Why won’t we diversify?
Alberta’s Tories never got the memo. Or if they did, they’ve long since forgotten.
That would be the memo every financial planner worth his or her salt sends out to clients: Diversify, diversify, diversify!
Forty-plus years later and it would appear that Alberta is less diversified than ever — our dependence on oil is stronger than ever.
And to emphasize the point, what do we suppose is the first part of an online tool Premier Alison Redford’s government has created to allow individual Albertans to try their hand at the budget process? Well, it’s deciding what the price for a barrel of oil might be over the next year, of course.
And that speaks loudly to diversification, or lack thereof, of Alberta’s economy.
I’ve been around just long enough to remember the calls to arms (economic) in the Peter Lougheed days, and even as recently as the Ed Stelmach premiership, where there was noise about Alberta’s need to diversify its economy.
Instead, what we continue to see is boom and bust and boom and bust, and Albertans continually being at the mercy of the price of oil.
And this year, as we know, dark days will soon be here as something called the “bitumen bubble” crawls out from under the bed, set to burst and spread horror via the provincial budget. If you live in this wonderful, beautiful province, you should be concerned about the budget, which comes down on March 7. If you aren’t directly affected, you will be indirectly.
The government is facing a $6-billion deficit — that is, a shortfall in spending versus revenue coming in.
The premier and deputy premier have both signalled things are far from rosy as a lower price of oil means the province is receiving about $75 million a day less in revenue. That price of oil is lower than what was forecast.
The non-renewable resource has saved our bacon, or fried it, time and again. This time looks like we’re going to fry.
And yet if the Progressive Conservatives would have done things differently, the impact of volatility in oil prices could be smoother — if our economy was more diversified.
The talk continues to this very day not about diversification but about building pipelines to get the raw product to market somewhere else. That somewhere else benefits from jobs created not in Alberta, but where the oil ends up. It’s such a blow for our social and economic infrastructure, for example, to make two steps forward, and then one back when the price of oil doesn’t meet expectations for a sustained period.
It’s been 66 years since Leduc No. 1 blew (Feb. 13, 1947), changing Alberta’s economy from mainly agriculture to oil and gas based. It’s been largely a marvelous ride since, but we still have this terrible vulnerability to the ups and downs of oil prices.
In 1974, three years after Lougheed formed Alberta’s first Conservative government, he indicated he wanted our dependence on oil reduced over the next 10 years.
Speaking to CBC in 2012, Lougheed said: “We should be refining the bitumen in Alberta and we should make it public policy in the province. That would be a better thing to do than merely send the raw bitumen down the pipeline and they refine it in Texas, and that means thousands of new jobs in Texas.”
The non-profit think-tank the Pembina Institute developed an Economic Diversification Index (EDI) that compares Alberta’s economic diversity with that of the Canadian economy as a whole.
“The EDI indicates that the diversity of Alberta’s economy was less diverse than Canada’s from the mid-1970s to the mid 1980s. From the mid-1980s to late 1990s, it was more diverse than that of Canada. In 2000 and 2001, the diversity of Alberta’s economy declined and was less than the diversity of Canada as a whole. Less diversity implies greater economic vulnerability and reduced resiliency,” the institute said.
Today, the government might argue that the standard of living in Alberta is testament to its diversification, but that’s a bit of a lie. We just have to look at the budget major concerns being expressed because of the price of oil.
Our good standard of living could be gone quickly if that price were to continue to be low for a prolonged period.
Meanwhile, as the provincial government prepares to present a tough budget, Albertans might want to try out the online budget process. Go to www.budgetchoice.ca to give it a whirl.
Mary-Ann Barr is the Advocate’s assistant city editor. She can be reached at email@example.com or by phone at 403-314-4332.