Tag Archives: oil prices

Venezuela’s struggle to keep the lights on

The government of Venezuela, once oil-rich and the fat cat of Latin America, is fighting for its political life after oil prices plunged and drought struck. The government declared a state of emergency, on Friday May 13. Behind the politics are ordinary people, such as the residents of Puerto Ordaz, struggling with a lack of power and water.

By Reuters
May, 2016

A non-operative water tank is seen in a neighbourhood called "The Tank" in the slum of Petare in Caracas, Venezuela, April 3, 2016. Although their nation has one of the world's biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation's 30 million people already reeling from recession, the world's highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins

A non-operative water tank is seen in a neighbourhood called “The Tank” in the slum of Petare in Caracas, Venezuela, April 3, 2016. Although their nation has one of the world’s biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation’s 30 million people already reeling from recession, the world’s highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins

Residents of Venezuela’s southern city of Puerto Ordaz enjoy pleasant views of the Orinoco and Caroni rivers and are a half hour’s drive from one of the world’s biggest hydroelectric dams.

Yet most days they suffer water and power cuts.

The irony is not lost on Marelis Gonzalez, who runs the “Las Chinas” food store. She is fed up with constant outages that halt her fridges, making drinks lukewarm and spoiling meat.

“We should be the last ones without power or water,” Gonzalez tuts at the counter on an oppressively hot morning without services in the middle-class, hilltop Villa Brasil district. “If it’s like this for us, imagine those far away!”

Across the road, 82-year-old Arcelia Leandro is waiting patiently in her kitchen for power and water to cook lunch for her grandchildren. “It’s been like this for three months, cuts every day. We’ve never had a situation like this. Horrible.”

Venezuela’s energy and water problems have escalated in the last few weeks: yet another headache for the OPEC nation’s 30 million people already reeling from recession, the world’s highest inflation rate, and scarcities of basic goods.

Officials in President Nicolas Maduro’s socialist government say they can hardly believe their bad luck. After the global oil price collapse slashed revenues by more than half, along came the drought-inducing El Niño weather phenomenon.

That has sent water levels at the all-important Guri dam and hydroelectric complex, just south-west of Puerto Ordaz, to a record low and nearing a critical 240-meter level where some turbines would be inoperable.

“It’s like having a car without any fuel,” Electricity Minister Luis Motta told Reuters, showing where waters at Guri had receded to reveal long-sunken boats, form sand dunes, and even expose roads flooded in the 1960s when the dam was formed.

“It’s difficult to defeat nature.”

A man pushes a wheelbarrow loaded with water containers in a neighbourhood called "The Tank" at the slum of Petare in Caracas, Venezuela, March 17, 2016. Although their nation has one of the world's biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation's 30 million people already reeling from recession, the world's highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins SEARCH "SERVICES TANK" FOR THIS STORY. SEARCH "THE WIDER IMAGE" FOR ALL STORIES

A man pushes a wheelbarrow loaded with water containers in a neighbourhood called “The Tank” at the slum of Petare in Caracas, Venezuela, March 17, 2016. Although their nation has one of the world’s biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation’s 30 million people already reeling from recession, the world’s highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins 

Already unpopular and facing an opposition push to remove him, Maduro has launched an energy-saving campaign and imposed rationing, although he euphemistically calls it a ‘Plan for Load Administration.’ But the government’s main hope is pinned on late rains in the south, forecast for May or June.

Children fill plastic containers with water from a well on a street, close to a neighbourhood called "The Tank" in the slum of Petare in Caracas, Venezuela, March 17, 2016. Although their nation has one of the world's biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation's 30 million people already reeling from recession, the world's highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins SEARCH "SERVICES TANK" FOR THIS STORY. SEARCH "THE WIDER IMAGE" FOR ALL STORIES

Children fill plastic containers with water from a well on a street, close to a neighbourhood called “The Tank” in the slum of Petare in Caracas, Venezuela, March 17, 2016. Although their nation has one of the world’s biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation’s 30 million people already reeling from recession, the world’s highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins 

Critics say the government is using El Niño as a convenient scapegoat to hide incompetent management of the electricity sector: insufficient investment, poor maintenance, corruption, and a failure to diversify away from the Guri which provides two-thirds of Venezuela’s power.

