their assets, and their employees like a roller coaster.

I'll be bold and say that we won't see $140 oil again for another 20 years, if ever.

[Azure]

Originally Posted by SebC

Personally... I think I pissed away the bust. Damn you TSX, go back to 7000. Please?

I think a lot of people are kicking themselves right now.

[Cowboy89]

Bottom line that two booms and busts should have taught us not to base public policy on ever increasing commodity price assumptions and not to spend carelessly just because we have it now. It's very hard to wein spending down after government departments/special interests are addicted to surplus cash. The problem with that is when there are obscene surpluses all the "I have a great idea to spend the cash", type ideas come out of the woodwork

Example of this attitude of no foresight or fiscal prudence would be this Post from a royalty review debate back in '07:

We live in a debt free province pulling in surpluses left right & centre every year, there is plenty of money in the provincial coffers. What is needed is for your namesake Eddie our buddy to loosen up the purse strings and start spending that money - to attract more doctors and nurses and more teachers to Alberta, to give the cities more funding to pay contractors who will hire the labour needed for these infrastructures.

More money SPENT always solves the problem, but more money in the government treasury locked up and not being utilized does not. Why do you think Bronco is always crying for money? It's all there locked up in Ed's safe. Would you need more money if you were Bill Gates? Start worrying about how to SPEND the obscene amount of money you have first before worrying about what is the best way to duplicate the NEP legacy of the Trudeau era.

Looking back on that thread there was only really a handful of people who supported less government spending and who looked at the royalty review as speculation on higher oil and gas prices.

http://forum.calgarypuck.com/showthr...Royalty+Debate

[Shazam]

Well, "conquering the debt" should never have been a priority then.

[Envitro]

Originally Posted by Shazam

I'll be bold and say that we won't see $140 oil again for another 20 years, if ever.

Try 20 months, at most. The only way we don't hit $200 oil is if someone magically comes up with an alternate, cheap energy source that will power all power grids, vehicles, and machinery. Good luck...

[Shazam]

Originally Posted by Envitro

Try 20 months, at most. The only way we don't hit $200 oil is if someone magically comes up with an alternate, cheap energy source that will power all power grids, vehicles, and machinery. Good luck...

For every one barrel of oil used, there were 27 traded in the derivatives market.

[red sky]

I had all three of the professors mentioned in that article. I wrote a similar paper actually in Emery's class regarding the Alaska Fund vs. The Alberta Heritage Fund. Although the population is much smaller in Alaska, they seem to have the right idea with what to do with the Royalties. They can now fund fiscal spending with the interest alone.

[VladtheImpaler]

Originally Posted by red sky

I had all three of the professors mentioned in that article. I wrote a similar paper actually in Emery's class regarding the Alaska Fund vs. The Alberta Heritage Fund. Although the population is much smaller in Alaska, they seem to have the right idea with what to do with the Royalties. They can fund now fund fiscal spending with the interest alone.

I guess there are some benefits to not abdicating your government to idiots... I was at the Premier's dinner last year - another dolt in a long line of dolts. And I am right wing.

[Azure]

Originally Posted by red sky

I had all three of the professors mentioned in that article. I wrote a similar paper actually in Emery's class regarding the Alaska Fund vs. The Alberta Heritage Fund. Although the population is much smaller in Alaska, they seem to have the right idea with what to do with the Royalties. They can now fund fiscal spending with the interest alone.

I've said that Alberta should try to do something like that numerous times.