 Norway’s sovereign wealth holds lessons for Canada Twenty-five years ago, Norway chose to bank the returns from its oil resources, and it has paid off handsomely - to the tune of $1 trillion. Alberta can only look on with envy, writes Susan Ormiston.Commentsview comments in forum You need to be a member of CKA and be logged into the site, to comment on news. |
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By contrast, Alberta’s Heritage Savings Fund, established in 1976 by premier Peter Lougheed, sits at only $17 billion Cdn and has been raided by governments and starved of contributions for years.
“We don’t change our policies in Norway, with changes in the oil price – you can’t do that," he says. “Lougheed’s government in Alberta knew that, they made policies and then they left them behind."
Oil and gas make up 25 per cent of Norway’s GDP, so the recent plunge in oil prices should have set off alarm bells in Oslo. Thousands of workers have indeed been laid off, but parliament is not painting a dire forecast for 2015.
"We all agree we're not facing a crisis," says Siv Jensen, Norway's finance minister.
Twenty-five years ago, when Norway set up its oil fund, it demanded high taxes from oil companies – 78 per cent after profits and the costs of research and exploration. One hundred per cent of those taxes were banked. The government is allowed to tap into the fund, but only up to four per cent. That leaves the principal untouched.
“We have low unemployment, we have growth, we have a huge surplus – that’s a very robust start in the face of declining oil prices”, she says confidently.
shows that Norway is in trouble or is something that Alberta could not have done?
Maybe there's hope for you yet!
I'm impressed, Andy. You put up a post about how investment capitalism is improving the lives of everyday people in Norway far more than the socialist model of pissing away wealth works in Alberta.
Maybe there's hope for you yet!
I you embrace Norway's version of capitalism, the we are indeed strange bedfellows. High taxes, very generous government programs, state ownership of industry.
1)
- and a unified culture too, where massive amounts of revenue each year aren't diverted to placate Quebec or the Natives.
2)
- in what universe, assuming the Canadian oil industry had been nationalized the way Norway's was, could any single person who knows the slightest thing about Canadian politics, politicians, and political parties, would anyone ever believe that Pierre Trudeau, Brian Mulroney, or Jean Chretien have been wise enough to leave that kind of money alone. They wouldn't. No politician in this country would have because in Canada, from the left or the right, every single one of them looks at every single dollar made or saved as something to be taken and spent by them for their own political advantage. Nationalizing the industry wasn't the problem. It was the kind of down-East scumbag politicians who would have looted the entire profit and revenue structure for their own re-elections. If anything having the industry nationalized with those kind of politicians in control would have meant that the money was spent and wasted even faster and with even more little to show for it than the provincial PC's in Alberta have managed to accomplish.
The 'concern' for Alberta that is on display with this article, and from the guy posting it, is tissue-paper thin at best. Just more contempt from those who look at us as servants to their standard of an Official Greater Good, or whatever the fuck it is they allegedly believe in. When they get around to saying something about how the accrued half-trillion provincial debts of Ontario and Quebec are affecting the rest of the country I might believe that their motivations are genuine and not just more of their regional-based politics and malice. Until then though it's just more of the same bullshit from them that it's ever been. FOD to all of them.
(and the comments section is full of the usual hatred that only the CBC-obsessed left-wing in this country are capable of making)
There is nothing that would have prevented Alberta from hewing closer to how Norway runs things. It's good to see tho, that Albertans like the poster above are typical Canadians. Sell out cheap, spend the income during good times, then winge about the federal government and other provinces during bad times.
We had people here saying how Norway was in trouble with the falling oil prices and how their model won't work in Alberta. What part of this:
By contrast, Alberta’s Heritage Savings Fund, established in 1976 by premier Peter Lougheed, sits at only $17 billion Cdn and has been raided by governments and starved of contributions for years.
“We don’t change our policies in Norway, with changes in the oil price – you can’t do that," he says. “Lougheed’s government in Alberta knew that, they made policies and then they left them behind."
Oil and gas make up 25 per cent of Norway’s GDP, so the recent plunge in oil prices should have set off alarm bells in Oslo. Thousands of workers have indeed been laid off, but parliament is not painting a dire forecast for 2015.
"We all agree we're not facing a crisis," says Siv Jensen, Norway's finance minister.
