Trump administration 2024-2028

[MilEME09]

Norway also doesn’t have its head up its ass, and has built a significant sovereign wealth fund with its oil revenues. Federal and provincial policy failures mean that we don’t have that when we should have.

policy and exploitation, when AB says you get a 50% royalty rate for ten years, guess what happens at 10 years? they project shuts down, then they restart it a couple years later at the reduced rate

 

[Kirkhill]

Wishing economic harm from the comfort of secure public sector jobs, knowing that that harm is going to disproportionately hit the private sector, is pretty crass.

The pain from tariffs will not be felt by MPs, policymakers, or established civil servants. It’ll be the auto assembly workers, or steel and aluminum manufacturers. It’ll be the people who sell them components and raw materials. It’ll be the Mom and Pop restaurants and stores and bars near the assembly/manufacturing plants. It’ll be the truckers and rail employees who move those goods. It’ll be the cleaners and admin staff at the suddenly shuttered warehouses. It’ll be the coaches and staff for kids’ activities that parents now can’t afford. It’ll be the social and entertainment and recreational and cultural businesses that depend on people having discretionary income. It’ll be the retail workers whose stores are on razor thin margins.

The pain will be felt by the men and women you see on your morning commute, in the grocery store, when you go to the bank or the barber shop. Their faces may not be memorable- but they aren’t faceless.

Those will be the victims of Trump’s economic attacks on Canada and Canadians. There will be areas where it’s highly concentrated, but the impacts will be coast to coast.

So give those jobless people new jobs - Jobs supporting the resource sector.

Tractors, trains and trucks. Pumps and valves. Rails and pipes. Plastics and lubricants.....

It worked for us for 120 years (Sir John A to Brian Mulroney).

And if we could turn the economy around on a dime in WW2 I find it hard to believe we can't do the same today. We literally have everything we, and everybody else, needs.

 

[Kirkhill]

policy and exploitation, when AB says you get a 50% royalty rate for ten years, guess what happens at 10 years? they project shuts down, then they restart it a couple years later at the reduced rate

You don't think Norwegian companies game their system? I continue content with 80% solutions. Heck, I have seen plants continue for decades at 60% levels.

 

[MilEME09]

You don't think Norwegian companies game their system? I continue content with 80% solutions. Heck, I have seen plants continue for decades at 60% levels.

oh they likely do, but clearly the system is more robust than ours

 

[Brad Sallows]

Norway also doesn’t have its head up its ass, and has built a significant sovereign wealth fund with its oil revenues. Federal and provincial policy failures mean that we don’t have that when we should have.

Norway has a population about a quarter larger than AB and is not a member of the EU, so it only has to support one level of government above the cities/counties.

 

[Kirkhill]

oh they likely do, but clearly the system is more robust than ours

Norway has a population about a quarter larger than AB and is not a member of the EU, so it only has to support one level of government above the cities/counties.

The answer is still within the people. It is their politicians that they elect writing their rules and regulations and making their bargains.

Our problem is the one that Anita Anand is trying to address. And despite her being Team Red I am really glad to see she has decided to run again.

 

[suffolkowner]

look to what Norway charges for its oil. Much different situation

 

[brihard]

Norway has a population about a quarter larger than AB and is not a member of the EU, so it only has to support one level of government above the cities/counties.

Everything I said stands both federally and provincially Canada is absolutely capable of legislating/regulating such that hydrocarbon royalties could have built a considerable sovereign wealth fund. It’s not an either/or proposition.

 

[Brad Sallows]

Everything I said stands both federally and provincially Canada is absolutely capable of legislating/regulating such that hydrocarbon royalties could have built a considerable sovereign wealth fund. It’s not an either/or proposition.

The point is its easier to be prosperous if you're not funding as much government overhead.

 

[brihard]

The point is it’s easier to be prosperous if you're not funding as much government overhead.

The point you made wasn’t particularly germane to what I said. I simply said it could have been done and that the fact that it was not is a policy failure. That’s true and stands on its own.

 

[Brad Sallows]

The point you made wasn’t particularly germane to what I said. I simply said it could have been done and that the fact that it was not is a policy failure. That’s true and stands on its own.

It's easier to set aside money in a sovereign wealth fund if you're prosperous. It's easier to be prosperous if you're paying for less government. How much detail is needed to draw the obvious conclusion from "government revenues are fungible"?