After a 2009-10 drought that also led to electricity rationing and hurt late president Hugo Chavez’s presidency, the government poured investment into thermoelectric projects to try to prevent a repeat.

Stalin Gonzalez, a lawmaker who heads the opposition-run National Assembly’s administration and services committee, said $21 billion had been put into the electricity sector since 2010. “What did they do during all this time?” he asked.

Opposition politicians have lambasted Maduro’s power-saving measures, including giving state workers a two-day week, urging women to reduce the use of hair-dryers, and changing Venezuela’s time-zone so there is half an hour more light in the evenings.

High up in the steep and cramped streets of Caracas’ Petare slums, one of South America’s biggest shanty-towns, residents count the time they last had running water – 1 year and 7 months – and need to go ever further and pay ever more to find it.

Their neighborhood, ironically, is called “The Tank”, after a huge, rusting hulk of a water storage container that towers over shacks: it has been empty for years.

Children snake up the hill with jerry cans filled from a well with precious loads of water. Residents purify water with vinegar, and carefully “recycle” it from kitchen to toilet.

A man walks past an electric pole with overhead power cables in Caracas, Venezuela, April 2, 2016. Although their nation has one of the world's biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation's 30 million people already reeling from recession, the world's highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins SEARCH "SERVICES TANK" FOR THIS STORY. SEARCH "THE WIDER IMAGE" FOR ALL STORIES

A man walks past an electric pole with overhead power cables in Caracas, Venezuela, April 2, 2016. Although their nation has one of the world’s biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation’s 30 million people already reeling from recession, the world’s highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins 

When they have money, families band together to buy a truckload of water, but the price has jumped to 25,000 bolivars – twice the monthly minimum wage – for 7,000 liters.

Maria Rivero, carrying plastic containers used to carry water, poses for a picture in a neighbourhood called "The Tank" at the slum of Petare in Caracas, Venezuela, April 3, 2016. Although their nation has one of the world's biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation's 30 million people already reeling from recession, the world's highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins SEARCH "SERVICES TANK" FOR THIS STORY. SEARCH "THE WIDER IMAGE" FOR ALL STORIES

Maria Rivero, carrying plastic containers used to carry water, poses for a picture in a neighbourhood called “The Tank” at the slum of Petare in Caracas, Venezuela, April 3, 2016. Although their nation has one of the world’s biggest hydroelectric dams and vast rivers like the fabled Orinoco, Venezuelans are still suffering water and power cuts most days. The problems with stuttering services have escalated in the last few weeks: yet another headache for the OPEC nation’s 30 million people already reeling from recession, the world’s highest inflation rate, and scarcities of basic goods. President Nicolas Maduro blames a drought, while the opposition blames government incompetence. REUTERS/Carlos Garcia Rawlins 

Some channel rainwater off their roof into buckets via corrugated iron sheets.

“I feel abandoned. It’s humiliating. This is no life,” said community worker Yunny Perez, 46, saying her family now has to make painful choices between spending on water, food or medicines for a disabled child.

“We’re an oil country yet look at the poverty here,” added Perez, who used to be a “Chavista” or fervent supporter of the late president, but is disgusted with Maduro and has just begun supporting the opposition.

So bad is the situation that thieves ambush water trucks to siphon off their load.

Schools close early, malls and hotels have been ordered to rely on their own generators, and plastic water tanks are multiplying across the nation.

Opposition lawmakers say the lack of water is increasing health risks, with scabies on the up for example.

And protests are proliferating.

For a nation used to considering itself a rich kid on the block in Latin America – thanks to its oil wealth – the indignities from failing services are a blow to the national psyche.

As well as having the world’s largest oil reserves, Venezuela has big areas of rainforest, plenty of gold and other metals, and vast water resources. Yet the tourist brochures showing luxuriant scenes of water gushing off Angel Falls or down the Orinoco River now seem like a cruel joke.

Satirical web site El Chiguire Bipolar has been mercilessly parodying the situation. It ran one spoof story on the government submerging an overweight politician in the Guri to raise waters, and joked that now Mars-like conditions make Venezuela ideal training for astronauts.

“The conditions are perfect: no water, only light by day, ferocious heat and precarious food sources,” it scoffed.

