Business
A Response To: An Open Letter To Canadians From Oil And Gas Workers
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Update – April 13th 2020: Eavor Techologies View Eavor Technologies CEO – John Redfern’s response here
My letter in response to this article in the Financial Post: https://business.financialpost.com/opinion/an-open-letter-to-canadians-from-oil-and-gas-workers
By Zac Trolley
Dear Albertan oil executives,
Canada’s oil and gas workers need your help. For decades, we have been asking you to diversify our economy and look for ways to avoid the boom and bust cycle. We are now in a perfect storm with oil prices falling and workers in isolation from a deadly virus. We need your leadership more than ever.
Unfortunately for us, you’ve chosen the least imaginative path possible: stay the course. In your April 6th Op-Ed in the Financial Post, you argued that the fossil fuel industry needs federal support in order to maintain a skilled workforce. For a province that prides itself on hard work and innovation, don’t you think we can do better?
The underlying assumption that you have made is that oil prices will return to a level that’s profitable for Alberta. But the historical trend doesn’t support your argument.
When you look at the historical price of WTI, Alberta’s golden years came from a bubble. In 2008 analysts all over the province were claiming oil would climb to $200 and Alberta would become the crown jewel of Canada. That turned out to be wishful thinking. You have dusted off that same playbook, claiming that oil will keep going up in price. The more likely scenario is that prices will return to their historical average.
We cannot rely on high oil prices for our economic survival.
(The picture was taken from https://tradingeconomics.com/commodity/crude-oil But any 30-year graph will do. )
I agree with you that we need to ensure that we can maintain our workforce. It’s essential that Alberta has skilled people working in our province so that we can develop our resources. Canada as a whole needs to maintain our skilled labour force and keep our economy functioning so that we can rebound once the pandemic is over.
But putting those 200,000 people back to work into fossil fuels is a terrible idea.
So what do we do with hundreds of thousands of unemployed people and billions of dollars of idle equipment?
My suggestion is we find markets outside of oil and gas that require very similar skill sets. We leverage our existing infrastructure, supply chains, and experience to build new industries here in Alberta.
I’ve got three examples.
Geothermal Energy
Geothermal energy needs the same drilling rigs that the oil service industry has sitting idle. You can use your existing geologists, roughnecks, pipefitters, and welders to drill geothermal wells instead of oil wells. The end result is clean baseload power that can replace coal in this province and all over the world. The added benefit of developing geothermal is that we repurpose orphan wells into sources of heat and electricity. Companies like Eavor and DEEP have already started.
Battery Manufacturing
As we move to cleaner energy sources, batteries will become more important to the sustainability of our economy. Batteries need a lot of material to be manufactured and companies like E3 Metals are developing extraction techniques to create a lithium industry here in Alberta. There are plenty of technicians, engineers, and fabricators in our energy community that are entirely capable of working on projects like this.
Nuclear Power
While we are brainstorming ideas, let’s think big. If we are serious about providing clean, low carbon, environmentally friendly energy we have to look at nuclear. The folks at Terrestial Energy have designed a modular reactor that’s small, safe, and could absolutely be manufactured here in Alberta. I bet the mod yards would be jumping at the chance to have a backlog of work.
I agree with you that we absolutely need to support our workforce. However, I don’t think keeping our oil industry limping along can be the full answer for our skilled and versatile workforce. Our talented population needs options.
Please stop looking in the rearview mirror and start building for the future.
Update – April 13th 2020: View Eavor Technologies CEO – John Redfern’s response here
This article was originally published on April 8, 2020.
Business
Americans Say Government Is Corrupt and Inefficient but Are Lukewarm About DOGE
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Democrats seem willing to tolerate a lot to get a larger government, but Republicans aren’t much better
Americans think government is wasteful when it’s not outright fraudulent and abusive. That should create a welcoming environment for the Department of Government Efficiency (DOGE) and its mission to cut fat out of federal agencies on the way to (hopefully) reducing the state and balancing the budget. But support for DOGE is lukewarm. Unsurprisingly in these politically fractured times, cost-cutting efforts are a lot more popular with Republicans than Democrats, but polling suggests the division isn’t just one of partisanship. The DOGE is running up against fundamental disagreements over the role of government and the people who staff it—and the price people are willing to pay for a less-obnoxious government.
