Why Oil As An Election Issue Is Bad News For Canada
When oil becomes an election issue it is rarely good news.
After Joe Clark’s minority PC government was defeated in 1979 over gasoline taxes in a budget, the subsequent Liberal administration introduced the National Energy Program. In 2008, Ed Stelmach’s Alberta PCs campaigned on the New Royalty Framework and won big. Earlier this year Alberta’s new NDP government promised higher corporate taxes and a royalty review if elected. The taxes became law July 1 and royalties will hopefully be clear soon.
Historically, the issue has been revenue; producers are excessively profitable, consumers should pay less and government must collect more. Taxes and royalties have gone up and down but, eventually, industry has been left with sufficient cashflow to maintain and grow the business. However, on multiple occasions, levies were raised first then cut later only because of devastating economic outcomes.
Oilfield services (OFS) is usually the first casualty of major energy policy changes. Often OFS job losses and bankruptcies provide clear signals policies are damaging. But as a key stakeholder, OFS has yet to figure out how to prevent the damage.
The essence of the oil sands debate this election is whether output should be allowed to grow. Some don’t want oil sands produced at all. NDP leader Thomas Mulcair, currently leading or tied in public opinion polls, is avoiding being this clear, preferring to dodge and weave on major pipeline projects.
While the outcome won’t be known until the votes are counted on October 19, there is good reason to be concerned whether this giant economic driver of the modern Canadian economy will grow at past levels anytime soon, if ever.
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