Copyright Reuters 2016

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Oil slump devastates Venezuela

Aerial view of Caracas from Plaza Venezuela. Paulino Moran/Flickr/Creative Commons

Jonathan Manthorpe: Venezuela’s grey and featureless President, Nicolas Manduro, the default successor to that preening, strutting rooster Hugo Chavez, is set to become the first head of government felled by tumbling oil prices. Above, aerial view of Caracas from Plaza Venezuela. Paulino Moran/Flickr/Creative Commons

JONATHAN MANTHORPE: International Affairs
March 5, 2016

Nicolás Maduro in 2013, at the memorial for Hugo Chavez. Prensa/Miraflores/Flickr/Creative Commons entrega de la Memoria y Cuenta del año 2012. Prensa / Miraflores

Nicolás Maduro in 2013, at a memorial for Hugo Chavez. Prensa/Miraflores/Flickr/Creative Commons

Venezuela’s grey and featureless President, Nicolas Maduro, the default successor to that preening, strutting rooster Hugo Chavez, is set to become the first head of government felled by tumbling oil prices.

It’s just a matter of who gets their boot lined up first to kick him out the door. The opposition, which since December has controlled 75 per cent of the seats in the National Congress, is working on a recall referendum.

Powerbrokers in Maduro’s United Socialist Party of Venezuela (PSUV) strongly suspect him of betraying the purity of Chavez’ fabulist, operatic “Bolivarian Revolution,” and are lurking behind the drapery with knives drawn.

And then there’s the military, which in Venezeula can always be depended on to launch a coup if the civilians bungle things.

The fate of Maduro, who as Vice-President easily moved up a notch after the death of Chavez in March 2013, is of minor importance in the grand scheme of things. Far more pressing for Venezuela’s 31 million people is that Maduro, and Chavez before him, have brought the country to the brink of economic and social collapse. It may yet tip over the edge into chaos.

Inflation is running at over 180 per cent according to the Central Bank, but the International Monetary Fund says it will hit 720 per cent this year. The economy contracted by over 10 per cent last year and is set to shrink by a further eight per cent this year, according to the IMF.

Basic foodstuffs such as sugar, rice, pasta, milk, cornmeal and flour are often unobtainable, and when stores do have supplies, people have to line up for hours for the chance to buy. It’s the same situation for basic medicines and for the same reason.

Venezuela depends on imports for most of the basics of life, and the bottom has dropped out of the value of the currency, the bolivar.

Maduro has tried to open the door by setting an official rate for necessary imports at 10 bolivars to the United States dollar. For non-essentials the rate is 200 bolivars to the greenback. But in Marxist and mismanaged countries like Venezuela, the blackmarket is always the best measure of the real strength of the currency. The blackmarket rate in Venezuela is over 1,000 bolivars to the US dollar. By this count, Maduro’s much ballyhooed increase on March 1 of the minimum wage to 11,578 bolivars a month is worth less than $US12. That’s less than a quarter of the United Nations’ poverty level.

The immediate cause of this turmoil is the 70 per cent decline in oil prices over the last two years. Venezuela has the world’s largest proven oil reserves and is the tenth largest producer. According to the Organization of Oil Exporting Countries, oil revenues bring in 95 per cent of Venezuela’s hard currency and account for 25 per cent of gross domestic product.

Venezuela has suffered from the “Dutch disease” of excessive reliance on one product since the discovery of oil under Lake Maracaibo during the First World War. This bred both corruption and a cycle of military coups. The cancer reached the bone during the 1973 oil crisis, when wealth flooded into Venezuela in untenable quantities. The whiplash came in the 1980s and 1990s with the collapse of oil prices. There were endless violent street protests and attempted military coups. One, in 1993 was led by army major Hugo Chavez. He had for years been running within the armed forces a secret socialist movement, founded on the supposed ideals of South American revolutionary Simon Bolivar. The coup failed and Chavez was imprisoned, but was pardoned the following year, 1994. Chavez went public with his Bolivarian Revolution political movement and in 1999 won the presidential election.

In power, Chavez swiftly moved to institute a socialist dictatorship. This was widely popular among the country’s poor and indigenous peoples and he was re-elected under the new constitution in 2001. But the authoritarian changes sparked protests among the middle and business classes. Many people were killed during street protests and strikes in 2002 that tried and failed to force Chavez from office.

