Gas forecast big gamble

Iris Evans has a long-standing affinity for playing the odds.

“At first it was quite daunting to think, ‘Oh my gosh, you’re going to be in finance’ . . . . Then you realize, ‘This is just like managing your chequebook.’” — Alberta Finance Minister Iris Evans, April 2009

Iris Evans has a long-standing affinity for playing the odds.

According to an April 2009 article in Maclean’s magazine, Alberta’s finance minister once put in 20 to 30 hours weekly entering sweepstakes, sometimes 35 at a time, while working as a registered nurse, teaching piano and raising three sons.

Evans’s gambles paid off handsomely. Her winnings included a year’s supply of Wonderbras, a lifetime supply of diapers, a Volkswagen Super Beetle and trips to Hawaii, Europe and the Caribbean, among other prizes.

“Entering contests, for at least two years, was a very profitable venture for me,” Evans recalled in the article.

Premier Ed Stelmach must be counting on Evans’s lucky stars to pull Alberta back into the black, given the government’s recent track record on deficit projections.

Late last month, Evans announced Alberta’s deficit would soar to $7 billion — $2 billion more than she forecast just four months previously — because natural gas prices hit a seven-year low.

As bad as a $7-billion deficit is in a province that once outlawed them, the final figure is likely to be much higher because Evans is betting that natural gas prices will be at least $4 per gigajoule for the remainder of the fiscal year.

The prediction was almost double the price of the September contract. As of mid-week, natural gas prices for the October contract were $2.73, down 25 cents — and falling.

Analysts are of two minds about the direction of natural gas prices.

Bulls suggest natural gas inventories are not as high as they seem and prices are as low as they will go. Record-low prices will spur manufacturers and power generators coming out of the recession to turn to natural gas rather than coal, further depleting inventories. If hurricane season is as disruptive as it has been in the past, then natural gas prices will be back in double-digits in no time.

Bears argue natural gas inventories are so much larger than any previous time in history that nothing short of a devastating hurricane season will alter them significantly in the short term. Natural gas prices could plummet to as little as $1 per gigajoule as supply further outstrips demand.

The bear’s long-term outlook is equally pessimistic, with at least one analyst predicting that supply and demand will be unbalanced until early 2011.

If there is any truth to the claim that Alberta’s royalties drop $1.3 billion for each $1 decline in the price of natural gas, then the odds are stacked against Evans.

But she remains bullish. When asked whether the deficit could get worse if natural gas prices continued to decline, Evans replied, “Not in this forecast.”

That’s a remarkable statement coming from a finance minister whose previous forecast was out by a mere $2 billion.

Forty years ago, it’s unlikely Evans would have drawn up a family budget based on the suggestion that her salary could double over a seven-month period, especially when presented with evidence running to the contrary.

And yet that is exactly what the provincial government has done when it comes to its deficit projections, which seem, at least in the short term, wildly optimistic.

It would seem that managing the provincial budget is more difficult than balancing a chequebook, after all.

And Albertans deserve a more honest assessment of the province’s finances if they are to tighten their collective belts.

Cameron Kennedy is an Advocate editor.

Just Posted

Sunny weather improves farmers’ prospects

A harvester kicking up dust. It’s a picture that will bring a… Continue reading

Rural transit pilot project being considered

Penhold, Innisfail and Red Deer County councils to decide whether to go ahead with project

Red Deer fire station up for sale

Home sweet home at Fire Station 4

Most surveyed Innisfail residents give urban chickens the thumbs up

Town of Innisfail will discuss whether to allow backyard chickens on Monday

‘Mom I’m in trouble:’ Canadian, Brit face 10 years in jail for alleged graffiti

GRANDE PRAIRIE, Alta. — The mother of a Canadian who was arrested… Continue reading

Coyote on the prowl near Penhold

This coyote was out on the prowl in a field just west… Continue reading

Sky’s the limit as Calgary opens testing area for drones and new technologies

CALGARY — The sky’s the limit as the city of Calgary opens… Continue reading

Hi Mickey, ‘Bye Mickey: 6 Disney parks on 2 coasts in 1 day

ORLANDO, Fla. — Heather and Clark Ensminger breathed sighs of relief when… Continue reading

Court weighs ‘Apprentice’ hopeful’s suit versus Trump

NEW YORK — President Donald Trump’s lawyers hope to persuade an appeals… Continue reading

StarKist admits fixing tuna prices, faces $100 million fine

SAN FRANCISCO — StarKist Co. agreed to plead guilty to a felony… Continue reading

Annual pace of inflation slows to 2.2 per cent in September: Statistics Canada

OTTAWA — The annual pace of inflation slowed more than expected in… Continue reading

Jury finds Calgary couple guilty in 2013 death of toddler son

CALGARY — A jury has convicted a Calgary couple in the death… Continue reading

Most Read