Tag Archives: oil patch

The good news for New Brunswick: Here, in this place 

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“Finances bleak, but province not bankrupt” – headline news in the Moncton Times & Transcript, Friday, January 23, 2015

Dear New Brunswick,

Here’s what you do when you’re about to go under: Put on your Sunday best, paint a smile on your face, take a walk through all your favorite haunts, count your blessings, and, above all, keep your mouth shut.

You would not believe how ennobling simple measures can be when you are about to lose everything.

After all, what is “everything”?

Is it a house, a car, a snowmobile?

Is it a wife, a husband, a son, a daughter?

Oh well, easy come, easy go.

We can’t have it all.

Gone – that’s the poetry of our times.

Gone.

In fact, when you think about it (and you’ll have plenty of time for that), “Gone” is a pretty fantastic place to live.

No more obligations, expectations or dreams. No more plans, plots or potting beds. No more of. . .well, anything, really.

Just silence, sleep, and the slow inexorable crawl to the circus tent, where all are destined to find their final resting places – just some sooner than others.

Still, dear New Brunswick, don’t forget to slap on that lipstick, don that boater, adjust the suspenders on the oak barrel you’re wearing. The world is watching you. You want to be presentable when you finally succumb.

Don’t you?

Fear not at all, noble province. Those who were smart enough to leave in time to make their bones in far-off places – where big, rock candy mountains still transform black gold into fountains of toonies – will return to bless your own inert skeleton.

Speaking of them, what of Jules and Jim 15 years from now.

In January 2031, Jules is running a hand through his thinning, grey hair, glancing occasionally at the clock on the wall of the departure lounge. “Looks like we’re running out of time,” he mumbles. “What else is new?”

The storms of late December had minced the schedules of the one airline that still bothers to call on New Brunswick. Normally, any delay en route to the oil and gas fields of northern Alberta mean long lineups for itinerant Maritimers arriving late to Fort Mac’s weekly job lottery.

But, today, Jules doesn’t mind so much. His traveling companion is late. Might as well sit tight, he tells himself. A pipe-fitter by trade, 25 years of going down the road and back has taught him how to wait. He’s good at it; waiting and thinking.

He’s old enough to remember a different New Brunswick, when his native home was not just a regional staging ground in the brisk business of exporting human capital. That was before the Wall Street money lenders had called the loans, effectively throwing the province into receivership.

Really, he thinks, what other choice did they have?

In 2024, the provincial government had failed to make the minimum payment on its long-term debt of $42 billion. Sporting an operating budget deficit, in that fiscal year, of $7 billion, it had needed a miracle to cover its financial obligations. And there hadn’t been one of those in this benighted corner of Canada for some time.

Still, Jules recollects the word “miracle” being used when he was a boy and Greater Moncton, for one, was an authentic economic nexus of the Maritimes.

He checks the clock on the wall again.

“Where is that whelp?” he mutters to no one in particular. “The boy is 45 minutes late, and the plane is here, finally.”

As his 16-year-old nephew Jim’s bonded master, Jules is almost looking forward to showing his young apprentice the ropes in Alberta.

Jim, apparently, has made other arrangements.

Dear New Brunswick, here’s what you do when you’re about to go under: Put on your Sunday best, paint a smile on your face, take a walk through all your favorite haunts, count your blessings, and, above all, shout from whichever rooftop you still own.

Shout loudly and shout boldly.

“I am still here.”

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Balancing the federal budget or bust

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As the we wake up to the nauseating certainty that the Conservative government of Canada finds itself with its shorts down around its ankles, we might properly wonder what all that official, post-Great Recession palaver about economic stewardship and sound fiscal planning actually produced.

Plummeting oil prices – always considered a possible, if not likely, eventuality a year ago by those who actually pay attention to markets – have sent once-mighty prognosticators in high office scurrying like so many scared bunnies into a brier patch (as the oil patch, don’t you know, has become suddenly inhospitable for political animals of every stripe and species).

In fact, Finance Minister Joe Oliver is so shakent, he’s taking the unusual, if not altogether unprecedented, step of delaying the federal budget until “at least” April – all the better, presumably, to gauge the impact on federal coffers of lower dividends oil producers pay to the people of Canada in return for the economic license we have apparently granted to them.

Given that most experts now predict that volatility in the oil and gas sector will remain the new normal for some time (perhaps, as many as three years), it’s hard to cotton what Mr. Oliver’s finance department mavens are divining as they buy themselves a month to chew what’s left of their nails to the nubs.

Really? Why not make it two or even six, for all the good it will do.

The energy roller coaster now makes balancing the federal budget in any meaningful or sustainable way virtually impossible – so dependent on revenues from fossil-fuel production are government coffers; as are, in fact, increasingly broad swathes of the rest of the economy.

In 2013, according to Natural Resources Canada (NRC), the oil and gas sector generated $133 billion in gross domestic product (about 7.5 per cent of the national total) in his country. It employed 190,000 people, or about 1.1 per cent of the working, adult population, even as it accounted for $83 billion, or 21 per cent, of total capital expenditures in Canada.

Again, says an NRC bulletin, “Federal and provincial/territorial (P/T) governments in Canada receive direct revenues from energy industries related to corporate income taxes, indirect taxes (such as sales and payroll taxes), crown royalties (which are the share of the value of oil and gas extracted that is paid to the Crown as the resource

owner) crown land sales, (which are paid to the Crown in order to acquire the resource rights for specific properties.”

Moreover, “the largest share of government revenues is collected from the oil and gas industry, which averaged $23.3 billion over the last five years, including $20.7 billion from upstream oil and gas extraction and its support activities. Between 2008 and 2012, the energy industries’ share of total taxes paid (11.9 per cent) was in line with their share of total operating revenues (13.6 per cent).

So, when the price of oil takes a hit, so do we all in this country – at least, fiscally. That’s almost as immutable a law of nature as gravity or, more appropriately, the handwringing and teeth-gnashing of high-profile politicians determined to keep their promises – fool-hardy though they may be – come what may.

“The Conservative government is warning for the first time that falling oil prices could trigger new spending cuts in order to deliver on a promised balanced budget,” Bill Curry writes in the Globe and Mail this week. “On the heels of the surprise decision to delay the federal budget until at least April, the government is putting Canadians on notice that it is prepared to cut spending further rather than abandon its goal of balancing the books.”

It’s a challenge that Jason Kenney, federal employment minister, insisted in broadcast interviews last weekend could be met with “additional fiscal restraint.”  After all, he said, balancing the budget is a commitment we made to Canadians in the last election.”

It does, however, seem broadly nonsensical – and even amateurish, from a money manager’s perspective – to manufacture more austerity just to be able to show a book entry in black ink, fleeting though it may be.

Canadians want their government’s books in fine balance, yes – but not at the expense of programs that do more good for the economy than does a technical surplus the durability of which ultimately hinges on volatile forces beyond any one pledge-making politician’s ability to control.

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