Corrupt and Inefficient Government, but Iffy Support for DOGE
Last year, Pew Research polling found that 56 percent of Americans say government is “almost always wasteful and inefficient.” The Babbie Centre at Chapman University reported that “nearly 2/3 of Americans fear that our government is run by corrupt officials.” And last month, A.P.-NORC researchers found 70 percent of Americans believe corruption is a major problem in the federal government, 65 percent say the same of inefficiency, and 59 percent see red tape—including regulations and bureaucracy—as a major problem.
Yet DOGE draws just a 39 percent “favorable” rating in the latest The Economist/YouGov poll, a bare three points ahead of “unfavorable” at 36 percent (25 percent picked “don’t know”). A poll this month from Trafalgar Group found 49 percent approving of the cost-cutting efforts of DOGE and Elon Musk, with 44 percent disapproving (7 percent were undecided). That’s more support than opposition in both cases, but you’d expect greater enthusiasm from a public that overwhelmingly considers government to be corrupt and wasteful (with plenty of evidence to support that position).
Part of the explanation, of course, is partisanship. Anything done by officials from one of the major parties is bound to be booed by the opposition, no matter what. As Gallup’s Jeffrey M. Jones pointed out in 2022, “generally speaking, Republicans and Democrats are more inclined to say the government has too much power when the president is from the other party, and less inclined when a president from their own party is in the White House.” That tribalism likely extends to cutting government as well, even if the cuts apply to agencies controlled for the moment by political enemies. Sure enough, both Trafalgar and The Economist/YouGov found far greater support for DOGE among Republicans than among Democrats (independents split the difference).
Democrats Want More Government, Flaws and All
But there are also real differences in attitudes toward the role of the state. The same Pew poll that reported widespread belief in the wastefulness and inefficiency of government also found that 49 percent of respondents “would prefer a smaller government providing fewer services” while 48 percent “would rather have a bigger government providing more services.” And the partisan divide here isn’t just tribal, it’s ideological. Despite fluctuations depending on who is in power, Republicans have overwhelmingly favored a smaller government providing fewer services since polling on the issue began in 1976 (support for bigger government peaked among them at about one-third in 1988 and 2004). Democratic support for larger, more active government grew from 49 percent in 1976 to 74 percent now.
Democrats in the A.P.-NORC poll were just slightly kinder than Republicans in their opinions on government corruption, efficiency, and red tape; majorities agree the federal government is corrupt and inefficient, while a 47 percent plurality says that red tape is a major problem. Given the overwhelming belief that government is corrupt and wasteful, but iffy support for DOGE, it’s fair to conclude that at least some Democrats are willing to put up with those concerns as the price of a larger state.
Partisan disagreement over the role of government also applies to trust in the people who staff the federal bureaucracy. These are the people the Trump administration offered buyouts and seeks to reduce in number, much like the Clinton administration did in the 1990s. Support for reducing the federal workforce depends, to a large extent, on agreement that those workers are part of the problem—or at least that we’d be better off with fewer of them. That’s not a universal opinion.
“Just 38% of Republicans and Republican-leaning independents express a great deal or a fair amount of confidence in federal career employees,” Pew Research noted last week. That’s down 10 points from 2018. “In contrast, 72% of Democrats and Democratic leaners say they have confidence in career government employees – 7 points higher than in 2022, but on par with 2018 levels.”
So, if we’re to believe what members of the public tell researchers, majorities of Americans across partisan divides think the federal government is corrupt and inefficient. But a fair number of those who hold this position—Democrats, in particular—are confident that the people employed by the federal government aren’t responsible for that corruption and efficiency. Those problems appear from somewhere, perhaps as a miasma emanating from the swamp that D.C. was in years past. Also, many of those concerned that corruption and inefficiency plague the government are willing to put up with those handicaps so that the corrupt and inefficient government can play a larger role in our lives.
