Alberta’s economy needs a break after five brutal years since oil prices fell, driving our economy into an agonizing period of stasis

Doug FirbyWe’re told 2020 could be the year Alberta’s economy turns the corner. So, if we do get some economic breathing room, what are we going to do with it?

Alberta’s economy is ready for a break. It has been five brutal years since oil prices fell, driving our economy into a long and agonizing period of stasis. Hundreds of thousands of jobs were lost, downtown offices were hollowed out and property values tumbled.

Now there are cautious signals that recovery may be on the horizon.

One of the rosiest forecasts comes from the Conference Board of Canada, which predicts that “British Columbia and Alberta will see the biggest boost from energy investment and are expected to lead the country in economic growth next year.”

While the Conference Board forecasts that Canada’s economy overall will grow by 1.8 per cent in 2020, it states that Alberta’s economy will grow by 2.4 per cent next year and 3.1 per cent in 2021. It credits the start of construction of the Trans Mountain Pipeline expansion, secured financing to build LNG Canada and a forecast turnaround in energy investment.

Trans Mountain will “change the landscape of the energy sector over the next five years, temporarily creating a significant net-positive take-away capacity for oil producers and incentivizing expansions and new projects,” the Conference Board stated.

The lack of “take-away capacity” – i.e., the ability to get oil to market – limited energy investment, the board stated. With the impending opening of the pipeline, as early as 2022, and with other measures taken to get energy to market (think rail), the board expects to see investment start trickling back in.

Attracting investment is partly a matter of economics but also psychological. When the province had a ‘socialist’ government, the soft-socialist NDP under Rachel Notley, businesses just didn’t want to stay or move here. And it is true that taxes and spending did increase in a business-unfriendly sort of way.

When the citizens tossed out the NDP after one term and brought in the fiscally-conservative UCP under Jason Kenney, the warm glow returned.

Curiously, the reality of the UCP has not been as energizing as the dream – the sweeping cuts the government has imposed, especially to programs the NDP had initiated to encourage diversification, have not been so well-received.

Kenney may well be making a mistake by imposing a 1990s-style Ralph Klein solution on today’s much different set of circumstances.

With money taken away from diversification initiatives, the province is once again putting its eggs in one basket – oil and gas. This strategy of fiscal restraint and focus on energy may get the economy rolling in the short term but one has to question the wisdom of not maintaining a parallel plan to transition the economy over the longer term.

The Conference Board alluded to that point – sort of – when it warned that Trans Mountain alone won’t solve Alberta’s ills:

“[T]he Trans Mountain itself is a temporary fix in that Alberta’s capacity to produce oil will rapidly outstrip the capacity of that facility. So for sustained growth, Alberta needs Keystone XL and the Line 3 expansion to also move forward.”

Trans Mountain, it should be noted, is still at risk of being derailed by challenges before the courts. But even if it goes ahead, Alberta will need a lot more than a couple more pipelines. It will need a government that’s willing to focus on more than just short-term fixes.

We’ve been warned time and time again that the era of big oil is passing.

Yes, it’s true that there are huge energy markets in Asia, but we should also know by now that international demand can turn much faster than predicted.

Alternative energy technologies are growing exponentially, with seemingly weekly breakthroughs. And let’s not forget that international anxiety over fossil fuels’ contribution to climate change is reaching a fever pitch.

Long-term Albertans know the bumper sticker by heart: “Please God, give me one more oil boom. I promise not to piss it all away next time.”

We’re a long way from another oil boom – a modest recovery is the best we can hope for over the next couple of years.

But if the completion of Trans Mountain and access to new markets does help Alberta’s economy get back on its feet, our leaders would be very wise to invest that revenue in building a new economy that will give us a fighting chance at a sustainable future.

Welcome to 2020. Let’s make this decade all about building the new Alberta.

Doug Firby is Editor-in-Chief of Calgary’s Business and Edmonton’s Business.

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