Fraser Forum

Alberta’s oil competitors have fewer barriers to investment

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The oil boom in Alberta contributed to considerable prosperity for both Albertans and those from outside the province who offered services to the oil sector and its employees, as well as those who found employment related to the boom.

But low oil prices are taking their toll on the many families whose incomes derive from the success of Alberta’s oil industry. The realities of the hardships are all too real when reading through a recent sobering Maclean’s article.

While the Alberta government can't control the price of oil, it can control its policy environment, and recent policy changes in the province are causing a decline in investor confidence, something that was also alluded to in the Maclean’s article.

That Alberta is fading in the mind of some investors should not be surprising, as the province recently increased corporate income taxes by 20 per cent, announced an increase in its carbon levy, instituted a new review of the province’s oil and gas royalties (expected to be released shortly), and announced it will design and implement a new slate of environmental taxes and regulations.

As we have seen in the past, a decline in investor confidence can quickly produce a decline in investment—something that happened previously when the province when through policy changes.
So how far has Alberta fallen in the eyes of investors?

The Fraser Institute’s 2015 Global Petroleum Survey, which measures the perceptions of investors regarding a jurisdiction’s oil and gas policies, presents a unique opportunity to assess this very question, and unfortunately the results are not promising for the province.

When focusing purely on whether policy acts as a deterrent to investment, Alberta fell from the 16th most attractive jurisdiction in the world in 2014 to 38th of 126 jurisdictions in 2015, a drop of 22 spots. Contributing the most to Alberta’s fall were increased concerns from investors over the province’s fiscal terms and taxation, as well as environmental regulations and political stability.

These negative shifts may not bode well for Alberta considering that the province’s immediate geographical competitors are perceived to be either attractive jurisdictions to invest in, or are improving.

For example, Texas, Saskatchewan and North Dakota all rank in the global top 10 in terms of having the lowest barriers to investment. British Columbia also saw a large improvement in 2015.
Policies matter. Adding costs and uncertainty to an industry already hampered by low oil and gas prices policies is not the way to go.


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