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.
Ken, ken, ken...who wouldn't want to keep good times rolling??
ReplyDeleteIf they were asking for a gov't subsidy (like Ag or many other industries), you could accuse them of all this. What they are saying is "The market will sort this out, please Gov't don't make it worse." Or prolong it unnecessarily.
Pretty reasonable to me.
Gas prices are low, so drilling has dropped.
Seems to me the only adjustment really needed is to find a way for Albertans to share in the upside, like when Katrina hits and gas spikes upwards in a way no one imagined. That's the source of the profits BTW and those are done and gone. We are in a new world.
If the panel had bothered to take the time to try and understand the industry that they were supposedly studying, perhaps we wouldn't have had to have this ridiculous argument. They went way over what they were asked to do and didn't do it thoroughly.
Government subsidies. As I recall, Bill Hunter was President and CEO of Alberta-Pacific Forest Products Limited, a company that lived off a loan from the Heritage Savings Trust Fund
ReplyDeleteNot quite all the truth. The GOA paid to build a road to haul logs as part of supporting the larget single line pulpmill in the world in Alberta - a place that had very little forest industry in 1987. ALPAC repaid it early - in full with interest!
ReplyDeleteThat loan deal was done way before Hunter ecame President but it was repaid while he was President!
In any event please explain the relevance of your comment to energy sector royalties.