Chavez was re-elected in 2007 and again in January 2013, shortly before his death from cancer.

Chavez’ presidency was marked by showmanship and flamboyant gestures. He used Venezuela’s oil wealth to make himself the patron of Cuba after the collapse of the Soviet Union when Moscow stopped propping up Fidel Castro’s regime. In 2006, Chavez toured Europe and promised to provide cheap oil to the continent’s poorest communities, drawing peaens of praise and thanks from the mayor of London, Ken Livingstone. He also delivered cheap heating oil to the impoverished of Massachusetts in the winter of 2006. But mostly he hammered constantly at the theme that his administration was under threat from the U.S. government of President George W. Bush, which he claimed was conspiring with Venezuela’s business classes to remove him.

Chavez used the straw man of foreign conspiracy to introduce all kinds of financial controls and nationalizations of industrial and agricultural sectors. These applied in such a way as to try to cripple Venezuela’s business community and to reward the President’s friends, including the military. The result, of course, was to embed corruption and to create a grossly misconceived and dysfunctional economy that could only survive while being fed a daily diet of petrodollars.

It was this genetically discordant animal that Maduro inherited three years ago after Chavez’ death. He has done nothing in the years since to try to put Venezuela on a sounder footing. Indeed, all his actions since matters came to a head with the oil price slump and his PSUV party’s loss of control of the National Assembly in December, suggest he only knows how to sing out of Chavez’ hymn book.

Before the new National Assembly met, Maduro packed the Supreme Court with 13 new judges sympathetic to himself and the PSUV.

So far the court has provided Maduro with some protection against the opposition-dominated National Assembly. Leading opposition figure Henrique Capriles has launched a recall campaign, aimed at getting the three million signatures necessary to force a referendum requiring Maduro to leave office before his current term ends in 2019. The Supreme Court is contesting the timing of the recall referendum, and has also dismissed a bill that would grant amnesties to political prisoners jailed under Maduro and Chavez.

During his State of the Nation Address on January 14, Maduro announced an emergency decree, giving himself extraordinary powers for 60 days to try to address the economic crisis. The National Assembly rejected Maduro’s move, but the Supreme Court backed the president.

But even with these draconian powers, Maduro doesn’t have the will to make the fundamental reforms necessary to set Venezuela on a sustainable economic course.

His fiddling with the official exchange rates to try to encourage the importation of necessary basic foods and drugs will do nothing in the face of the more realistic blackmarket rate.

Raising the price of gasoline by 6000 per cent made a lot of headlines, but it still costs less to fill up a gas tank in Venezuela than anywhere else in the world and the government subsidies for drivers are worth about $US18 billion a year.

There has not been an increase in gasoline prices since 1989, when the rises sparked violent riots. To try to avoid a recurrence, Maduro announced increases in social spending and a rise in the minimum wage from 9,647 bolivars a month to 11,578. As the money is essentially worthless and there’s nothing to buy with it anyway, this is a totally empty gesture.

Another strategy is to produce 19.5 million tonnes of “fair priced” food. But the dependence on bureaucratic management and price controls insure failure of this scheme from the start.

The final move shows where Maduro really fears a backlash. He announced that the military will take over all aspects of the country’s energy and mining businesses, including transport, construction, imports and exports. The new Military Company for the Oil, Mining and Gas Industries has been given a 50-year lease to, in essence, run the economy.

This massive bribe may not be enough to save Maduro from the military, on whose support he has depended increasingly as his stock withers within his PSUV and the opposition manoeuvres to oust him. There is a significant faction within the armed forces that believes Maduro must go, and by a coup if necessary. After all, these officers argue, it is the military that will have to deal with the unrest that is likely to spring from the President’s economic and administrative incompetence.

However, while the most influential figures, such as Defence Minister Vladimir Padrino Lopez, want Maduro out, they want his removal to be managed in a constitutional and dignified manner. They would rather avoid a classic military coup.

The most likely outcome for Maduro is that within days or weeks he will bow to insurmountable calls for his resignation from the military and his PSUV party. That would require the swift calling of new elections, with the prospect of an opposition leader becoming President.

By any measure, that will not be a victory to be envied.

Copyright Jonathan Manthorpe 2016

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Jonathan Manthorpe is the author of “Forbidden Nation: A History of Taiwan.”

