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Meditations on booms, busts, oil prices, sales taxes, Albertans and their governments

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Peter Lougheed

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If God gives us another oil boom like the one us Albertans are all praying for nowadays, what are the chances that this time we won't piss it all away again?

Not good, I reckon.

That's the thing about boom-and-bust economies -- they go boom and bust. If we haven't figured this out by now, there's not much hope for us.

After more than three years hovering between $90 US and $120 a barrel, oil prices started moving south in the middle of 2014 and have never really stopped their slide. Yesterday they slipped below $27.

I hate to say this, but I imagine a lot of people in other parts of Canada are feeling quietly smug about this. For years, we Albertans have been lecturing them on how to run their economies and their societies -- if only they were as smart as us, they could be as rich as us. Now, instead of being embarrassed, we're furious.

Well, the sainted Peter Lougheed warned us, didn't he?

No good could come from too much oil sands development too quickly, Alberta's first Progressive Conservative Premier, the original "blue-eyed sheik," advised us more than once. We were setting ourselves up for a big fall, he warned.

Now the fall has come. Again.

Whoever replaced premier Ralph Klein "has to look at how they're going to have a more orderly development in the oilsands," Lougheed prophetically warned Albertans in 2006, 21 years after his retirement from the province's top political job.

In an interview with the Edmonton Journal in 2006 in anticipation of Klein's retirement at the end of that year, Lougheed excoriated the Klein Regime's mishandling of Alberta's Bitumen Sands resource as not merely too much too soon, but way too much at once. He suggested things had been messed up on a superlative scale.

The Klein Government's mismanagement left more losers than winners and was generally a chaotic and expensive mess, explained Lougheed, who was premier from 1971, when his PCs knocked off the Social Credit dynasty that had ruled Alberta since 1935, until he stepped aside in 1985.

Oil sands projects should have moved ahead one at a time, not all at once, he argued. "Having all these projects go concurrently is going to substantially reduce the return to the owner -- and we're the owner." (Not that the latter point ever seemed to bother Klein very much.)

"If you overheat an economy and you affect citizens generally in terms of the costs of everything they buy … to the detriment of the citizens today," Lougheed said in what has to be seen as a pretty accurate description of the overheated state of the provincial economy in 2006.

Lougheed's tart commentary followed the unexpected confession in the Legislature by Klein, who was then near the end of a 14-year run as premier, that he'd had no plan for oil sands development.

Lougheed died in the fall of 2012 at 84. Mr. Klein died in the spring of 2013 at 70. Oddly enough, at a moment when the state of the economy has many Albertans pining for the "good old days" of Conservative rule, both departed PC premiers have been virtually sainted, if not deified, in the popular imagination despite the fact their governments, and their attitudes, could hardly have been less alike.

In Rachel Notley's NDP we have a government more like Lougheed's than Klein's -- but like Lougheed, I doubt Notley is prepared to risk doing what this province really needs to smooth out the spikes and toughs of oil volatility.

That is, bring in a sales tax like those in other resource-rich jurisdictions such as Saskatchewan (five per cent) and Texas (6.25 percent plus another two per cent for local governments) while we wait for oil prices to rise again.

The conventional wisdom has it that this would be suicidal -- although the conventional wisdom in certain circles right now is also that the NDP is done for anyway.

Could be, although two factors suggest oil prices will go higher again -- supply and demand -- and there's nothing like a flow of dollars to make a government look good. So don't bet the farm on the next election, one way or the other.

That said, when oil prices revert to form, I expect, so will Albertans, no matter who is running the place.

Listen to what Lougheed had to say? Have a plan? That might just be asking too much of us.

This post also appears on David Climenhaga's blog, AlbertaPolitics.ca.

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