Alberta, Canada in Crisis

Whispering in the Wind (WITW61) January 21, 2015

The political scheming that’s going on in Ottawa and Edmonton has gotten the Canadian public confused and shaking their heads with disbelief and worry.  Canadians are now asking; how did Canada get into this mess, who is responsible and will the upcoming election(s) clean things up?  Following is my take on one major reality facing Canada (Alberta) and how this reality is going to play out in the next four or five years. 

The Collapse of Oil Prices

Since the 1960s, the Organization of the Petroleum Exporting Countries (OPEC) cartel has dominated the global oil supply market.  Because of the entrenched pricing mechanism, the OPEC members “effectively” control international oil prices by adjusting their oil output levels.  Things have changed in the last twenty years and OPEC’s share of the global market has declined to about a 35-40 percent share – due in large part to increased supplies of more expensive-to-produce oil in countries like United States and Canada.  The slowing of some country economies like China has magnified the over-supply situation.  The bottom line, the OPEC nations feel threatened and they reacted.  Last November the twelve member states of OPEC met in Vienna and stood firm on maintaining their production levels at about 30 million barrels a day to keep their 40 percent share of the global market and to shelve the more expensive technologies in the United States and Canada.  This OPEC decision last November (when the price was at about US$70 per barrel) has driven prices to under US$50 per barrel – a catastrophic blow to Alberta’s more expensive oil sands developments. 

Alberta Needs to Regroup With Canada

I am convinced that Jim Prentice is the right person to guide Alberta through these very troubling times, but Premier Prentice has to come to grips with the diversity of Canada and the reality of its various power structures, structures and ideologies that at times have been known to divide the country.  What Premier Prentice has to do is get Steven Harper on side and get the prime minister supporting the development of a Nation Building Strategy that includes a National Energy Strategy and that means building strategic pipelines and further the further development of Alberta’s oil sands.  My advice to both Premier Prentice and Prime Minister Harper, be bold and have a vision – and in the end, use debt financing as a tool to build a stronger, more sustainable province and nation.