Tuesday, April 18, 2006

License to spend money

CBC say:

Oil prices brush $70 US a barrel
Last Updated Apr 17
2006 11:35 AM CDT

Oil prices briefly touched $70 US a barrel on Monday as apparent investor nervousness about U.S. supplies and global issues pushed the May futures contract for light sweet crude to a seven-and-a-half month high.

In morning trading on the New York Mercantile Exchange, the May contract pulled back slightly to trade at $69.77 US a barrel, up 32 cents from Thursday's close.

You know what this means for the governments of Saskatchewan, Alberta and British Columbia? It means "spend it while you got it." As Brian Crowley from AIMS points out, oil and gas revenues are "one-time" revenues. Once that hydrocarbon is pulled from the ground and sold on the market, it's gone forever. It's an asset that is constantly being reduced in value -- like drawing from your RRSPs before you retire.

Politicians don't see it that way. They see high oil prices as an oppornuty to "invest" in social programs. Incredibly short sighted.

12 comments:

Jonathan at Dalhousie said...

Is that the Norway model? I haven't done much research into Norway, but I'm amazed an interventionist state has such a high per capita GDP and Human Development Index ratings. I suppose at least there they have some sort of rainy day fund since they know the oil wil run out.

David MacLean said...

Yes, actually. Norway has what's called a "Petroleum Fund." Last time I checked it has $150 billion in it.

Problem is, Norway is running deficits right now, and the politicians want to dip into the fund for social spending.

But Norway is a different animal. It's a very small country of 8 million. The society is very homogenous -- a "monoculture" if you will. The population is concentrated around coastal areas.

Very different from Canada. Easier to govern.

David MacLean said...

Scratch that..Norway is posting huge surpluses...like Kuwait-style surpluses.

Alberta Oilman said...

The population of Norway is 4.6 million. The Petroleum Fund of Norway is valued at $210 billion US according to year end 2005 figures.

David MacLean said...

I stand corrected!!!

Chad Moats said...

I agree David,let's follow Norway's example on everything including taxes and social programs. Finally some sense out of you.
Bravo for learning from your mistakes, it takes a brave man to admit he was wrong.

David MacLean said...

The Norway road is the road to population oblivion and 15 dollar hamburgers.

Chad Moats said...

David, By the way do you know whom we should thank for such serendipitous oil prices, right ?

David MacLean said...

Yes Chad, the gods of supply and demand.

Chad Moats said...

No, Hugo Chavez mate.

David MacLean said...

Your point?

Chad Moats said...

and yours by this post ?
Advocating government spending ?

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