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Friday, September 28, 2007

Drilling Contractors Complain Business is Down - Its the Marketplace Not the Royalties

Drilling contractors issued a news release today saying their business is down. Why? Because of the market price of natural gas…and I dare suggest they have priced themselves out of the market right now. The commodity prices they drill for are too low for the rates they are charging. So the work dries up. Pretty normal supply and demand economics 101 stuff I’d say. Sounds to me we have a perfect example here of competitive the marketplace of supply and demand working as it should.
Don’t complain adapt and adjust.

Check the record of this sector and you will see this sector has enjoyed record profits for three successive years. They are showing that they are paying excellent wages and benefits and pulling workers from all other sectors of the Alberta economy. Those other sectors suffer because they can’t afford to pay those wages and they lose staff to the energy sector. No one blames the employees and many of these other suffering sectors are actually closing their businesses….because they can’t find staff.

My read of this news release is that these contractors – who have done extraordinarily well as of late - are now complaining because they are wanting to keep their good times rolling. Fair enough but they want the government and the rest of Albertans to ensure they prosper and we don’t get our fair share of our resource rents. The need for a fare share for the rest of Alberta is not on their radar screen at all.

They seem to only like the magic marketplace when it generates sufficient cash flows that they don’t have to worry, plan or - heaven forbid…manage.