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0 pointseigenvector10y ago0 comments

"Canada went all-in on oil" implies Canada had a choice. When the global price of a commodity you have massive reserves of spikes, what else do you do besides sell as much of it as you can?

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4 comments · 2 top-level

graeme10y ago· 2 in thread

Plan for the future by not leaning into the upswing of a boom and bust cycle. Governments encouraged more development, accentuating the cycle.

Governments could also have established rainy day funds. Alberta has one, but they haven't added anything to it since 1987. Canada as a whole has none (this is somewhat reasonable, as the federal government doesn't have jurisdiction over natural resources)

https://en.wikipedia.org/wiki/Alberta_Heritage_Savings_Trust...

forgetsusername10y ago

>Plan for the future by not leaning into the upswing of a boom and bust cycle.

I disagree. The upswing of the commodity cycle is precisely when you sell. Who knows, maybe oil is obsolete in 10 years. Then we're sitting on a pile of worthless gunk. Get your money when the gettin' is good.

graeme10y ago

I would agree with you, if the country had been saving any of it. As we currently ran things, the oil sales crowded out other sectors via currency appreciation for no long run gain.

That's environmental concerns aside. There are pretty good global and domestic reasons for leaving the most marginal bits of the gunk in the ground. And leaning into the cycle develops precisely those marginal sources that were most polluting or least profitable.

JamisonM10y ago

You can choose to sell less of the asset but you can also quite simply buy up massive amounts of reserves in a different currency. The CAD's value relative to the USD was motivated by the need to buy CAD in order to purchase the oil. This can be offset by using the royalties, and more, to buy up USD-denominated assets to balance the demand and lower the relative value of the CAD. As an example, there is a reason that the Chinese government his such a prolific purchaser of US treasuries, and it is not because they are particularly bullish on the US.

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