Oily Reality

The Star's Thomas Walkom takes on Bank of Canada honcho Mark Carney's pronouncement last week that the recession in Canada "is over". While I agree with much of Walkom's arguments to the contrary which point to the reality on the ground for Canadians, I can't say that this is accurate:

And yet, it says Canada's recession is over. How so?

Two answers: China and oil. The bank's hopes depend on the Chinese economy continuing to forge ahead, with its consequent thirst for Canadian raw materials. But most of all, the central bank assumes that oil prices will stay high.

That would obviously benefit Canada's oil producing provinces (and, through spinoffs, the rest of the country). As well, by keeping the dollar high relative to other currencies, a protracted oil boom would, in effect, make all Canadians richer vis-à-vis the rest of the world, causing consumers to buy more things and thus boost the economy.

Yet it's not clear that oil prices will stay high. Thanks in large part to the collapse of the U.S. economy, crude oil inventories are building up – which should dampen prices.

More important, there are indications that the high oil price now is driven less by real demand for energy than by speculation and the desire of institutional investors to park their money in something safer than the U.S. dollar.

All of which casts considerable doubt on the central bank's prediction of steadily high oil prices creating a quick end to this particular slump.

The news out of the Alberta government today is that welfare numbers are soaring in this province*. And the other day, they dropped a bombshell when they announced that home energy bills might triple in the near future as a result of its carbon capture plans.

Calgary's unemployment rate has doubled over the past year and while cheery politicians seem happy that more people are moving out west, (a stark contrast to former Calgary mayor/Alberta premier Ralph Klein who called similar migrants "eastern bums and creeps" during the 1980s' oil boom), what they fail to add is that the migration is happening, once again, because of distressed economic situations in other parts of Canada.

Meanwhile, the land of milk, honey, cows and oil does not have adequate resources to deal with more newcomers and with sky-high rent and food prices, the picture here is anything but bright.

Add a Conservative gov't that for decades has subsidized the oil barons while cutting essential programs for ordinary Albertans, resulting now in the first deficit in 15 years while still fighting against making the corporations pay their fair share of dues and I sincerely fail to see where Wolkum gets the idea that oil will be Canada's great salvation - unless he's strictly referring to the already uber-rich and the corporations they rode in on.

As for China's role in Canada's recovery, Wolkum would do well to take a look at the harsh reality it finds itself in in relation to the US as analyzed by Niall Ferguson. We can't help but feel the ripple effects here.

Most Canadians don't experience recessions as economists do. Numbers don't get us through the day when we're trying to survive. Theories and forecasts don't put food on the table. What may be "good" in an economic sense (ex. the high price of oil) just doesn't translate into what's good for us peasants.

So, no, this recession isn't over. Not out here in the real world. And let's be realistic - because China and the price of oil certainly won't be (and isn't) our salvation.

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*Alberta's welfare payout levels are absolutely appalling compared to the cost of living:

The amount a person can collect through income support varies. For example, a single person looking for work receives $583 a month, while a two-parent family with three children under the age of 12 would get $1,240 a month, plus a national child benefit supplement.

Related:

EI roll hits highest level since 1997

Alberta showed the fastest increase, and that province, plus B.C., Ontario, Saskatchewan and Manitoba all recorded their largest number of EI recipients since 1997.

In Alberta, the number of regular beneficiaries grew by 16.8 per cent to 57,000 in May.

Stelmach's Oil Royalties Compromise

Here's how the Conservative party/government operates in Alberta. They set up panels, committees and traveling road shows to pretend to care about the opinions of the voters peasants and then they go ahead and do what they planned to in the first place, despite the input.

So, it comes as no surprise that "Steady Eddie" Stelmach, who had set up his own panel to study royalty revenues from the oilpatch, announced today that, contrary to what his experts advised, he's going to ask for half a billion dollars less than what they recommended. Who cares if Albertans have been ripped off for years now?

Broken down, the government forecast additional royalties in 2010 to be as follows:

* $470 million more for natural gas -- about $270 million less than recommended by the expert panel;
* $460 million more on conventional oil -- about $4 million more than called for by the royalty report;
* $470 million more for oil sands -- nearly $200 million less than recommended by the panel.


The expected $1.4-billion increase in royalties would hike Alberta's total 2010 royalty take to about $8.6 billion from $7.2 billion.

The oil lobby had been extremely vocal and threatening prior to this announcement stating that various companies might "have" to pull out of the province. In other words, if they couldn't continue raking in the megabucks on the backs of all Albertans, they'd take their toys and go home - to the US, to China or wherever they came from in the first place. Let's face it, can anyone in their right mind in this financial climate with oil at $90/barrel and projected to be at $70/barrel in 2008 expect the rest of us to believe that they'd actually suffer if they had to fork over more royalties? Poor them.

