Alberta Premier Jim Prentice has found indirect support at the highest level from ExxonMobil Chief Executive Officer Rex Tillerson for his doom-and-gloom message that those who rely on oil prices for a living are in for a rough ride.
Tillerson spent, for him, an unusual amount of time in the first week of March behind microphones, on the airwaves and in front of TV cameras spreading the word that the world and investors should “settle in” for a long period of relatively weak and volatile crude prices.
He said there is the potential “for further pressure on the market,” noting that the rapid filling up of U.S. storage facilities compounds the need for producers to sell and could drive prices under US$40 per barrel.
Over the next couple of years “we’re going to kind of wallow around where we are ... until some of this sorts itself out,” Tillerson said.
He said a number of factors are “conspiring to create this market imbalance,” with the U.S. economy less than robust and demand for oil in Europe and China in decline.
‘A lot of bad news’
Bank of Montreal Chief Executive Officer Douglas Porter said “a lot of bad news began to unfold rapidly at the start of January. That’s when the big (oil based) capital spending cuts ... and some of the layoffs were announced.”
For Prentice it is the worst of times as he faces an estimated budget deficit of C$7.5 billion, dragged down by resource revenues, in the next fiscal year.
Seldom, if ever, has a political leader in Canada spent more time preparing more than 4 million Albertans for bad news when the province releases its 2015-16 budget on March 26.
Prentice frequently uses the word “unsustainable” as he prepares government employees for cuts or layoffs, driving home his basic point that Alberta can no longer expect to pay for the best of everything - notably the highest wages in Canada for doctors, nurses and teachers - with oil money.
“Nobody can be under any doubt that we’ve gone from the highest growth rate in Canada to somewhere near the bottom, so it’s going to be a tougher year for all of us,” he said.
Nor does sit well with many Albertans when Prentice rejects the notion of an increase in corporate taxes, arguing that would further accelerate the loss of investment and revenue.
Provincial sales tax?
The Canadian Federation of Independent Business wants to remove another option from the table by warning Prentice against ending Alberta’s prized position as the only Canadian holdout against a provincial sales tax.
Finance Minister Robin Campbell said March 2 that the budget will usher in unpopular measures that previous governments have sidestepped, which he has hinted could include a return to health-care premiums, road tolls and an increase in gasoline taxes.
But if public sector layoffs are going to be on the leading edge of Campbell’s spending cuts, government employees have already served notice that they will engage in wildcat strikes.
The budget is expected to be followed by an election in April when Prentice’s fleeting rise in public opinion polls will be put to the test.
He badly damaged his popularity on March 5 on a province-wide radio program when he told Albertans they had only to “look in the mirror” to understand why Alberta is facing such an enormous budgetary shortfall.
“We all want to blame somebody for the circumstance we’re in,” he said. “Basically all of us have had the best of everything and have not had to pay for what it costs.”
Opposition party leaders were quick to point out that Prentice’s governing Conservative party has ruled the province without interruption for almost 44 years.
Rachel Notley, leader of the socialist New Democratic Party, said the suggestion that Albertans should check their reflection was “profoundly insulting ... there is no question that what this has revealed is an incredible level of arrogance.”
