Alberta’s rulers were untouchable - but then the climate changed on its oil
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Your support makes all the difference.Predicting local elections in oil-rich Alberta, traditionally Canada’s most conservative province, has never given punters much value. The Progressive Conservatives (only Canada could have a conservative party that also calls itself “progressive”) held power for 43 years, with an assault from the left about as likely as a Marxist insurrection in Surrey.
And yet that’s exactly what happened last week. The ruling party, under a former investment banker called Jim Prentice, got thumped by the very left-of-centre New Democratic Party, which emerged with 54 seats having held just four prior to the election. The NDP was ahead in the polls from the start of the election campaign, and unlike voters in the UK, voters in Alberta weren’t lying to Gallup.
How did this happen? Political scandals took their toll – the previous Progressive Conservative leader, Alison Redford, resigned in March 2014 following her questionable use of government money (even if spending C$48,000 to attend Nelson Mandela’s funeral was a steal by some standards). Mr Prentice then “fought” a risible campaign, little more than “I need a mandate, so give me one”. He did indeed get a mandate – to take a hike.
Were Alberta any normal province, this wouldn’t take up many column inches outside the local press, but Alberta isn’t a normal province. Home to more than three quarters of Canada’s oil, Alberta has benefited from one of the biggest oil booms in recent memory, only beaten in North America by the boom in North Dakota.
That the oil price is below where it needs to be for Alberta’s reserves to be extracted profitably is a big budget issue – one for which Mr Prentice cannot be blamed. What his party can be blamed for, and should be, is the fact that the Alberta Heritage Savings Trust Fund, set up in 1976 to look after state royalties from the oil industry, was only worth $17bn (£11bn) in December 2014. This compares somewhat poorly with the Norwegian sovereign fund, set up at about the same time and funded in the same way. It is now worth something like $900bn.
Alberta currently takes a lower proportion of oil profits as a royalty than Norway, although it does go some way to proving that high royalties (the posh word for taxes) do not necessarily discourage business. Not surprisingly, one of the NDP’s priorities is to review Alberta’s cut of oil money.
The impact on the oil industry could be bigger than higher royalties. The new leader of the province, Rachel Notley, is likely to try to introduce tougher climate-change measures. Under the arch-conservative Prime Minister Stephen Harper, Canada has taken a much more sceptical approach to climate change despite most of the country melting before its eyes.
Alberta will also increase local corporate taxation by 2 per cent to 12 per cent, more in line with the rest of the country but still at the low end. Expect to hear much wailing and gnashing of teeth from corporations about “job killing”, which apparently only happens when taxes are paid by corporations.
Alberta’s fortunes, and so the political fortunes of its new leaders, rely almost entirely on a recovery in the price of oil. If that doesn’t happen, and in the short term it looks unlikely, Alberta’s boom is over and the NDP is not going to be able to deliver on many of its campaign promises. Nonetheless, voters actually having the guts to try something different – despite the possible impact on the state’s largest revenue generator – is heartening. And by Canadian standards, it’s nothing short of revolutionary.
The cloud burst that proves Google is coming for Wall St
Just a few weeks ago, Google made one of its most audacious (and expensive) recruitment moves to date, poaching Ruth Porat from the Wall Street investment bank Morgan Stanley to become its new chief financial officer. Most of the coverage focused on the fact she is female – glass ceiling and all that. That’s important, but it misses the point.
The main point, made in this column, is that her appointment could mean Google is fixing its stare on the profits made by Wall Street doing work that the search giant could do just as well.
Lo and behold, on Wednesday the privately held “big data” company SunGard unveiled new software that can process and analyse 6 billion trading and market-related messages per hour, with the ability to raise that to a mind-boggling 25 billion per hour. The software is powered by Google Cloud Bigtable, using the same algorithms that power Google’s other big data services, like its search engine and maps.
The work behind this product predates Ms Porat’s appointment, but that does not mean it has not been influenced by her arrival. Maybe it is not Google taking on Wall Street, just seeing what it can add to the mix. For now.
SunGard (which happens to have just filed for an IPO valuing the company at $7bn) is blazing a trail that others surely will follow. If it can deliver data that traders can use effectively at a better price, which is the intention, it won’t be worth $7bn for long – and the $70m that Google has guaranteed Ms Porat over her first two years might end up being a bargain.
Twitter took the money, so it can’t run from investors
Reading online comments about your own opinion columns is not always a good idea, but one reader made a popular point on last week’s column about Twitter and its failure to live up to market expectations.
“Why does it have to make millions in profits?” asked the commentator, or words to that effect, the implication being that I think companies only have worth if they are profitable.
Not true. The real sharing economy exists. Wikipedia has broadened access to knowledge and is funded by donations; Craigslist has nearly killed off local newspapers but has remained admirably immune to the lure of big money.
Twitter chose a different path.
There is nothing wrong with attempting to turn a business into a billion-dollar enterprise, but nobody forces any company to go public and take investors’ money. When management does that, they choose to answer to Wall Street, as Twitter has done, and so that is the standard by which their performance must be judged.
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