In the meantime, because of the oil boom in Alberta, our cost of living has skyrocketed and the influx of people looking for and finding work here has overstretched our (already underfunded) infrastructure. So, who's really suffering here? It's definitely not the oil patch.

And, just as an added perspective of exactly what this government thinks about "governing" in this province, it doesn't get much clearer than this, does it?

Meanwhile, Alberta Liberal Leader Kevin Taft, who was at the premier's press conference in Calgary, declined to comment on the report. Taft said it was "undemocratic" to freeze the opposition out of the technical and media briefing, which didn't give his party advance time to review the plan.

"We need time to study it, and will get back as soon as we can."

Albertans who keep electing these Conservatives, especially after the mess Ralph Klein perpetrated on our province, really need to get their heads out of their ideological bubbles. They, along with the rest of us, have been complaining for decades about people issues like the state of our health care services (why do Albertans still pay health care premiums??), the cuts to education, the inattentiveness to the needs of the poor, the refusal to actually listen to anyone but the sound of their own voices, the backwards attitudes towards civil rights etc etc etc. Yet those Conservative voters just can't bring themselves to kick the useless, arrogant bums out of power.

I've often said that, rewriting another popular saying, 1000 monkeys in a room with calculators could manage Alberta's economy just as well as these Conservative governments do. And they might even do a better job of it - especially during times like this when oil money is flooding the province.

So, I don't have any tears to shed for these oil companies and the fact that Steady Eddie caved to their whining shows that he's just as spineless and beholden to that lobby as Klein was.

I'll post more analysis of today's announcement as it comes in. From what I've heard so far, those who expected Stelmach to follow the advice of his panel are disappointed.

Related:

CBC's roundup of Alberta oil royalties news, background and reactions (includes video of Stelmach's press conference)
 

McCain on Conservative Green Politics

John McCain (R-AZ) and hopeless candidate for '08 president tried to explain his rationale for flip-flopping on ethanol and the need for green politics to Timmeh on Sunday's Meet the Press.

MR. RUSSERT: This is what you said about ethanol--not about subsidies, but about ethanol.

SEN. McCAIN: Mm-hmm.

MR. RUSSERT: "Ethanol does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality."

SEN. McCAIN: Mm-hmm.

MR. RUSSERT: And after you said that, you acknowledged you might pay a political price for that view, and this is what you said.

(Videotape, June 19, 2005)

SEN. McCAIN: My opposition to ethanol has--obviously would hurt me. But you know what I found out? That every time I've done something from what may have been influenced by political reasons, I've regretted it. Every time that I've done something that I think is right, it's turned out OK in the end. I've got to do what I think is right. And if it offends a certain political constituency, I, I regret it, but there's really nothing I can do about it.

(End videotape)

MR. RUSSERT: Now you go to Iowa and say this: "I support ethanol. I think it's a vital alternative energy source, not only because of our dependence on foreign oil but because of its greenhouse gas reduction effects." You had said it had nothing to do with reducing fuel consumption, nothing to do with improving air quality.

SEN. McCAIN: I, I, I am of the confirmed belief that when oil is 10, $15 a barrel, that ethanol does not make sense. When oil is $60-plus a barrel, then ethanol does make sense. I still oppose the subsidies to it. It makes a lot of sense. We are dependent on foreign oil too much. We have a situation where greenhouse gases has now become--emissions has become a vital issue. I am for sugarcane, biofuels, switch grass, and corn-based ethanol because of our need for independence on foreign oil. And it has become far more graphic and dramatic as we watch people like Mr. Chavez in Venezuela behave the way that he has, and President Putin behaving the way that he does. It's a fact that when oil is low amounts per barrel and--that we are not concerned about greenhouse gases or dependence upon foreign oil, it doesn't make the sense that it makes today. It does make sense today.

MR. RUSSERT: But you do now disagree with what you said in '03, that it has nothing to do with reducing fuel consumption...

SEN. McCAIN: What I was...

MR. RUSSERT: ...or nothing to improve air quality?

SEN. McCAIN: I don't...

MR. RUSSERT: You now believe...

SEN. McCAIN: I don't know what--I don't know what it does to fuel consumption. I'm sure that there is some question about that, as the...

MR. RUSSERT: How about air quality?

SEN. McCAIN: ...as the, as the technology has increased dramatically. The air quality, it does reduce greenhouse gas emissions. Most effectively? Does--as much as nuclear power? No. But given our dependence on foreign oil, given the situation as the price of oil then--and, and the realities of climate change, we should go for many alternate fuels. I do not support the subsidies.