Contact: jonathan.manthorpe@gmail.com. Please address queries about syndication/republishing this column to jonathan.manthorpe@gmail.com

 

 

Manthorpe B&WJonathan Manthorpe is a founding columnist with Facts and Opinions and is the author of the journal’s International Affairs column. Manthorpe has been a foreign correspondent and international affairs columnist for nearly 40 years. Manthorpe’s  nomadic career began in the late 1970s as European Bureau Chief for The Toronto Star, the job that took Ernest Hemingway to Europe in the 1920s. In the mid-1980s Manthorpe became European Correspondent for Southam News. In the following years Manthorpe was sent by Southam News, the internal news agency for Canada’s largest group of metropolitan daily newspapers, to be the correspondent in Africa and then Asia. Between postings Manthorpe spent a few years based in Ottawa focusing on intelligence and military affairs, and the United Nations. Since 1998 Manthorpe has been based in Vancouver, but has travelled frequently on assignment to Asia, Europe and Latin America.

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NOTEBOOK: a bellwether election for Alberta?

May 5, 2015

Could Alberta become  a bellwether for politics in North America’s oil patch?

Alberta citizens vote in a provincial election today.  Alberta — world famous as home of the oil sands — has been ruled by the Progressive Conservative party for more than four decades, and it is the base of Canada’s hard-right federal Conservative government. Now the socialist New Democratic Party, which received less than 10 per cent of the popular vote in 2012,  is on a wave of massive popular support, and numerous opinion polls give it a shot at governing.

The election of a socialist government in right-wing Alberta would have been unthinkable until now — but amid social and political upheaval, global oil prices are volatile and plunging, and communities almost entirely reliant on oil and gas extraction are suffering.

Alberta-based journalists Penney Kome and Sean Holman consider aspects of the election issues.

Photo of an Alberta oil rig by Greg Locke, Copyright 2014

Alberta oil rig. Photo by Greg Locke © 2014

Transparency Issue Little Seen on Campaign Trail

By Sean Holman

Alberta’s freedom of information law is weak and underused. Yet, in an election where one of the most important issues is government accountability, there has been surprisingly little discussion about reforming that law – despite proposed policy changes that could further threaten the public’s right to know.

Progressive Conservative leader Jim Prentice, Incumbent premier. Photo: premier's office

Progressive Conservative leader Jim Prentice, Incumbent premier. Photo: premier’s office

According to a 2012 report from the Centre for Law and Democracy, Alberta tied with New Brunswick and the federal government for having the worst freedom of information law in the country. In addition, it costs $25 just to file a freedom of information request in Wildrose Country  –  among the highest application fees in the country.

I can’t help but think that’s one reason why the province’s access law is so underused.

According to the most recent statistics available, in fiscal 2012/13 Alberta government ministries received 60 general freedom of information requests per 100,000 people in the province. By comparison, in Ontario, where the application fee for those requests is $5, that number was 87 in 2012. And, in British Columbia, where there is no charge, that number was 106 in 2012/13.

But, troublingly, Premier Jim Prentice has a plan that could further suppress such access requests in Alberta even further.

Right now, an individual who files a freedom of information request is the only one who receives the records responsive to it. That means reporters and others can get scoops from making those requests – a reward for the considerable time, effort and sometimes money spent on them.

But, in February, CBC News revealed the premier moved to take those scoops away by “personally” ordering government to post responses online for everyone to see, including competing reporters. And if you don’t think that’s a disincentive, just think how you would feel if someone else could constantly claim credit for work you were responsible for.

Prentice’s order has yet to be carried out. Nevertheless, the platforms for the Alberta Party, the NDP and the Alberta Liberals don’t include a word about strengthening the province’s freedom of information law. Only Wildrose’s platform promises such a change, while the Greens have a plank that commits them to a “radical overhaul of rules around transparency and accountability.”

Nor have journalists talked much about the need for reform either, perhaps because they believe too many believe Canadians don’t care about that issue – a self-defeating notion, even if it may sometimes be a truthful one.

But what all this amounts to is, at the very least, a missed opportunity to change that indifference, raising awareness among Albertans about why their information rights are important and how those rights can prevent another 44 years of unaccountable governments in this province.  

To read Sean Holman’s full column, Transparency Issue Little Seen on Campaign Trail, visit his site.   

