Saturday, June 21, 2008

Canada's oil wealth strategy questioned

CALGARY — The amounts are staggering.

The money that the oil and gas industry is pulling into Alberta this year alone could work out to about $50,000 per capita, thanks to soaring commodity prices.

Canada is already the world's eighth largest exporter of oil, and the third largest exporter of natural gas – an enviable position when prices are skyrocketing and widely expected to stay high.

Yet economists and central bankers who gathered at a conference to brainstorm on how energy affects the economy sound anxious.

Canada, some argue, is “flailing” in how it handles this windfall.

“We are truly endowed with tremendous energy resources,” said Peter Tertzakian, chief energy economist of ARC Financial. “But does it create wealth?”

Production of natural gas is declining, he said. Labour constraints and inflation in the oil patch prevent investment activity to rise in tandem with oil and gas prices. And the costs of higher energy are dividing rich and poor, as well as deepening a regional divide in Canada between energy-producing provinces and energy-importing provinces.

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