CHARBONNEAU – Smith’s oil-bonanza plans for Alberta are in doubt

ALBERTA PREMIER Danielle Smith bet the farm on high oil prices. She hoped oil prices would stay high so she can finance projects like new schools at a cost of $8.6 billion.

Alberta is highly dependent on royalties from oil and gas. In 2023, royalties amounted to about one-quarter of the annual budget. The oil sands alone contributed $13.1 billion.

It seemed like a sure bet.

Historically, conflicts involving major oil producing nations have been a surefire way of sending crude soaring.

Russia’s invasion of Ukraine in February of 2022 looked like a repeat of the cycle. In June of that year, West Texas Intermediate Crude hit a high of $120 a barrel.

Now it’s at $70 a barrel.

Remarkably, despite the turmoil created by Russia’s invasion and Israel’s war with Gaza and Lebanon, oil prices have not soared.

It’s been a boon for motorists. Gasoline is holding at about $1.55 in Kamloops. Shortly after Russia’s invasion, gas was up to $2.10.

What gives?

For one, the U.S. is now the world’s biggest oil producer, having overtaken Saudi Arabia and Russia. That makes oil less vulnerable to turmoil in the Middle East.

Then there is China’s economic weakness which reduces global demand for oil. Electric vehicles are also a factor.

“In fact, there may be a global oil oversupply shaping up,” says investment reporter Tim Shufelt. “A new World Bank report forecasts that production will outpace global demand by an average of 1.2 million barrels a day next year (Globe and Mail, November 1, 2024).”

The World Bank report says that a glut of oil is: “likely to limit the price effects even of a wider conflict in the Middle East.”

How much the price of oil drops is anyone’s guess. It probably won’t be as low as the pandemic-related shutdowns of 2020 when oil tanked at $12 a barrel.

You would think that Alberta Premier Smith would have learned not to count on oil, not after previous oil booms went bust.

Areas of Alberta are prime for wind and solar power. But Smith, just to spite PM Trudeau, has put a halt on new wind and solar projects in Alberta. This significantly reduces investment and job opportunities in the renewable energy sector. Alberta risks losing about $33 billion in investments due to the halt, according to the Pembina Institute.

In addition to the cancellation or delay of 118 renewable power projects, municipalities have been deprived of an estimated $263 million in annual revenue from taxes and land leases.

The loss of revenue from taxes and land leases affects rural municipalities. Rural Alberta is the base for Smith’s support. But they don’t seem to mind the loss of hundreds of millions.

At a recent leadership review, 91.5 per cent of her United Conservative Party members approved Smith.

It seems that ideology has gripped the land as leaders attain a cult-like status. Trump’s victory in the U.S. is evidence that irrational belief in a leader matters more than common sense and decency.

Bizarrely, party members at Smith’s leadership review passed a resolution to abandon net-zero targets, and to recognize CO2 as a “foundational nutrient for all life on Earth” and not a pollutant.

It would be a joke if it wasn’t so sad.

David Charbonneau is a retired TRU electronics instructor who hosts a blog at http://www.eyeviewkamloops.wordpress.com.