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| Going around in circles must be frustrating. |
Plummeting crude prices have dropped refining
margins to negative numbers and so it isn’t surprising that Come by Chance
refinery announced Sunday it is shutting down operations for upwards of five
months.
The official
excuse is the pandemic but the real reason is economics. There’s no point
in running a business that isn’t making money.
And you cannot make money in a global market where demand for petroleum
products has dropped like a stone.
The same economic reality that is hitting the oil
industry is hitting governments in provinces that depend heavily on oil
royalties. In Alberta, Western Canada Select
was trading at less than five Canadian dollars a barrel on Friday.
According to the National Post, the provincial
government estimates that every dollar in crude prices costs the Alberta
government $355 million in lost royalties. Economist Trevor Tombe estimates the
drop in crude prices thus far has cost the Alberta government about $5 billion
in royalties.
Newfoundland and Labrador is in worse shape. Going into what is now the crisis year of
2020, Dwight Ball’s Liberal administration forecast as deficit of almost $800
million. Last Thursday, the provincial legislature
approved government requests to borrow almost $3
billion dollars directly or through the provincial hydro corporation. Finance minister Tom Osborne told reporters
outside the House of Assembly he had no idea how big the 2020 deficit would be.
Premier Dwight Ball was no more help in understanding
how big a financial problem the government faces this year. He ducked questions twice last week about the
province’s finances by pointing to the borrowing bill. The borrowing bill, he said, would allow the
government to find money to meet payroll and provide essential services.
Ball wasn’t any clearer on NTV’s Issues and Answers
on Sunday. Michael Connors asked Ball if
the province could raise the $2.0 in direct borrowing approved by the
House. The short answer was “yes”. As Ball knew when he recorded the interview
on Friday, the provincial government went to the markets two days before and
raised the money it needed this week – still in the old fiscal year – with the
help of the Bank
of Canada’s commitment to buy up 40% of any provincial treasury bills or
promissory notes with a term of 12 months or less.
Ball’s answer was a rambling upchuck of talking points:
“We think so because what we have right now is supported by the Bank of Canada they
40 percent of the credit to as we put t bills as an example and promissory
notes out there that provinces do from time to time so this puts now with the
support of the Bank of Canada puts Newfoundland and Labrador and not just
Newfoundland and Labrador because we regularly have conversations with the
other premiers as well so it’s not just Newfoundland and Labrador that are
experiencing the problems of reaching financing given the circumstances that we’re
in so given the decision made by the Bank of Canada to support provinces like
Newfoundland and Labrador up to 40% of the credit that they would be looking
for now we have the ability with the decision that was made in the House of
Assembly yesterday to be able to go to our lenders with the support of the bank
of Canada to put in place a loan of up to $2 billion dollars to support
province indeed then that allows us to support the economy and to support and
supply services for Newfoundlanders and Labradorians.”
Connors’ next question was whether or not we’d see a spring
provincial budget. Ball’s response was not
even relevant, initially and finished up with the claim that the province would
have an economic crisis after the health crisis was over.
Connors tried again and asked if there might at least
be an update on the debt and deficit. Transparency,
Ball replied, as went back to talking about the health crisis, and without any
hint he was aware he was being completely opaque about the province’s finances.
Ball talked about economic difficulty but, when you
listen to his comments at around the 10-minute mark of Connors’ interview, you
can tell Ball is referring not to the provincial economy but to the provincial
government’s debt and deficit. His
solution to that problem in 2020 is the same as it was in
2015 when he took office.
We are back to looking for a federal bailout. In order
to get from where we are to where we need to be, Ball said, the provincial
government will need to be “in a unique situation” with the federal government,
not like any other province. “In the very near future we will need some
extraordinary help from Ottawa.”
Even participating in cost-shared stimulus programs
would be difficult given the government’s financial state, Ball insisted. But
as fast as he claimed poverty, Ball talked about giving people of the province
relief from their electricity bills.
Of course, Ball knows the government’s financial state
remains precarious because he continued the overspending started in 2006. As much as the public complained in 2016, the
changes were relatively minor and in 2017, Ball abandoned the original budget
plan altogether.
Newfoundland and Labrador is only unique because of
all the provincial governments in Canada, Ball leads the only one that hasn’t sorted
out its own financial mess. This is an
old story for regular SRBP readers, but it is worth reminding people that Ball
never wanted to do anything but go to Ottawa for a handout.
Meanwhile, his rate
mitigation scheme is stalled and on top of that Ball wants untold billions
more from a federal government that has commitments across the country to other
provinces that have already looked after themselves than Newfoundland and
Labrador has done under successive leaders from two different parties.
So it is that Ball ends his premiership where he
started, with his hand stuck out.
And the provincial government he will eventually hand
over to someone else is basically in the same financial mess it was when Ball took office.
-srbp-