Remember the shock when gas bars across the province began adapting their signs to display post $1 per liter prices? It was a mental adaptation to the arrival of so called "Peak Oil" predicted by geophysicist M. King Hubbert.
In Newfoundland and Labrador the surge in oil prices was a tough hit for the average consumer. The cost of filling up our vehicles, our oil tanks and out grocery carts went through the roof. The province began offering oil rebates to assist the most vulnerable adapt to the new reality.
The impact on the provincial government's coffers was like day and night. A somber 2004 province wide "Mother Hubbard" address by than Premier Danny Williams declared the cupboards were bare.
The province was nearly broke. We were spending beyond our means. The civil service was too large. Expenditures on government programs had to be reduced to fit the economic reality of our high debt levels verses our revenues. Than world oil prices surged and those coffers filled with bonus petro dollars.
Over the next decade the government doubled expenditures as it milked the golden cow and failed to look after the other farm animals. One by one other industries fell by the wayside and the government became more and more reliant on those petro dollars.
The province forgot that lower government revenues follow from lower commodity prices like “night follows the day." Anyone who challenged the spending spree was deemed to be negative. Talk that the economy would not continue to soar was called "bull". The good times were here to stay. Government austerity was forgotten and any rainy day fund was deemed unnecessary.
The price drop is an
unexpected turn of events for an industry that for decades has operated
under the assumption of Peak Oil. Our government has been caught completely unprepared. It turns out that all of the chest beating about being good fiscal stewards was hollow.
As oil consumers begin to feel the benefit of lower prices our government's revenues are beginning to tank. The long vaunted concern of our auditor generals regarding unsustainable spending has proven true. We feasted on ambrosia, bought into the narrative of strong, proud and independent with no concern for the future.
Gas prices may slip below $1 a liter this week. While you are enjoying the break on filling your gas and oil tanks start preparing for the very real hard choices that your government is going to have to make as the reality of living by it's staple means sets in.
Brace yourself for another "Mother Hubbard" speech. Hubbert’s peak, at least in the short and medium term, no longer applies.