MR. RUSSERT: So you've changed your mind.

SEN. McCAIN: No, I haven't. I have--I have--I have adjusted to the realities of the world we live in today, and if I don't adjust to those realities, then I would be stuck in the past. I have to adjust to the realities. The realities today are that we have a serious problem with climate change, which I have been concerned about for many years, and we have a far more serious challenge as associated with our dependence on foreign oil.

Not too long ago, a year or so ago, there was an attempted attack on a Saudi oil refinery. If that attack had succeeded, the price of oil would have gone to $150 a barrel overnight.

MR. RUSSERT: And the reality of being part of the Iowa caucuses had nothing to do with it.

SEN. McCAIN: I don't--I don't--I can't respond to a, a statement like that.

MR. RUSSERT: But...

SEN. McCAIN: I do what I--I do what I think is right, and I will continue to do what I think is right. And if conditions change as far as some specific issue is concerned, then, obviously, then I will continue to re-evaluate my position on specific issues.

Now, putting aside the fact that McCain is a bumbling fool who shouldn't be president of anything, least of all the United States, his position on the climate change issue is definitely representative of the way the right-wingers view environmental concerns these days.

McCain, along with every other winger who supported the war against Iraq, possible action towards Iran, cozy relationships with the Saudis and the shunning of leaders like Hugo Chavez realize now that their actions have so increased the public's anger towards oil insecurity which has resulted in higher energy prices everywhere that they have no choice but to talk about green politics in order to lessen dependence on a commodity that they thought they could control partially by seizing Iraq's assets. That's why there's a furious push against the al-Maliki government to pass the oil law in Iraq - private companies like Halliburton are waiting in the wings to take over. The problem is that the Bush administration mismanaged the war to such a point that security to enable the war profiteers to make off with the oil spoils has become almost impossible. Add to that the fact that, as the New York Times reports, billions of dollars worth of oil have been lost via corruption and smuggling and you have a bunch of right-wingers who are stuck with what to do next.

So what do they do? The obvious answer is to try and cover up their failures by now claiming that they want to "go green". But, it's not about the environment. It's about attempting to minimize the impact of the high oil prices on their disgruntled constituents, and thus the politicians' falling poll numbers, by pretending to care about things like pollution and emissions. That's why they have chosen to do as little as they can possibly get away with when it comes to things like honouring (or in the case of the US, not even signing on to) commitments to plans like the Kyoto protocols.

Canadians are already aware of the half-hearted efforts by Conservatives here to manage these issues via their so-called "Clean Air Act" and by this government's refusal to go after Alberta oil sands pollution.

And while pro-Bushites talk tough about the "addiction to oil" and feign interest in climate change, here's what they're really up to behind the scenes:

Negotiators from the United States are trying to weaken the language of a climate change declaration set to be unveiled at next month's G-8 summit of the world's leading industrial powers, according to documents obtained yesterday by The Washington Post.

A draft proposal dated April 2007 that is being debated in Bonn, Germany, this weekend by senior officials of the Group of Eight includes a pledge to limit the global temperature rise this century to 3.6 degrees Fahrenheit, as well as an agreement to reduce worldwide greenhouse gas emissions to 50 percent below 1990 levels by 2050.

The United States is seeking to strike that section, the documents show.

Many scientists have warned that an increase of more than 3.6 degrees this century could trigger disastrous consequences such as mass extinction of species and accelerated melting of polar ice sheets, which would raise sea levels.

It's all a political balancing act and it's meant to keep corporations happy - not average citizens. Oil companies are shoveling in profits but since that's not seen as a Good Thing(tm) by consumers, politicians who are responsible for failed foreign affairs policies have to find some way to appease the masses. Let's not forget that this isn't the first time we've been at this place in history. Back then, "ecology" was the buzzword. How far have we come since then? Not far enough, obviously.

Conservative politicians appear to be in "hurry up and wait" mode - hoping that Iraq will settle down enough to bring prices down to something that might be seen as being more comfortable to consumers (even though we'll still be gouged at the pumps) while pols sing in unison: "supply and demand, supply and demand". That reliance on fixing the Iraq situation is only an illusion when one considers all of the disastrous foreign policies right-wingers support that affect all of us on a daily basis.

It's just like McCain said:

It's a fact that when oil is low amounts per barrel and--that we are not concerned about greenhouse gases or dependence upon foreign oil, it doesn't make the sense that it makes today. It does make sense today.

Sometimes, even politicians speak the truth, when they probably didn't even mean to.