UPDATE: May 21, 2015. Goldman Sachs has just released an oil price forecast suggesting that North Sea Brent crude […]
CBC’s The National has tonight broadcast a public debate titled “The Politics of Oil” on the current oil economy crisis in Canada. A key issue exposed tonight was the contrast between Canada’s national policies on oil wealth and Norway’s. In the 1990’s both Canada and Norway debated how to manage oil wealth and created funds to invest for future economic development. Today, Norway’s national saving fund is worth $1.03 Trillion while Canada’s, actually Alberta’s fund, is worth only $17 Billion, and has barely increased since the late 1990’s.
Those following international events have probably already seen the stories on Putin’s Russia, and the combined impact international economic sanctions, and now, the unexpected and unwelcome plummet in World oil prices. The Russian economy in 2015 will likely see a budget deficit of $20 Billion or more as the ruble collapses and oil prices plummet. The problem is global and expected by analysts to persist for the foreseeable future. Lesser developed countries like Venezuela and Nigeria, which are more dependent on their oil economies, are expected to see even greater impacts. Economists commonly refer to this as the “natural resource curse.”
In my earlier post on March 11th , “Alberta Bitumen Bubble and the Canadian Economy: An Industry Analysis Case Study,” I reported the stark facts of Canada’s current economic crisis as announced by Canada’s Minister of Finance, Jim Flaherty, and Alberta Premier Allison Redford, directly resulting from pricing forecasts for “Western Canada Select” (WCS) from the oil sands. In that post I also explored the now well-established economic conundrum known as the “natural resource curse.” This simply means that economies that rely heavily on natural resource exploitation, have historically underperformed more diverse economies. This is now most certainly the case in Canada.