Republicans Also Want Their Expensive Goodies
Of course, consistency and logic aren’t necessarily common features of public opinion. As I’ve noted before, Republicans and Democrats may disagree when it comes to broad philosophical statements about the size and role of government, but when it comes to specifics, there’s more that unites them than divides them. Majorities of partisans of both parties as well as of independents want more federal spending on Social Security, Education, and Medicare, according to A.P.-NORC. A majority of Democrats also want more to be spent on Medicaid and assistance to the poor, while a majority of Republicans similarly want more dedicated to border security and the military.
Social Security is almost a quarter of federal spending all by itself, while Medicare, Medicaid, and other health care are slightly more, by the Cato Institute’s reckoning. National defense is about 13 percent, as is income security, with interest on federal debt right behind. DOGE faces quite an uphill battle to succeed in its mission to slash the size and cost of federal government.
DOGE faces obstacles from Democrats who recognize that the government is corrupt and inefficient but want more of it anyway. It also faces a challenge in Republicans and independents who say they want less government but don’t want to surrender their favorite boondoggles.
Americans are lukewarm about DOGE because they’re torn about its mission. Sure, they have a low opinion of the federal government, but they might be willing to put up with its deep flaws so long as it delivers their goodies.
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Business
Worst kept secret—red tape strangling Canada’s economy
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From the Fraser Institute
By Matthew Lau
In the past nine years, business investment in Canada has fallen while increasing more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker than in the U.S.
According to a new Statistics Canada report, government regulation has grown over the years and it’s hurting Canada’s economy. The report, which uses a regulatory burden measure devised by KPMG and Transport Canada, shows government regulatory requirements increased 2.1 per cent annually from 2006 to 2021, with the effect of reducing the business sector’s GDP, employment, labour productivity and investment.
Specifically, the growth in regulation over these years cut business-sector investment by an estimated nine per cent and “reduced business start-ups and business dynamism,” cut GDP in the business sector by 1.7 percentage points, cut employment growth by 1.3 percentage points, and labour productivity by 0.4 percentage points.
While the report only covered regulatory growth through 2021, in the past four years an avalanche of new regulations has made the already existing problem of overregulation worse.
The Trudeau government in particular has intensified its regulatory assault on the extraction sector with a greenhouse gas emissions cap, new fuel regulations and new methane emissions regulations. In the last few years, federal diktats and expansions of bureaucratic control have swept the auto industry, child care, supermarkets and many other sectors.
Again, the negative results are evident. Over the past nine years, Canada’s cumulative real growth in per-person GDP (an indicator of incomes and living standards) has been a paltry 1.7 per cent and trending downward, compared to 18.6 per cent and trending upward in the United States. Put differently, if the Canadian economy had tracked with the U.S. economy over the past nine years, average incomes in Canada would be much higher today.
Also in the past nine years, business investment in Canada has fallen while increasing more than 30 per cent in the U.S. on a real per-person basis. Workers in Canada now receive barely half as much new capital per worker than in the U.S., and only about two-thirds as much new capital (on average) as workers in other developed countries.
Consequently, Canada is mired in an economic growth crisis—a fact that even the Trudeau government does not deny. “We have more work to do,” said Anita Anand, then-president of the Treasury Board, last August, “to examine the causes of low productivity levels.” The Statistics Canada report, if nothing else, confirms what economists and the business community already knew—the regulatory burden is much of the problem.
Of course, regulation is not the only factor hurting Canada’s economy. Higher federal carbon taxes, higher payroll taxes and higher top marginal income tax rates are also weakening Canada’s productivity, GDP, business investment and entrepreneurship.
Finally, while the Statistics Canada report shows significant economic costs of regulation, the authors note that their estimate of the effect of regulatory accumulation on GDP is “much smaller” than the effect estimated in an American study published several years ago in the Review of Economic Dynamics. In other words, the negative effects of regulation in Canada may be even higher than StatsCan suggests.
Whether Statistics Canada has underestimated the economic costs of regulation or not, one thing is clear: reducing regulation and reversing the policy course of recent years would help get Canada out of its current economic rut. The country is effectively in a recession even if, as a result of rapid population growth fuelled by record levels of immigration, the GDP statistics do not meet the technical definition of a recession.
With dismal GDP and business investment numbers, a turnaround—both in policy and outcomes—can’t come quickly enough for Canadians.
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