The past few weeks have been rife with good news for our energy-based regional economy.
Oil prices are doing great thanks to OPEC’s announcing they would cut production. The Trudeau government has given their blessing to the Kinder Morgan TransMountain expansion and Enbridge Line 3 replacement. The Canadian Association of Drilling and Oilfield Contractors announced that drilling activity is projected to be over 30 per cent more than last year. And according to the sometimes reliable Farmer’s Almanac, we’re looking forward to a cold and snowy winter, something sure to spur demand for natural gas.
We are seeing companies starting to hire back some of the workers that were laid off previously. Over the past few weeks, we’ve seen ‘help wanted’ signs and job fairs across the city. After peaking at 10 per cent in July, Red Deer’s unemployment rate is at 7.6 per cent today. While this is obviously good news that should be celebrated, our economy is far from being out of the woods.
However, one of the worst things we can do is grow complacent in the expectation that things will go back to the way they were with a ‘booming’ economy and full employment. Coming back from one of the biggest recessions in Alberta’s history will come with significant challenges.
The increase in oil prices are not just good news for Canadian companies. Our biggest trading partner, who we happen to share a border with, who also happens to be our biggest competitor is not exactly lacking in resources themselves. The United States has been extremely aggressive in its efforts to get oil out of the ground and built the equivalent of 10 Keystone XL pipelines since just 2010. Over the same time period, U.S. production increased from 5.5 Million Barrels of Oil Equivalets per Day (MMBOED) to over 9 MMBOED.
Meanwhile, in Canada, we have the leader of the Green Party saying she will have be arrested before the Kinder Morgan pipeline goes anywhere and the Mayor of Vancouver promising “protests like you’ve never seen before.” Many are saying the TransMountain pipeline expansion will never get built because of such virulent opposition to the project.
Along with the pipeline announcement Premier Notley gave her consent to the $50 per tonne federal carbon tax. Albertan businesses and consumers will have to manage with paying $0 in carbon tax today, to $50 per tonne by 2022. A cost our southern neighbours have no plans to burden upon themselves.
Last week the Provincial Government released the Second Quarter Fiscal update showing a projected $ 10.8 billion deficit. Depending on who you asked the government has either a serious spending problem, serious revenue problem, or some combination thereof. Either way, the size of the deficit will impact government’s ability to spur the economy through tax reductions or further stimulus spending. If anything, we can probably expect even more tax increases from our spend-happy government. These developments combined create some serious challenges for Alberta businesses as so eloquently stated via Twitter by the CEO of Questerre Energy, Michael Binnion: “What does the US pick? Saudi oil with no carbon tax/human rights or Canadian oil with carbon tax &Canadian values? Answer: the cheaper one.”
During a recent speech, Perrin Beatty, President and CEO of the Canadian Chamber of Commerce stated that in this rapidly changing environment “business needs to operate with a tolerance for uncertainty.”
The leaps forward in technology, changing governments and the policies they enact, and changing consumer behaviour means today’s business needs to be more nimble, more creative, and more industrious than ever before. Albertans have never been one to shy away from a challenge. We are known for our entrepreneurial spit, ingenuity, and work ethic. Those are exactly the core qualities we will have to call upon to overcome the challenges in front of us because just waiting for the economy to get better will not work.
Reg Warkentin is the Red Deer Chamber’s policy and district manager.