Twenty-five years ago, when Norway set up its oil fund, it demanded high taxes from oil companies – 78 per cent after profits and the costs of research and exploration. One hundred per cent of those taxes were banked. The government is allowed to tap into the fund, but only up to four per cent. That leaves the principal untouched.
“We have low unemployment, we have growth, we have a huge surplus – that’s a very robust start in the face of declining oil prices”, she says confidently.
shows that Norway is in trouble or is something that Alberta could not have done?
Some parts of their model would work here - like the savings part of things (we used to put 30% of non-renewable resource royalties into the HTF but stopped shortly after Lougheed left office). After all, Norway modeled their wealth fund on the Heritage Trust Fund.
The part that wouldn't is the royalty rate nor the fact that most of the industry is run by Norway themselves (via Statoil). I doubt most multi-national companies would be willing to invest billions of dollars on oilsands projects if it took 100 years for them to turn a profit (due to 78% royalty rates like Norway charges). Having said that, I would have liked to see a higher royalty rate than Ralph's 1% fire sale he offered in the 90s. Alberta may be wealthy, but there is no way we could have raised the tens of billions necessary to build the oilsands industry entirely by ourselves. Oh we could have done some of it on our own, but the oilsands industry would be a fraction of its current size and we almost certainlyy wouldn't have developed all the efficencies private industry did (to reduce costs and emissions).
If we want a better comparison, all we have to do is look at Alaska. They save 25% of their royalties and have a fund worth 50+ billion. We could have had that too if we were just a little more disciplined.
The problem with Alberta is Albertans.
We want the best of everything but aren't willing to pay the taxes necessary to provide them - so our weak-willed government caved in and just funnelled non-renewable resource royalties into general revenues and spent them instead of saving for the proverbial rainy day. Here it is 30 years later and it's pouring outside and we really have nobody to blame but ourselves.
But why couldn't Alberta be directly involved in the oil industry like Norway is? Why were oil companies willing to invest in Norway with such a high royalty rate, but not in Alberta? Norway's oil won't last nearly 100 years, yet companies were willing to invest. Norway didn't build the industry on its own, they went partners with private industry. How could Norway, with only a 20% larger population, and not much else going for it besides oil, raise the funds to invest in its own resources, but not Alberta? The oil sands may yield a lower rate of return than Norway's oil does, but I don't see how the difference can be so huge as 1% versus 78%.
Really Alberta is just like the rest of Canada, only written larger. We're content to take little risks and so let others reap the profits. We want our cake now, always think there's more around the corner, so sell our resources cheap for a quick buck now, not save for the future. The story is really the same in BC, with forestry. We allowed a forest industry that had a colonial view, move in take the resources, move to another country, not treat trees like a renewable resource. A friend who worked in the industry told me that the US would buy a log from us (this is some years ago) for $500 that our BC mills would turn that same lokg into $200 worth of lumber. Ie our industry didn't invest in new, more efficient equipment that would maximize the value of a log. We were so used to cutting huge first growth trees, cream them off the land and be very wasteful in how we processed them. The only difference is that trees grow back, oil doesn't, and we have a more diverse economy.
There's no free tuition in Canada but university should be subsidized since most decent jobs require it
Most decent jobs only require dedication, not a University education. I've know more than one millionaire without a University education, and one barely had high school. All it requires is the willingness to sleep in the back of your truck for 10 years, and to hold a welding torch 12 hours a day for 11 months a year.
Most trades could get away with a 2 or 4 year technical diploma, not University.
But why couldn't Alberta be directly involved in the oil industry like Norway is? Why were oil companies willing to invest in Norway with such a high royalty rate, but not in Alberta?
Well, firstly, ideology. The same reason we got rid of all the highway construction departments and contracted them back to build infrastructure. Alberta isn't in the business of being in business. Even the Heritage Fund is managed by a Crown Corporation now, not a Government Department.
As for investment, many plants require an WTI price of $85/bbl just to break even, and Alberta moved to a flat rate structure to accommodate the Bilions it take to build a new oilsands extraction plant. Norway's high royalty rate was acceptable because building a drilling platform didn't incur the high costs that an oilsands plant does, so it makes money at much lower oil prices.
Here's the debt clocks for the entire country, feds and provinces. Seriously, everyone just shut the fuck up about who's better at managing an economy. We all fucking suck at it with the only difference being that some suck at it much worse than others do.