A lack of funds for anything could be called a "policy failure" by people who think it's a good idea.

 

[brihard]

It's easier to set aside money in a sovereign wealth fund if you're prosperous. It's easier to be prosperous if you're paying for less government. How much detail is needed to draw the obvious conclusion from "government revenues are fungible"?

A lack of funds for anything could be called a "policy failure" by people who think it's a good idea.

As I said, it is a policy failure that Canada and/or provinces have not built a sovereign wealth fund out of hydrocarbon revenue. Norway, incidentally, spends vastly more per capita on total government expenditures than Canada. Norway has not built a sovereign wealth fund by being a paragon of small government virtue. They simply decided up front that a chunk of those revenues would go into plainly enriching the country. It has been very successful. Canada failed to seize this same opportunity. We still could but we’re way behind.

 

[suffolkowner]

As I said, it is a policy failure that Canada and/or provinces have not built a sovereign wealth fund out of hydrocarbon revenue. Norway, incidentally, spends vastly more per capita on total government expenditures than Canada. Norway has not built a sovereign wealth fund by being a paragon of small government virtue. They simply decided up front that a chunk of those revenues would go into plainly enriching the country. It has been very successful. Canada failed to seize this same opportunity. We still could but we’re way behind.

they also take a good chunk of money too

 

[brihard]

they also take a good chunk of money too

Who are you referring to? The provinces/feds?

 

[suffolkowner]

Who are you referring to? The provinces/feds?

Norways oil royalties

 

[Brad Sallows]

As I said, it is a policy failure

Based on what criteria?

Oil/gas royalties fluctuate a lot, but in Norway typically account for about 20% to 30% of total government revenue. (I find this hard to credit, but my searches turned up figures in the neighbourhood of NK 500 million for oil/gas royalties and total spending approaching NK 2500 million, annually.)

In Canada, royalties are a bit less than 0.1% of total government revenue.

In what universe is setting aside 0.1% of total revenue going to make much difference? In what universe is it likely that Canada can kick royalties up by a factor of 1000?

And what is the opportunity cost of foregoing spending the royalties up front, year after year, in order to accumulate a fund?

 

[brihard]

Based on what criteria?

Oil/gas royalties fluctuate a lot, but in Norway typically account for about 20% to 30% of total government revenue. (I find this hard to credit, but my searches turned up figures in the neighbourhood of NK 500 million for oil/gas royalties and total spending approaching NK 2500 million, annually.)

In Canada, royalties are a bit less than 0.1% of total government revenue.

In what universe is setting aside 0.1% of total revenue going to make much difference? In what universe is it likely that Canada can kick royalties up by a factor of 1000?

And what is the opportunity cost of foregoing spending the royalties up front, year after year, in order to accumulate a fund?

Sounds like our private sector producers were given and got used to a sweetheart deal then. Canada’s annual oil production is more than double Norway’s. Yet Norway has from its oil royalties a fund more than three times the total value of the Canada Pension Plan fund. Norway also seems to have a more than healthy oil production sector despite the cut the nation takes.

A squandered chance on Canada’s part. Really, squandered chances over and over, because it’s not like we had a single opportunity to make that decision. As I said- a policy failure, and one we’ve kept recommitting to.

 

[foresterab]

Sounds like our private sector producers were given and got used to a sweetheart deal then. Canada’s annual oil production is more than double Norway’s. Yet Norway has from its oil royalties a fund more than three times the total value of the Canada Pension Plan fund. Norway also seems to have a more than healthy oil production sector despite the cut the nation takes.

A squandered chance on Canada’s part. Really, squandered chances over and over, because it’s not like we had a single opportunity to make that decision. As I said- a policy failure, and one we’ve kept recommitting to.

As I understand the Norwegian wealth fund it also has a few different aspects:
1) most production is offshore in what we'd call "federal" waters. So from day 1 it was largely a national company working on developing it. Private companies also operate but they pay significantly higher royalty rates than are found in North America.
2) The oil they produce is Brent Crude which has normally been the benchmark international grade and generates much more wealth per barrel than Western Canada Select or West Texas Intermediate grades.
3) The profits from the "boom" years were used to help fund the R&D to diversify. There's a reason they are so dominant in a few sectors and it was the interest from the fund, not the capital, used to help generate more opportunities.

