It was nice for Alberta’s New Democratic Party Government that the first thing the price of Alberta heavy crude did the morning after Premier Rachel Notley’s announcement her government would cap production of Alberta oil by 8.7 per cent for three months was to squirt upward.
On Friday night, Western Canadian Select was trading at $21.93 US per barrel. By the end of the day yesterday, the Alberta heavy crude from the oilsands was up to $29.95 US. That’s an increase of more than 36 per cent basically overnight, two nights if you want to be picky about it.
It’s an increase of nearly 126 per cent since Alberta heavy crude bottomed out at $13.27 in the middle of last month. Needless to say, that considerably narrows the gap with West Texas Intermediate, the proximate cause of all the hysteria in the oilpatch and all the political offices that pay it heed.
Astonishingly, the first instinct of the Canadian business press appeared to be to give Premier Notley credit for the upward momentum, and for the fact stocks of bitumen-producing companies were soon bobbing along in the same direction.
You can count on it, though, everyone will soon have a theory about why this happened – and people who don’t like Ms. Notley’s NDP government for whatever reason will have theories that say her policy announcement had little to do with it.
Perhaps Jason Kenney, the leader of Alberta’s United Conservative Party Opposition will claim that stocks would have gone up even more if the NDP had taken his advice and capped production by 10 per cent, instead of 8.7.
Whatever. For the rest of us this suggests that commodities markets may actually behave rationally from time to time – something that anyone who pays attention to business news has plenty of reason to doubt.
And it indicates that most market fundamentalist politicians, like Mr. Kenney, are fair-weather fundamentalists who are always willing to look for an unexpected market failure if that’s what their friends in the corporate sector need.
This is mildly comforting, even if it’s a little hypocritical, to those of us who put evidence ahead of ideology and recognize that market failures are an everyday occurrence and we need governments to step in from time to time, not only to restore sanity as in the present circumstances, but to prevent us from all going crazy in the first place. There’s a term for this: regulation.
Shares of companies like Cenovus Energy Inc. and Canadian Natural Resources Ltd. that were suffering because of the yawning price differential between Western Canadian Select and the benchmark crude from Texas were buoyant. Those of corporations like Suncor Energy Inc. and Husky Energy Inc. with their own refineries south of the 49th Parallel, not so much.
So expect more sniping from the corporations that had been making out like proverbial bandits, like that in Imperial Oil Ltd.’s sour news release Sunday night. It lamely tried to make a case that the Notley Government’s decision to actually act like an owner for the first time since Peter Lougheed was premier “sends a negative message to investors about doing business in Alberta and Canada.”
Well, good try. You have to give Imperial CEO Rich Kruger points for trying. It’s what his shareholders pay him to do, you could argue. But his claim won’t hold much water with most Albertans, regardless of their political stripe.
Bonus points to Derek Fildebrandt, the former fair-haired boy of the Alberta conservative movement kicked to the curb by Mr. Kenney for his various misadventures, for bragging he’s the only MLA still fighting “oil supply management” – a characterization he obviously picked up from reading this blog. (You’re welcome, Derek!)
The Strathmore-Brooks MLA said his tiny Freedom Conservative Party “is proud to be the only party in Alberta standing up for free enterprise.” This will get up the noses of some of his erstwhile allies in the UCP benches.
Nevertheless, taking this position should stand him in good stead to run as a candidate for Maxime Bernier’s sour grapes People’s Party of Canada in the likely event he loses his seat in the provincial general election next spring.
Credit for coming up with an alternate theory first, however, must go to Stephen Mandel of the Alberta Party for claiming the NDP took too long, and the UCP wanted to as well, when he would have rushed in immediately, presumably without consulting anybody.