Copyright Sean Holman 2015

Sean Holman is assistant professor of journalism at Mount Royal University, Calgary, Alberta

Hay field in Peace River, Alberta. Photo by Greg Locke, copyright 2009

Hay field in Peace River, Alberta. Greg Locke © 2009

Alberta poised to turn NDP orange as Tory grip on power withers

By Penney Kome 

Alberta, the province that elected North America’s first Muslim mayor, is flirting with another surprise: a feminist New Democrat government — or at least Opposition — led by labour lawyer Rachel Notley. Notley worked for decades in the essential and very contentious fields of workers’ compensation and occupational health and safety, in B.C. as well as Alberta. Twice elected to the legislature (2008, 2012), she became party leader last October. All of her own accomplishments are enhanced by her heritage as daughter of the late revered ND leader, Grant Notley. His tragic 1984 death in a small plane crash plunged even conservative Albertans into mourning. 

Alberta NDP leader Rachel Notley, on May 3. Photo: Don Voaklander, creative commons

Alberta NDP leader Rachel Notley, on May 3. Photo: Don Voaklander, creative commons

In the 2015 snap election, called before the official “fixed” election date, the NDP is running a full team of 87 candidates — 52 per cent of whom are women. An April 13 election poll found the NDP running strongly, with 30 per cent of decided voters, compared to 24 per cent for the Conservatives and 31 per cent for the remaining rump of the far right Wildrose Party. “NDP feel momentum building in Calgary,” the Herald reported on April 18.

Jim Prentice must be wondering what happened to the Progressive Conservative party’s iron grip on Alberta politics. Sometimes compared to visionary Premier Peter Lougheed, Prentice was the only federal Harperite to vote in favour of same-sex marriage. He was elected federally three times, in 2004, 2008 and 2010, with Harper as leader and held three different Cabinet posts, serving consecutively as minister of Indian Affairs, Industry, and the Environment. Then he stepped down, and returned to private life for four years, until he ran for and won the provincial leadership in 2014.

True, he inherited a party in disarray after the Conservatives unceremoniously dumped Alison Redford — and a one-resource economy in disarray, after the price of oil plummeted. This spring, he had to postpone his proposed budget a month to see which way the oil prices were blowing. Prentice did score a major coup when he recruited Wildrose leader Danielle Smith and eight of her Wildrose MLAs, getting them to cross the floor just before Christmas. That should have ended the Wildrose threat — but it didn’t. Instead, under new leader Brian Jean, Wildrose’s five remaining MLAs and 81 candidates are attracting nearly a third of decided voters — 31 per cent.

Read Penney Kome’s full column, Alberta poised to turn NDP orange as Tory grip on power withers, on Rabble.ca.  

Copyright Penney Kome 2015

Penney Kome is an author and journalist based in Calgary. 

 

Further reading:

Alberta election projection, ThreeHundredEight.com

Canada’s Mayor: Naheed Nenshi. By Brian Brennan, Facts and Opinions (paywall)

 

 

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Let the Good Times Roll

Fireworks Vancouver 2014

“The decline in oil prices comes as the U.S. is a lot closer to good financial stability than at any time in the past decade, and the crazies only come out when a government is broke, or nearly so. That will not be the case in 2015,” predicts Jim McNiven. F&O file photo

 JIM MCNIVEN  
January, 2015

Just to get you in the mood for this New Year’s piece, let me suggest you look at these two YouTube performances, one by the Grateful Dead from 25 years ago, and the second by the Grand Dominion Jazz Band from about two years ago. Life is getting interesting if you live in North America.

 

 

 

The American and Canadian economies will do well this next year, especially the American. Their consumers, who represent over 70% of that economy’s GDP, should begin to shed their uncertainties and the Federal Reserve won’t raise interest rates. The Canadian economy will go into an election year with the outcome looking close, which means Canadian austerity will relax and its consumers, only representing 50-or so per cent of that economy, will get some breaks. The biggest break for both countries is the collapse of oil prices, which is likely to persist for some years, well after the initial sigh of relief has disappeared from the consumers. It is like a nice, ‘progressive tax cut’ in both countries. Numbers like $750 billion are bandied about in the U.S., a lot more than any Congress could deliver.