That being said the Norwegians have also been very disciplined about growing the fund. I believe there is not just well royalties revenues going in but also a portion of oil company taxes (i.e. companies based upon non-renewables) which increases the inputs and more importantly....they are not raiding it constantly as a rainy day fund. That, combined with strong investment into international markets (about 50% of the fund total comes from investments), allows them many more options.

The extra 20% profit from Brent Oil is just icing on the cake when compared to the financial discipline they showed. I think back to the 1990's when Natural gas was $8-10/gigajoule and if I remember correctly the Alberta budget was overspent by over 4 billion dollars...but they didn't care due to the gravy train of boom prices. 1.2 billion was spent just on "Ralph Bucks" or a $400 payment due to boom...twice....now think what would happen if instead it went into the Heritage Trust Fund Savings.

 

[Brad Sallows]

I think back to the 1990's when Natural gas was $8-10/gigajoule and if I remember correctly the Alberta budget was overspent by over 4 billion dollars...but they didn't care due to the gravy train of boom prices. 1.2 billion was spent just on "Ralph Bucks" or a $400 payment due to boom...twice....now think what would happen if instead it went into the Heritage Trust Fund Savings.

And that brings us to a question "sovereign wealth fund" advocates don't bother to answer. What happened when the money was spent? What utility was achieved by government spending that year?

There is nothing special about royalties. Any government could create a sovereign wealth fund out of revenues from any sources. The only connection to royalties is a mathematical formula which uses a royalty amount as the basis of a calculation. Example: "Each fiscal year end we will pay into the SWF an amount equal to whatever was invoiced for royalties that year." Norway could just as easily claim it uses oil and gas revenues to pay for lifesaving medical treatments for sick children, and uses taxpayer revenues to create a SWF.

Taking the obvious one step further, if we could reliably depend on a gap between our cost of borrowing and our RoI in the SWF, it might look sensible to borrow massive amounts to create one. The flaws should be equally obvious.

- Even an arm's length SWF will be subject to political pressures.

- A SWF agency might not be able to compete with financial firms for the top-shelf mathematical talent hired to develop models to manage investments, decreasing the likelihood of a consistently profitable borrowing-investing gap.

- Government borrowing competes with private borrowing. The resulting negative effects are not easily measured, but are part of the equation when determining whether a profitable borrowing-investing gap really exists. (The government debt instruments and the SWF are "seen"; the economic effects are "unseen".)

What sets Norway apart, and appears to be forgotten by SWF advocates, is that Norway rather suddenly had a lot of new money (relative to its revenues and expenditures) introduced. Canada doesn't have that. We could instead say that we have a SWF fund which is in large arrears - the accumulated federal deficit. We could achieve an effect similar to investing in a SWF by simply cutting payments to service debts.

SWF advocates can retreat to a more defensible position by asserting that AB should have one. They still have to show that the utility of spending now is less than saving for a rainy day.

 

[Humphrey Bogart]

As I understand the Norwegian wealth fund it also has a few different aspects:
1) most production is offshore in what we'd call "federal" waters. So from day 1 it was largely a national company working on developing it. Private companies also operate but they pay significantly higher royalty rates than are found in North America.
2) The oil they produce is Brent Crude which has normally been the benchmark international grade and generates much more wealth per barrel than Western Canada Select or West Texas Intermediate grades.
3) The profits from the "boom" years were used to help fund the R&D to diversify. There's a reason they are so dominant in a few sectors and it was the interest from the fund, not the capital, used to help generate more opportunities.

That being said the Norwegians have also been very disciplined about growing the fund. I believe there is not just well royalties revenues going in but also a portion of oil company taxes (i.e. companies based upon non-renewables) which increases the inputs and more importantly....they are not raiding it constantly as a rainy day fund. That, combined with strong investment into international markets (about 50% of the fund total comes from investments), allows them many more options.

The extra 20% profit from Brent Oil is just icing on the cake when compared to the financial discipline they showed. I think back to the 1990's when Natural gas was $8-10/gigajoule and if I remember correctly the Alberta budget was overspent by over 4 billion dollars...but they didn't care due to the gravy train of boom prices. 1.2 billion was spent just on "Ralph Bucks" or a $400 payment due to boom...twice....now think what would happen if instead it went into the Heritage Trust Fund Savings.

The Norwegians did exactly with Equinor what the Saudis are now doing with Aramco. Using the immense wealth generated by their black gold to diversify and create numerous income strings via a Sovereign Wealth Fund.