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September 29, 2006

Another red flag on Alberta's economy

An article posted today in the Edmonton Sun seems the Toronto Dominons at it again.  A couple of weeks ago, Edmonton was the place to be for the next 25 years, before that Edmonton was on the bubble watch and now it looks like we're going ot bust.  All I know is I'm getting everything I have out of T.D. funds till they can be a little more consistent.  Here's the article from the Edmonton Sun.

Fri, September 29, 2006

Past our peak?Bank forecast raises flags over Alberta's hot economy


This should give all those giddy Alberta PC leadership candidates - with their wild plans to spend our way out of the mess - an attitude adjustment. Or are they so far out of control that nothing sinks in?

The economics department of the TD bank released its latest provincial report yesterday. In it, they used that four-letter word that begins with "B." Not the one that rhymes with "vroom" or "zoom." The other one that Albertans hate to hear. Which sounds a lot like "rust" or "dust."

And if the Toronto Dominion's economic fortune tellers are right - and here's hoping they're not - Ralph's Little Miracle on the Prairie could be looking at a "bumpy road ahead."

Of course, the view from a Toronto bank tower is not always 20/20. Other bank economists have predicted $100 US-a-barrel oil by now. Here's how the TD gets there from here.



"There is no doubt that many ingredients of an overheated economy appear to be in place in Wild Rose Country," the outlook cautioned. It pointed to the "pull back" of both oil and natural gas prices in recent weeks. So much so that the OPEC conspirators were talking yesterday of a production cut to stop the downward spiral of world oil prices.

But they weren't getting any help from the Natural Gas Supply Association. The Washington-based outfit put out its winter supply-outlook document yesterday.

Combine the "dramatic recovery" of gas production in the Gulf of Mexico from last year's hurricane damage with "significantly above-average" gas volumes already in storage. Then add "El Nino conditions" which signal a mild winter.

All these factors "will for the first time in four years result in downward pressure on the natural gas market."

Maybe it's already here, with Direct Energy setting the October regulated price at just $4.10 per gigajoule in Northern Alberta - which sure beats over 12 bucks last January.

All this, with the general fear of a across-the-board slowdown in the U.S. economy, "has raised concerns," the TD Bank analysis sighed, "that a repeat of an economic bust may be in store." Ouch.

Not only has the growth in the Alberta economy "passed its peak" the report warned, "the risks of a hard landing have been rising."

The possibility of us becoming Bust-berta are now as high as 25%, the bank said.

"Such a sizable slowdown from the current rate will not be lost on Albertans," the outlook continued. "At least the mood of euphoria that is pervasive in Alberta will die down significantly."

Unless, of course, you are an Alberta PC leadership hopeful.


But maybe a report released this week by Alberta Auditor General Fred Dunn - who always has both feet planted firmly on the ground - will bring the Tory boys and girls out of the bubble.

Dunn once again had the thankless task of auditing the energy department. What he found is disturbing, especially if you are running your leadership campaign on a gusher of spending.

The department apparently has a "target" that the provincial government should collect 20% to 25% of industry's net operating revenues. As owners of 81% of the resource, we better get our fair share.

The latest stats aren't even included in Dunn's report. But the 2004 numbers show that the three-year average was just 19% of the industry's take. "This has declined from 21% reported in 2003 and is below the target range," the auditor noted.

He blamed reduced royalties for low production gas wells, lower conventional oil production and "significant investments" in the oilsands which allows energy companies to pay the penny-on-the-dollar royalty.

This doesn't look good.


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