On top of this, there is a ‘goody’ coming to the travelling well-off, including seniors. The Bank of Japan has been buying up massive quantities of government bonds held by people and institutions in that country and paying for them in newly-printed money. This is supposed to generate inflation and lower the value of the yen, making Japanese exports more competitive. It looks like the European Central Bank in the Euro-zone is going to do much the same thing to stimulate its continuously sluggish economy, thus making the Euro decline in value. This year looks like a prime time for that long-delayed European or Asian tourist trip.

In Canada, the dollar has declined around 15 per cent from its early 2014 value of around par with the US dollar, to 86¢, which is about the place where, given Canadian productivity and other ratios, the Bank of Canada is probably content to have it. If it looks like it might sink further, one could expect a rise in Canadian interest rates. Being somewhat of a commodities economy and with commodities almost all suffering, the dynamism in the country will shift to Ontario and BC from Alberta and Saskatchewan.

The fall in oil prices probably won’t hurt most of western Canadian production. Most western Canadian producers have been squeezed for the past few years by a differential between the West Texas Intermediate (WTI) price and the international Brent benchmark price and have had to become more efficient. The price drop will slow or stop a lot of development work on new, higher-priced oil projects for the time being. This will take out the growth dynamic in the Oil Patch(es). The drop in the dollar will make some non-commodity activity in central Canada more attractive, as will the drop in fuel prices at the factory gate. 

On the other side of the ledger, there are some problems and losers. First and foremost are the budgetary implications for a number of oil-producing countries, especially, Russia, Iran, Venezuela and Iraq, all of whom need $100-plus per barrel to pay for expenditures already budgeted. With Iran and Russia the subject of formal international sanctions, their ability to go to foreign capital markets is not good, and at the least a really expensive action. The rational thing to do in this reality is to negotiate an end to these sanctions, but politics is about perception and not about reality. So, who knows what might happen. Geopolitical risk is perhaps the biggest downside factor to watch.

Second is the role of the U.S. dollar as everybody’s popular currency. The Federal Reserve (Fed) sold many billions of dollars in bonds over the past few years as part of a kind of stimulus program for the economy, called ‘quantitative easing’ (QE). It didn’t do much to inflate the economy, so where did these bonds go? It seems that a lot of these were used by individuals and institutions as security for local funds then used in dollar-denominated loans for emerging world projects. If the intermediaries need to recover their bonds quickly, projects could falter and small economies could be pushed to the brink, with nasty results. We saw a lot of this in Thailand and Mexico in the 1980s. The problem that follows is one of ‘contagion’, where lenders elsewhere get nervous and call in their loans, etc., etc., and you’re back in a meltdown like, though different from, 2008. Uh-oh.

Then there is the demographic question. If, as in Japan, a declining economy, low savings rate and low productivity growth all lead to declining demand, then all Prime Minister Abe is doing with his QE is to try to zap a dead cat in hopes it will come alive again. Europe isn’t in as bad a situation, but is starting to go that way. An old society in general, with dozens of autonomous fiscal policies and political regimes is going to make the results of the ECB’s plans for its own QE problematic. 

Finally, we should keep an eye on the possibility of an American ‘Arab Spring’ experience as the inequality issue continues to bubble along. Economic inequality generated ‘Occupy Wall Street’ and personal inequality has generated the protests in St. Louis, MO, and in New York City. Add to this right-wing disaffection with legal and bureaucratic systems that seem to have broken down, to nobody’s advantage. All in all though, the decline in oil prices comes as the U.S. is a lot closer to good financial stability than at any time in the past decade, and the crazies only come out when a government is broke, or nearly so. That will not be the case in 2015.

So, my best wishes for a happy New Year.

 Copyright Jim McNiven 2015

 

Jim McNiven

Jim McNiven

 James D. McNiven, author of the Thoughtlines column, is Professor Emeritus at Dalhousie University in Halifax, Canada, and Senior Policy Research Advisor with Canmac Economics Ltd. He was the Fulbright Research Professor at Michigan State University’s Canadian Studies Center in 2010-11.

Dr. McNiven has a PhD from the University of Michigan. He has written widely on public policy and economic development issues and is the co-author of three books. His most recent research has been about the relationship of demographic changes to Canadian regional economic development. He also has an interest in American business history and continues to teach at Dalhousie on a part-time basis. 

 

 

 

 

 

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