Tuesday, February 19, 2013

BITUMEN AND RURAL NEWFOUNDLAND



What happens to this province when the Bitumen Bubble in Alberta bursts?

We know that Newfoundland and Labrador’s reliance on a sole export, Oil, has made the province venerable to poor policy choices and the whims of the world market price for crude.

The Alberta oil industry employs more people and puts more money into the hands of the average Newfoundland and Labrador wallet than our own offshore industry does.

Entire regions of this province prosper because of the Fort McMurry shuffle. The real numbers are kept hidden by the province who has been studying the extent of our migratory workforce through labor force studies over the past couple of years.

As we saw a couple of years ago, a slowdown in Alberta creates panic in rural regions of this province.  Fortunately the last slowdown was  the  brief , EI claims were had not even run out when the big projects and camps started re-hiring. After a brief respite the migratory workers were back rolling in the cash.

When the bubble does burst, thousands of  people in our province are going to find their source of income gone. The impact on rural communities and business will be catastrophic.

In recent weeks a black cloud of uncertainty has stalled over Alberta.  The province is running record deficits. Environmental concerns and the surge in American Shale Gas has resulted in a tightening of markets for Bitumen. Alberta producers are selling their product at great reduced prices.  This “retail” selling is cutting into royalties, future mega projects and with those employment opportunities.

The Alberta oil patch has been the diversification of the rural economy in this province that has saved communities from extinction.  Will the shortage of skilled workers present opportunities for these soon to be displaced workers?

Just think about it for a moment, the Alberta Bitumen industry is teetering on a bust because the United States is approaching energy self-sufficiency.  They do not need, or particularly want the product.

The same energy market reality faces NALCOR in trying to sell excess hydro in the American Market. Natural gas is producing cheap power on the East Coast of the USA that Churchill Falls can not compete with.

Will NALCOR be forced to follow Alberta’s lead and sell the power at close –out prices? If so who pays?

The taxpayer and rate payers in this province will?

Four Billion dollar deficits are just a small piece of the economic Tsunami that could breach our shores at any time.

As the current exercise in peekaboo economics illustrates, our government has never had plan.

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