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RED DEER, Alta. Jan. 6, 2015/ Troy Media/ – “Please lord, let there be another oil boom. I promise I won’t piss it away next time.” That was a bumper sticker popular in Alberta in the 1980s.
History repeats itself far too often, particularly when it comes to economic cycles and the human mistakes that piggyback on those cycles.
When an economy’s linchpin is a commodity that is prone to market and malicious vagaries, fortune (and fortunes) can turn in a heartbeat. A market manipulated by the puppet masters at OPEC only makes it worse, particularly in a world that hasn’t yet found meaningful ways to push away from carbon-based fuel sources.
The evidence is clearly seen in today’s Alberta. As it has been before, repeatedly.
In the 1980s, the world oil market underwent what economists call a correction – twice, in 1986 and 1988. In all, prices were significantly depressed for almost 300 days. Compounded by the obscenely high interest rates during that period, a deep and scarring crisis hit many Alberta families. People lost their jobs, defaulted on their mortgages, had their vehicles repossessed. Drug and alcohol use ramped up as people sought refuge for horrible circumstances. Families disintegrated under the pressure.
As a young homeowner, I watched as a desperate neighbour barricaded himself in his home. The situation was not resolved until a standoff that drew the police. It was not an isolated incident.
The fallout from that first slump was widespread and sobering. But the lessons learned, apparently, must be learned again – and again.
Albertans, with oil windfall wages in hand, seem to repeat the same mistakes with regularity, despite our best intentions and the warnings of bumper stickers.
It happened again in 1991, 1998, 2001 and 2008 – and it is happening again now.
According to the Canadian Society of Petroleum Geologists, the petroleum-based industry in this country has suffered through seven significant market cycles since 1980. In each, prices have dropped significantly (from almost 44 per cent in the least bad situation to almost 80 per cent in the worst). And these down cycles have lasted a significant amount of time (from 484 days starting in 1998 to 82 days in 1986).
Yet many Albertans just won’t learn. The snowmobiles, boats, trailers, luxury motorcycles and ATVs in the driveways of large homes owned by young families suggest the lessons of the past are not being absorbed. A young family in my neighbourhood bought an expensive pleasure boat just before the 2008 oil price collapse. I’m not sure that boat ever reached water before the family was forced to sell it and their home. On sunny days, they uncovered the boat and sat in it with a cool drink – on their driveway. Perhaps buying a pickup truck to tow the boat was just beyond their extended credit.
A recent Globe and Mail report says young Albertans once again lack the income to service their extraordinary debt. Albertans have the highest debt loads in the country in both significant categories: excluding and including mortgages.
And Alberta delinquencies and insolvencies are above the national average.
You can blame banks for extending massive credit to so many Albertans. You can blame market forces that are beyond our control. You can blame previous governments for not foreseeing the inevitable and working double time to diversify the economy. Or you can blame Albertans for overly optimistic economic choices. There is plenty of blame to go around.
But blame won’t solve the problem.
Inevitably, there will be a price correction. The Saudis are running extraordinary national deficits (21.6 per cent of gross domestic product in 2015, after years of muscular budget surpluses). They can’t keep it up forever; they will eventually have to constrict world oil supplies and push prices back up.
But OPEC members, as a whole, have deep pockets and a will to succeed. So Albertans will continue to suffer.
Albertans’ days of economic glory likely will never be repeated. Oilsands development has ground to a halt and will be slow to resume. Pressure to find alternate energy sources will only grow, leaving Alberta to find new products to market. The days of big oil money are on the wane.
History, at last, will likely not repeat itself – at least with oil and gas as its fuel.
We have likely pissed that opportunity away for the last time.
Troy Media columnist John Stewart is a journalist based in Red Deer. John is included in Troy Media’s Unlimited Access subscription plan.
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