Potential Alberta Revenue Solution

[Alpaca]

I have been a member of CP for a fairly long time, seldom post but enjoy reading the threads.
I have an idea for a possible Alberta Revenue solution and with the number of folks on here familiar with the oil industry thought I would run it by you.
Some what complicated and difficult to explain. But here is my best shot.
As the price per barrel of oil drops the revenue from Royalties drops as eventually does the price of gasoline at the pumps. So does diesel but the drop in diesel at the pumps is more complicated.
So the thought is as the price per barrel of oil drops there is an increase in the government take per liter of gasoline. This would be applied as the gasoline price drops. For example the price of a barrel of oil drops so as the price for gasoline drops the government take is 1/2 a cent for every 1 cent drop in the price of gasoline that would have occurred without the surcharge.
For example lets say a $10 drop oil prices results in a revenue loss of $1B per year, and a $10 price drop results in a drop of $0.10 in the price of regular gasoline. In this scenario the government would take $0.05 of the $0.10 drop and we the consumer would only see a $0.05 drop in the price at the pump.
For what I have been able to find on the internet Albertan's consume 6,000,000,000 liters of gasoline and 4,000,000,000 liters of diesel per year, and this is non farm consumption. The 5 cents per liter to the government is $300M plus what the diesel might be. In todays world the price of oil dropped say $40 with a Royalty revenue drop of $4B.
The pump price has dropped about 40 cents so if 20 cents went to the government and 20 cents to the consumer. Revenue goes up $1.2B for gasoline plus x from diesel. Consumer still benefits although not as much.
As the price of oil recovers, gas prices increase, the surcharge comes off.

Am I out to lunch?

[polak]

So the consumers have to pick up the tab for a failing commodity?

How about we focus on diversifying our economy. Instead, for every dollar that Oil goes over $90 bucks a barrel, O&G producers need to pay an extra royalty which gets distributed to non-oil and gas companies.

This would attract all industries when times are good. Not just the ones that can benefit from Oil and it's not like O&G companies are going to close shop when there is +90 dollar oil to be had.

[shermanator]

An interesting idea, but what we need to do is get a consistently stable revenue source that does not rely on oil and gas royalties.

This means a combination of increased taxes (corporate / sales / income) and reduced government bloat.

[SebC]

We're kind of duplicating the PST thread here, but no reasonable tax source is really stable. Income tax, PST, gas tax, etc. are all subject to ebbs and flows. The real key is to save money when things are going well to cover deficits when they're not.

[Northendzone]

So drivers pay more?

[Knalus]

Originally Posted by Northendzone

So drivers pay more?

And they pay more at a time when they are less likely to be able to afford it.

[DoubleK]

Isn't this a bass-akward way of regulating the pump price?

New Brunswick might have a case study or two to examine.

[Harry Lime]

Flipped through a couple of pages to find a concise economic primer of the oilsands and royalty issue. This isn't bad.

http://andrewleach.ca/oilsands/your-...oyalty-primer/

Now take into account that continuous upgrades allow companies to never really reach payout. If we force them to place the point of reaching payout on the initial project and each upgrade independent of one another, we make this possible.

http://www.huffingtonpost.ca/2014/01...n_4576887.html

We then buy the debt of all other provinces and use it as income to pay equalization, until such a time when every provincial debt is paid off, and Alberta's Heritage fund becomes a self-sustaining source of income.

Every Canadian moving to Alberta spontaneously would become a real issue. Having a trillion dollars in the bank would be our biggest political problem. Woe is us.

There are a lot of permutations of this plan to work over, many 'think tanks' can poke holes in it for political gain, but the general idea works, if there is enough will.

[calgarywinning]

Sounds like Russia in having the "government" diversify the government. The real problem here is that in times of "good" the government is unable to run medical system. They cannot update it or provide more system, financing and state of the art technology to help the very people they live off of.

Bottom line, any taxation increases coming should directly be for fixing the system.

[Tinordi]

What about a bleemingly obvious carbon tax?

[Thor]

Its sad to see how Norway has built up a massive rainy day fund with their oil, and Alberta has so little to show for it. I remember the heritage fund when Klein first started it and how promising it was, now today its just a depressing reminder of how much money we've pissed away.

[GGG]

Originally Posted by Thor

Its sad to see how Norway has built up a massive rainy day fund with their oil, and Alberta has so little to show for it. I remember the heritage fund when Klein first started it and how promising it was, now today its just a depressing reminder of how much money we've pissed away.

The best long term solution is to not rely on oil revenue to fund current programs and like Norway or Alaska bank the revenue and live off of interest. It takes 20 odd years to really pay off but after that you afe set for ever.

[nfotiu]

Originally Posted by Thor

Its sad to see how Norway has built up a massive rainy day fund with their oil, and Alberta has so little to show for it. I remember the heritage fund when Klein first started it and how promising it was, now today its just a depressing reminder of how much money we've pissed away.

The legend of Ralph Klein keeps growing. Are we going to credit Klein with inventing the internet and going to the moon too?

[Thor]

Nope I have no such illusions about Klein, but his government did start the Heritage fund and at first it was being used as something positive, but as so often happens all that money was too tempting for them to just leave it alone.

Norway has fiscal responsible approach to its oil production, they are very strict on that fund even though there has often been a lot of pressure to take money out.

Alberta has really dropped the ball on missing out on so much revenue from the oil sands, we gave the companies using the sands better deals than they should have and then go and waste what we did get out of it.

[nfotiu]

When former Premier Peter Lougheed set up the Heritage Fund in 1976, he saw it as a way to insulate the province from the uncertainties of its dependence on oil revenue, a depleting resource subject to large and unforeseen swings in price and demand. Thirty percent of oil and natural gas revenues were to be set aside every year. By the early 1980s the Fund had reached $12 billion, but collapsing oil prices prompted the government in 1984 to suspend payments and stop reinvesting revenue, transferring it instead to general revenues.

http://fullcomment.nationalpost.com/...g-politicians/

[Thor]

My bad

[CaptainCrunch]

Originally Posted by Tinordi

What about a bleemingly obvious carbon tax?

I don't believe that a carbon tax should ever go to general revenue. If your going to do a carbon tax that money should go towards environmental cleanup.

As well isn't a carbon tax fairly punitive as the companies that pay them just pass the costs down the line until it ends up in the laps of the consumers? Manufactured goods, transport costs, utilities costs would all increase, isn't that the best definition of a regressive taxation?

Right now Ontario is looking at a Carbon tax to general revenues because they've spent so stupidly and wastefully that they are going to use a Carbon Tax as another form of general taxation.

I think that Australia and other countries have killed their carbon tax programs after their program ran on a policy of repealing the tax and ended up with a majority government.

Yes Alberta needs to find another way to raise revenue, but they also need to look at their spending and the size and payrate of their civil service in concert.

[ken0042]

Originally Posted by SebC

We're kind of duplicating the PST thread here

Yes, we are.